Thackray Williams

Has the ‘Credit Crunch’ put your Will at risk?

Falling property prices and rising bills have affected the size of many people’s total assets.  As the property is usually the largest asset that someone owns, with the downturn of the property market this can have a large effect on your Will.

Many people make cash gifts to friends and family and then leave the remainder of their estate to children or close relatives.  Another common alternative is to leave your residence or any additional properties that you own to one beneficiary with the remainder of your estate to another.

Specific gifts of cash, property and personal belongings have priority over the gift of the remainder of your estate.  Whilst you may have decided the size of these priority gifts based on the size of your assets at the time you wrote your Will, if the value of your assets have dropped the amount that you are leaving in the residue of your estate could be a lot less that you wanted.

For example, let’s say that Mr and Mrs Smith wrote their Wills in 2007.  Their house was worth £600,000 and they had savings and investments of £100,000.  They decided that on the second death, they wanted to leave a cash gift totaling £50,000 equally to their eight grandchildren and then the remainder would go to their four children.  The gift to the grandchildren was at that stage just over 7% of their estate.

If the value of their property has now dropped to £400,000 and their savings and investments are now worth £75,000, this would mean that the grandchildren still get £50,000 between them which is now 10.5% of the estate.  This means that the drop of the property price and the savings and investments only affects their children.

Another example would be where Mr and Mrs Jones left their property to their daughter and then decides to leave the remainder of their estate to their son.  At the time of writing the Will the property was worth £400,000 and they have savings and investments also totaling £400,000.  If the value of the savings stays the same but the property price dropped to £300,000, this only affects their daughter meaning that their son is now treated a lot more favorably under the terms of the Will.  This may also result in their daughter taking court action to try and even this out which is time consuming, expensive and also stressful for all involved.

It is important to review your Wills regularly to ensure that your wishes are carried out and that the changes in your assets do not alter these.  It is not only the drop in the housing market that can affect your Wills.  If someone goes into a nursing home and their assets are reduced significantly to pay for this, the remainder of your estate could, in theory, be less that the value of any cash gifts that you included in your Will.  If this was the case for Mr and Mrs Smith, their grandchildren could receive more that their children.

If you do want to discuss this or make changes to your Wills, please feel free to contact us:

Bromley – Debbie Korb – 0208 290 0440
Beckenham – Jill MacMahon – 0208 663 0503
West Wickham – Andrea Robinson – 0208 777 6698