What do Karl Marx and Keith Moon (former drummer with The Who) have in common? Yes, I know they are both dead but not only that – both died intestate.
Marx, the philosopher and economist whose writings inspired generations of political activists, died in 1883 and left an estate of £250. While Moon, the outrageous performer who influenced a whole generation of baby boomers, who died in 1978, left an estate valued at £375,599.
In Moon's case the excuse that may be given for intestacy would in all probability be his relatively young age at death. This is, of course, not valid. There can be no doubt that the first step for a client, irrespective of age, who does not have a will is to make one immediately. While we all know this, have we all taken our own advice and – what is more important – have all your clients?
Where there is no will on death, the intestacy laws will apply as a matter of course. The rules inevitably mean that a particular family's requirements are unlikely to be met. In addition, the rules that apply are not likely to be tax efficient.
Arranging a will can allow tax efficiency to be incorporated and in many instances could be one of the main criteria used when decisions are made. The financial adviser's role here is paramount and in many instances he is the professional best placed to advise.
It is important to bear in mind that a marriage revokes any existing will, unless it states that it was made in anticipation of marriage. Also, divorce cancels any benefits under a will to a former spouse, unless the wording clearly states that divorce should not affect such an entitlement.
As a result, sound financial planning coupled with common sense will always dictate that when circumstances change it is advisable to make a new will, particularly in the circumstances mentioned above – marriage or divorce.
A large area of overlap exists between highlighting reasons why a will should be drawn up or reviewed and the identification of individual or family protection needs.
This link becomes closer where there are dependant children, as preparing a will provides the opportunity to leave instructions for the care and custody of the children in the event of death. Intestacy rules do not cater for this. Thus an ideal platform to address the family protection needs arises. The issues that a client requires to consider when drawing up a will are in many ways similar to those that identify protection needs and can include, for example:
Equities and unit trusts
Bank and building society savings accounts
National savings/premium bonds
Existing life assurance and death-in-service benefits
Other personal effects.
Other borrowings and credit card liabilities.
It is argued by many that meeting the basic protection needs of dying too soon, suffering from a serious illness, or long-term disability, is straightforward and can be arranged without advice.
However, the implications for a client of simply buying a protection product and popping it in the back of a drawer and the back of the mind can be far-reaching.
The implications need to be considered in a much wider context. As far as protection planning goes it does require the adviser to address the issue of trusts.
It should perhaps be a matter of concern that a relatively small percentage of protection policies are written “under trust” with some groups estimating that below 10 per cent of all new cases are written under trust.
However, few could disagree with the general principle that, other than investment/savings plans and those policies that are to be assigned (for example to lenders), all policies should be written under trust.
The facility to arrange cover supported by flexible trust wording is one that can add real value and form a rounded protection solution when combined with an appropriately drafted will.
While your own clients may not always be a Marx or a Moon, the recommendations that you make to them to draw up a will and in meeting their protection needs could nevertheless have implications for their dependants and future generations.