Introduction to wills and estate planning - Purpose and function of wills

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Overview

Wills are essential tools in estate planning, determining how a person's assets are distributed after their death. For legal students preparing for the SQE1 FLK2 exam, a deep comprehension of wills' purposes and functions is important. This article explores various roles, legal frameworks, and the importance of wills in estate planning. We'll look at complex scenarios, relevant examples for exams, and key considerations for future solicitors.

Legal Framework and Validity of Wills

Statutory Foundations

In England and Wales, the legal foundation for wills is based on the Wills Act 1837 and the Administration of Estates Act 1925. The Wills Act 1837 defines the requirements for a valid will:

  1. The testator must be at least 18 years old (s.7)
  2. The will must be in writing (s.9)
  3. The testator must sign the will in the presence of two witnesses (s.9)
  4. The two witnesses must sign the will in the presence of the testator (s.9)

Testamentary Capacity

A valid will requires the testator to have testamentary capacity. The Banks v Goodfellow (1870) case set the standard, requiring the testator to:

  1. Know the nature and effect of making a will
  2. Understand their property's extent
  3. Consider potential beneficiaries
  4. Be free from any mental disorder affecting decisions

Recent cases like Clitheroe v Bond [2021] have further detailed these principles, highlighting the need for current evidence of capacity.

Formal Execution

Courts strictly interpret formal execution requirements. In Marley v Rawlings [2014], the Supreme Court found a will signed by the wrong spouse invalid, emphasizing the importance of strict formalities.

Main Functions of Wills

1. Asset Distribution

A will's primary role is to direct asset distribution, including:

  • Specific gifts of items or money
  • Residuary estate disposition
  • Trust creation within the will

Example: Dr. Emily Chen, with an art collection, investments, and family home, might specify:

  • Her art collection to the National Gallery
  • £100,000 for a scholarship at her alma mater
  • Her home held in trust for her children
  • The remaining estate divided among her siblings

This flexibility allows wills to match personal circumstances.

2. Executor Appointment

Wills appoint executors to manage the estate, including:

  • Collecting and handling assets
  • Paying debts and taxes
  • Distributing the estate

Executors must act impartially and uphold their fiduciary duties, as emphasized in Brudenell-Bruce v Moore [2014].

3. Guardianship Provisions

Wills can name guardians for minor children. Under the Children Act 1989, this requires:

  1. Guardians over 18
  2. Written, dated, and signed appointments
  3. Guardian acceptance

Example: Dr. Chen might appoint her sister Sarah as guardian, with Michael Wong as a backup.

4. Tax Planning

Wills are vital in inheritance tax planning. Strategies like nil-rate band trusts and charitable legacies can significantly reduce tax liabilities.

For example, leaving 10% or more of an estate to charity can lower the IHT rate from 40% to 36%.

5. Avoiding Intestacy

A valid will prevents intestacy laws from applying, which may not reflect personal wishes and can complicate estate administration.

Complex Scenarios in Will Drafting

International Assets

For those with assets across borders, conflict of laws issues must be considered. The EU Succession Regulation allows choosing national law for governing estate succession, even if assets are in multiple EU countries.

Example: A British national in France could choose English law for their entire estate, avoiding forced heirship rules.

Business Succession

Wills help ensure business succession by:

  1. Bequeathing shares
  2. Creating business asset trusts
  3. Arranging partner buyouts

Example: A sole trader may specify their business be held in trust, with income for a spouse and capital eventually passing to children.

Intestacy and Its Consequences

Without a valid will, the Administration of Estates Act 1925 rules apply, leading to potential issues like:

  1. Unmarried partners having no inheritance rights
  2. Stepchildren not being recognized
  3. Unintended estate distribution

Case Study: Mr. James Thompson, valued at £750,000, left his estate to his children under intestacy rules, excluding his long-term partner.

This highlights the need to make a will to ensure personal wishes are fulfilled.

Conclusion

Wills are foundational documents in estate planning, performing multiple essential roles:

  1. Distributing assets according to wishes
  2. Appointing executors
  3. Naming guardians for minors
  4. Enabling tax planning strategies
  5. Preventing unwanted intestacy outcomes

For SQE1 FLK2 candidates, understanding wills' purposes and roles is vital. This includes knowing legal validity requirements, asset distribution nuances, and testamentary decision consequences. Navigating complex scenarios like international assets or business succession is key for future legal professionals. Understanding the full scope of wills equips aspiring solicitors to offer sound client advice within legal boundaries.