I thought I’d share with you a true story that appeared in one of our trade press journals recently.
It puts across well the fact that no matter how good the advice and planning from an adviser, at the end of the day it is up to the client to implement that advice. Sometimes, if they don’t, things like this can happen…
An adviser had a friend called Jerry who he had advised for many years, and we will let him tell his story below:
“Jerry, a father with children, was more of a friend than a client, and he would bend my ear now and again for advice. I particularly advised Jerry to make a will, and repeated this advice over many years.
He said he would get round to it.
When he became ill with cancer a couple of years ago, I reiterated it again, saying it was imperative that he wrote a will. Sadly, he died without having completed one. “
So what were the implications?
The point about writing a will is to:
- ensure that your assets are dealt with as you would wish on your death, and that your loved ones do not have a mess to deal with.
- avoid intestacy where his widow gets £125,000 and then a life interest in half of the residue. The children will inherit the other half of the estate, initially in trust, but then each child will inherit his or her share absolutely at the age of 18.
This is a less than appealing proposition as there is often a concern about putting potentially large amounts of cash in the hands of teenagers, just as they are perhaps going through the rebellious stage of their lives!
In future, her finances are going to be limited predominantly to a life interest in half of the financial assets. She is not at all keen on the prospect of her children having absolute entitlement to a fairly big chunk of money when they reach 18. For a young woman, to be limited by the terms of an interest in possession only is not very appealing.
Also, the children are far too young to effect variations to the will, so they are going to have to wait until they have both reached 18 and hope they are still getting on well to agree terms.
It’s not difficult to see situations in which there could be strife between the widow and her children, particularly if she remarries or the children develop relationships with other people who are demanding where cash is concerned. Children these days are hot on their rights!
To add insult to injury, Jerry also failed to make nominations or trust arrangements for his life insurance policies.
This creates problems.
The main one is that it adds to the cash in his estate which is to be divided between wife and children, thereby exacerbating the inheritance tax problem.
One should not overlook the practical benefit of putting death benefits in trust or nominating a beneficiary, in that it enables cash proceeds to be paid direct to the beneficiary without having to wait for probate to be granted. It is quite often the case that there will be no inheritance tax benefit if everything is being left to a surviving spouse but access to cash when it is needed is vitally important.
By not making a will and failing to put his life policies in trust, Jerry managed to pile up layer upon layer of trouble for the people trying to wind up his estate, who needed to carry on their lives with a minimum of further disruption, recognising the fact that a loved one had just died.
There will always be people who, for one reason or another, do not act on advice and there is not very much one can do about that. However, ensuring that they appreciate the potentially disastrous results of ignoring this kind of advice might be, one would hope it would embarrass at least some of those people into taking the right course of action.
The Key Considerations
Setting up a Will of Testament really is crucial to your overall financial planning strategy. Without one, you may be planning for Gordon Brown to be your main beneficiary.
And we’re sure this is not your preferred choice…
