It has always been a sensible step to consider the future, and in particular what would happen to your estate and assets if something were to happen to you. It is often seen as a very morbid subject, which people sometimes shy away from. However, not addressing the subject has the potential to store up significant difficulties for your family, and might well mean that your assets would not be dealt with as you might expect or wish. A simple way to counter that concern is to put in place a will which clearly sets out your wishes.
Drafting wills is an area of work which the Thorntons Dental Team have always carried out. We have however seen an increase in the number of wills enquiries from our dental clients in recent months, perhaps not surprisingly given the difficult times which we are in at the moment.
Why have a written will in place?
Many people think that if they were to die, their estate would transfer to their closest relatives (such as their spouse or children) and so there is no real concern if they don’t have a written will. Unfortunately, however, that isn’t the case. In the event of someone dying without having prepared a will (known as dying intestate), their estate will be distributed in terms of Scottish succession law.
Depending upon the structure of your family, that may mean some (but not necessarily all) assets going to a spouse, some going to children, and in other cases to more remote family members. Put simply, the absence of a will means that there is no control over who inherits the estate, the law will be applied and the estate will go to whichever family members are entitled to it, whether or not that would have been the wish of the deceased. Having a will removes that risk.
In turn, the law will determine who will be your executor (the person who administers your estate) if you don’t have a will. You can however, if you have a will, state in it who you would like to be your executor. It is also simpler to appoint an executor where there is a will, without one the court process is more involved which also increases the cost of dealing with the estate.
Maximising your estate – Inheritance Tax
When someone dies, and depending upon the value of their estate, Inheritance Tax (IHT) may be payable. Subject to various exemptions, the rate of IHT is 40% which could mean that a substantial part of your estate would be realised and paid to HMRC rather than going to your family. Some have no concern about that. However, others wish to look at ways at which IHT can be minimised. As part of estate planning, the team can advise on how that can be achieved, including the use of trust, gifting during lifetime, and so on. Once again, having a will allows some of these tax mitigating measures to be put in place.
If you own a practice, this will be likely to form a substantial part of your estate. If you were to die before retirement, steps would need to be taken to realise that value. In the case of a sole principal, that will inevitably involve the sale of the practice, unless you have a family member who is also a dentist and who will take on the practice.
In the case of a principal who works in partnership with others, or who operates as a part owner through a limited company, the position will be slightly different, and once again some forward planning is required. Having a will in place is only part of the picture, you will also need to consider how your interest in the practice will be dealt with on your death. This would be dealt with through a Partnership Agreement or a Shareholders Agreement.
The issues to consider and agree on would include:
- Who takes on your interest in the practice – does it go to your co-principals or would a third party buyer be brought in?
- How would the practice be valued and what price would therefore be paid to your estate?
- When would the estate receive the cash – would it be in one lump sum or in instalments?
- Importantly, how would the buy out be financed – the continuing principals may not have immediate access to cash?
It is our experience that not addressing this subject makes things much more stressful for all concerned in the event of a principal dying, whereas agreeing these areas and recording them in a written Agreement will be of great assistance.
Putting in place a will doesn’t need to be a difficult exercise, and it should give you comfort that your family will be benefit from your estate in the way which you would wish.