New research from Canada Life reveals that many UK adults are misguided in their knowledge about estate planning, wills and the laws of succession.
A sample of 2000 UK adults were provided with a set of common estate planning misconceptions, to test their understanding.
This comes as previous Canada Life research also revealed that over two fifths (44%) of UK adults have not written a will, nor are they in the process of doing so.2
Top five estate planning misconceptions
- Almost four in 10 (38%) incorrectly believe that if all of a person’s assets pass to their spouse, they will avoid probate
- A third (33%) incorrectly believe that if a person doesn’t have a will, everything passes automatically to their loved ones anyway when they die
- A quarter (25%) incorrectly believe that making a will is a one-time process
- More than one in six (17%) incorrectly believe that if someone marries or re-marries, they don’t need to update their will
- More than one in six (16%) incorrectly believe that a cohabiting partner will inherit their deceased partner’s estate, even if they are not a married couple
Estate planning misconceptions addressed3:
- If all of a person’s assets are passing to their spouse, this doesn’t mean they will avoid probate. Assets that are owned jointly with a spouse, such as a property, will likely pass to them automatically due to a law called ‘right of survivorship.’ However, with solely owned or personal assets, such as an insurance policy, your Legal Personal Representative (commonly also the executor of a will) will take over the ownership first. Some financial organisations may ask for Grant of Probate – a court document that validates a will and gives the executor(s), or Legal Personal Representatives (LPRs), the right to administer the deceased person’s estate. So, even if your spouse is inheriting all your assets, your LPR may need to obtain probate first.
- If you don’t have a will in place when you die, your assets won’t automatically pass to your loved ones, or perhaps not the ones you expect to. Where your assets are not subject to a trust (personal or pension), the law will decide how those assets are allocated, consistent with specific rules, and depending on where you live in the country. For example, if you don’t have a spouse or children, then your parents may inherit, whereas you may prefer that your estate to go to siblings instead.
- Making or updating a will should not be a one-time process. It’s essential to review your will periodically to ensure that it still reflects your wishes and circumstances. Many people who make a will may leave the document dormant for many years and be surprised to find how out of date it is, possibly naming beneficiaries that are no longer relevant.
- In England and Wales, marriage automatically invalidates any previous will unless it was explicitly written to signify the marriage or civil partnership. If you don’t make a new will after getting married, the law will decide who inherits your assets under the rules of intestacy. It’s also important to remember that if you’re separated but not divorced, then your estate could pass to your ex, so it’s essential to review your will to ensure your assets pass to those you desire.
- Many couples forget that under the current succession laws, a cohabitee has no automatic rights under the intestacy rules and will not automatically inherit their partner’s estate when they die. So, a valid will is essential to make sure assets pass to the surviving partner as you would want them to.
Liz Hardie, Technical Specialist – Tax, Trusts and Estate Planning, Canada Life said:
“Whilst people generally seem familiar with some estate planning laws, there are still gaps in understanding. The easiest way to avoid potential pitfalls and ensure that your estate is distributed according to your wishes is to write a will and keep it up to date.
“If an individual dies intestate – without a valid will in place – their estate will be divided up according to the laws of succession, meaning the assets may not go to those they desire. Making wrongful assumptions about these laws, may lead to loved ones facing delays and longer probate, potentially higher inheritance tax bills, in addition to disputes amongst the presumed beneficiaries as well. As part of the will writing or updating process, it is important to involve your beneficiaries and have an open conversation with them about your wishes.
“You can write a will yourself as long as someone witnesses the signing of it, or you can have a professional do this on your behalf. If costs are an issue, some charities also offer a free will writing service at certain times of the year.”
