In 2020 it was reported that almost 58% of adults in Scotland do not have a Will, meaning the majority of the Scottish population should take advice about putting a Will in place.
You may be in the 48% who do have a Will and are of the view that this is all you need to do - but this isn’t always the case. When was the last time you reviewed your Will?
Whilst most people have an idea of who they wish to name to inherit a legacy or a share of the residue of their estate, many do not give consideration as to what would happen to the various aspects of their estate should the named beneficiary/beneficiaries pass away before them.
Name substitute beneficiaries in your Will
If an individual (excluding a direct descendant) is due to receive a legacy, and they die before you and you have not named a substitute beneficiary/beneficiaries, the failed legacy would fall into the residue of your estate.
If an individual (excluding a direct descendant) is due to receive a part or all of the residue of your estate, and they die before you and you have not named a substitute beneficiary/beneficiaries, that failing share will fall into intestacy, which is where the law determines who will inherit this share of your estate.
Consider fall back beneficiaries
Let’s take an example, you have prepared a straightforward Will leaving your estate to your spouse/partner, and in the event they predecease you, to your children. You, your spouse/partner and children are in a fatal accident with no survivors, what would happen to your estate? These events unfortunately happen, especially where people live, travel and holiday together which many young families, and indeed older families do.
To deal with this scenario, you could name “fall back or ultimate” beneficiaries in your Will. They can be anyone, but often are family, friends or charities who you would like to benefit if your original beneficiaries have not survived you, rather than the law dictating who benefits. By including a fall back provision no extended family members or other individuals would be entitled to a share of your estate unless they have been named in the Will.
Possible effects of failing to name fall back beneficiaries
In the example above, under the laws of intestacy your parents could receive a one-half share or your entire estate shared equally between them, or to the surviving parent should the other have predeceased you. This could affect their own tax planning efforts or, more worryingly, if they were in care or at risk of going into care, any inheritance they receive from you could be used to fund their care.
If you died in the circumstances noted above and you had no surviving parents or siblings, your estate would pass to more remote family members. Those such as the family of your spouse/partner would not receive anything. Many couples choose to cover this eventuality, for example, by splitting the estate between both sides of the family.
Having a Will is just as vital when considering who you would like to inherit on your death, as it is when deciding who you would rather not inherit. When naming a beneficiary in your Will you should always consider what would happen to their inheritance should they predecease you.
Everyone’s situation is different, whether personal, family, or financial and there are a variety of options available. If you would like to discuss which one is best for you, please contact the Private Client team on 03330 430150.