Credit crunch is making wills out of date, warn legal experts

The decreasing value of savings and assets is meaning that thousands of wills are not as valuable as when they were first written, meaning loved ones could be left without the financial security their families believe they have provided.

The effects of declining house prices and plummeting interest rates are wide-reaching, but many people have not yet realised the impact the economic climate may be having on the provisions they have arranged for their families.

Martin Holdsworth, is head of contentious wills and probate at Leeds and Bradford laws firm, Gordons, whose team is one of the few in the north dedicated to contentious wills and probate.

Martin commented: “The underlying danger here is that if a will was made pre-credit crunch and the provisions of the will are not reviewed, there is a real risk that it may throw up some unexpected results.

“A recent case in point involved a retired gentleman, who wished to pass his entire estate to his wife upon his death after payment of a number of legacies to friends and to charity. At the time the will was made, the man's estate comprised a property and saving investments that were large enough to cover the legacies, whilst the house plus the balance of savings were sufficient for the rest of his wife’s expected life.

“Unfortunately, the credit crunch occurred between the making of the will and his subsequent death, dramatically reducing the value of his portfolio of savings. Consequently, there were insufficient funds to pay out the legacies and his widow had to sell the house he had left her. It also left his widow without savings or income beyond her modest pension. I was able to resolve the situation but only after court proceedings were issued, forcing the various legatees to defer their legacies until after the death of the widow.”

In addition, there is a danger that changes to intestacy rules from February 1 could lead to fewer people making wills in the first place.

Martin explained: “Many couples mistakenly assume that if they die without a will – known as dying intestate - then their entire estate will automatically pass to their spouse or civil partner. However, this is not the case.

“Currently, the intestacy rules dictate that a surviving spouse or civil partner receives the first £125,000 of the deceased’s estate if they have surviving children. Without children, the surviving partner receives £200,000. From February 1 these figures will increase to £250,000 and £450,000 respectively.

“Whilst the increase in the statutory legacy will increase benefits for spouses and civil partners, the intestacy rules do not take into account families which include stepchildren, or indeed the deceased’s prior wishes as to how they would have wanted their estate to be divided.

“Unless the increase is accompanied by a campaign raising the awareness of the need for people to prepare wills, then it may actually result in fewer people making adequate provision for their families after their death.”

Martin concluded: “It is also worth noting that the credit crunch has seen a rise in litigation generally and disputes involving wills is no different. I personally have seen a four-fold increase in clients seeking advice and assistance.

“I would urge anyone who does not currently have a will, or whose will may need updating, to seek legal advice as soon as possible or risk leaving their loved ones with nothing.”

Published: 19th February 2009

Martin Holdsworth

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