Most people want to be sure their loved ones will be taken care of after they pass and you might be considering leaving some cash in your Will to make that happen.
We all hope it is as simple as choosing an amount and naming who it goes to, but there is actually a bit more to think about.
It requires careful planning and the right support to make sure your wishes are followed through with.
How can you leave cash sums in your Will?
Leaving money in your Will can be done in a few different ways and the right choice really depends on what feels right for you and your family.
One of the most popular ways is to leave a fixed cash gift to someone, often referred to as a pecuniary legacy.
This means you will specify a set amount of money to go to a certain person or organisation, such as a family member or charity.
You will also need to consider who pays the inheritance tax on the gift, especially if it’s a large gift or you have already used up your tax thresholds. Will the recipient pay or will it come out of your residuary estate?
It’s a simple option that reassures you that your beneficiary will receive what you intended and this is what most people are looking for.
Alternatively, you might find that leaving money as part of your residuary estate is best.
Your beneficiaries will each receive a percentage of what’s left after everything else, like your debts and inheritance tax and other gifts, has been paid.
This can be helpful if you’re not sure exactly what your estate will be worth in the future and if its value changes over time.
If you’re leaving money to someone younger, it is handy to set an age at which they will receive their inheritance and they are ready to manage the sum of money. This will also involve a question of Inheritance Tax if you set an age over 18.
Also, to say who gets the gifts should someone pass away before you e.g. leave it to their children or goes back into your estate.
Can I use trusts for cash gifts?
Trusts can sometimes sound quite complicated, but they are actually quite effective in protecting your estate and wishes.
If you leave money to someone under the age of 18, it will usually be held in a trust until they reach adulthood and appointed trustees will manage the funds on their behalf in the meantime.
You can also choose to use a trust for adult beneficiaries.
For example, a discretionary trust allows trustees to decide how and when money is distributed and this will be based on the needs of the beneficiaries. This can be both as to income (generated from the fits) or its capital.
This can be particularly useful if circumstances are likely to change or you want to protect assets from risks such as divorce or financial difficulties.
It can also allow funds to be released gradually, perhaps to help with your loved one’s education and housing after you pass.
Of course, trusts do need careful planning and must consider potential tax implications and you need to know how they work before including them in your Will.
Let us help with your estate planning
It’s completely understandable to want to keep things simple, but you do need to spend a bit of time planning your estate.
Failing to do so could put your money at risk of being distributed not as you intended or your loved ones facing confusion or disagreements at an already difficult time.
Our Wills, Trusts and Probate team is on hand to explain your options around leaving cash and gifts in your Will and finding the best option for your estate.
We will make sure your Will is clearly drafted and legal and flag anything you might not have considered around your trusts.
If you want to learn more about how we can support you, contact the Head of Department Gemma Hughes at gemma.hughes@mackrell .com 0203 542 2553 or our Senior Associate, Jeffrey Cohen, at jeffrey.cohen@mackrell.com or call 0203 972 6781.
