Lucy Wilton, a solicitor in our Wills, Trusts and Probate team talks about Flexible Wills – What they are, why you might choose one, and how they work.

A Simple Will

You wouldn’t believe the number of people who contact us saying they would like to make a ‘Simple Will’. The reason most people make a Will is to ensure that their assets are left to those they wish to have them after their death.

Sounds simple enough doesn’t it?  

The Unknown Unknowns of Life

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”
Donald Rumsfeld

As Donald Rumsfeld referred to them, the existence and impact ‘unknown unknowns’ of life are what people tend to overlook. Many people don’t take into account the fundamental fact that their personal and/or financial circumstances may change significantly between the time at which the Will was made and when they die. A ‘Simple Will’, also known as a ‘Fixed Will’, does not allow for this.

None of us know what the future holds, and changes in personal and financial circumstances are unpredictable. The circumstances of our chosen beneficiaries are also usually uncertain. ’Fixed Wills’ are very basic documents, but many people have not heard of the more comprehensive ‘Flexible Wills’ which can achieve the same simple outcomes if required, but importantly offer the opportunity for decision making at the time of death, when actual circumstances are known; such as the value of your Estate, the taxation rules, beneficiaries’ needs etc. Fixed Wills cannot achieve this and the rigid outcomes that they instead produce can become outdated, and even unintentionally cause family strife at a time when it matters most.

Changes in personal and financial circumstances which impact a Will can include:

• Grandchildren not named in the Will
• Divorce and marital instability amongst beneficiaries
• Re-marriage and resulting ‘blended families’ including stepchildren
• Changes to inheritance tax thresholds
• Changing financial circumstances of beneficiaries such as bankruptcy 
• Care fee liability for your surviving spouse
• Additional assets not owned when you drew up your Will

Removing the guesswork

A Flexible Will, together with an accompanying document called a Letter of Wishes, means that, when you die, your chosen Executors/ Trustees are given the authority to make decisions about your Estate using their discretion, and these decisions are guided by what you have laid out in your Letter of Wishes. The Letter of Wishes can therefore be as broad or as prescriptive as you see fit.

Decisions based on certainty

This means that the Executors/ Trustees of your Estate can make decisions when the actual circumstances and extent of the Estate are known, rather than you having to make a best guess about what the circumstances will be at the time of your death.

What will be the value of your Estate?

A practical example of this could be that you may have chosen to leave specific amounts of money to each of your grandchildren, but spending during your lifetime on things such as care costs, have depleted the assets which are left.

As the total value of the Estate is now considerably less than you anticipated when you drew up your Will, the amounts you originally specified to be left to your grandchildren will have become disproportionate to the value of the overall Estate. This will result in your children having little inheritance as the residual beneficiaries, as the bulk of the Estate will need to go to your grandchildren. This may not have been your intention when making your Will. A Fixed Will also cannot be changed without agreement of all beneficiaries, plus everyone concerned needs to be, over the age of 18.

In contrast, a Flexible Will in this situation would enable the Trustees to use their discretion to reallocate the funds intended for the grandchildren, so that they are proportionate, based on actual circumstances at the time of your death.

Of course, if the amounts specified to be left to the grandchildren were not disproportionate to the value of the Estate, then the Trustees simply would not exercise their discretion, and would pay your grandchildren the amount stated.

You will see either outcome is possible to make provision for with a Flexible Will, but not with a Fixed Will, as it is just not possible for you to know what expenditure your final years will incur at the point you make your Will.

What about the potential impact of the cost of care on your Estate?

There are many other scenarios such as this for which a Flexible Will is advantageous. Another common situation may be that one spouse dies, and the surviving spouse is in need of residential care, having lost capacity.

If you and your spouse both make Fixed Wills, each leaving all to your spouse, and you survive your spouse, on their death, all their share of your joint assets e.g. your marital home, becomes yours.  This will mean that should you need care at the end of your life, the value of your joint assets will be considered as part of the means testing process.  If you had both made Flexible Wills, your assets are held in a Trust, managed by Executors whom you appoint, and your half of the assets could be shielded from means testing, as they are owned by the Trust, rather than by your surviving spouse.

A Fixed Will can’t be changed

The clue is in the name as they say, but perhaps good to mention anyway! A Fixed Will is not able to be ‘varied’ or, in other words, changed by the surviving spouse.

Varying a Will

‘Varying a Will’ is done by something called a Deed of Variation which is a legal document enabling beneficiaries of a Will to change it after the person has died. You might choose to do this if you don’t need all your inheritance at that point in time and would like it to go to someone else.  This can help with minimising inheritance tax. You might want to pass on money to your grandchildren to help them buy a house for example rather than have more money yourself which could just end up being spent on your care. A Deed of Variation cannot be consented to by minors (U18s) or beneficiaries who have lost capacity. A Deed of Variation is not required if you have a Flexible Will as the Trustees can exercise their discretion.

Trusts within Wills

Flexible Wills sometimes make use of Trusts, but not in every circumstance.  All Wills are in fact Trusts of a kind. A Will containing a Trust to be utilised by the Trustees can be just as simple as a Fixed Will, but it would afford your chosen Executors/ Trustees flexibility when dealing with your Estate upon death, something that a Fixed Will cannot achieve. We describe Wills containing Trusts as ‘Flexible Wills’ and can advise whether this would be suitable for your own circumstances, and what sort of Trust should be involved.  Having a Trust within a Will means that the assets are no longer owned by you but are held within a Trust which is managed by your chosen Trustees.  The decisions of the Trustees would be guided by your Letter of Wishes. Even though your Flexible Will may provide the option for a Trust to be used, it does not have to, if those are your instructions, and providing your beneficiaries do not need protecting.

The cheapest option isn’t always the best

Flexible Wills are often overlooked in favour of the standard Fixed Wills, mainly because Fixed Wills are cheaper, but a Fixed Will may not be suitable for your personal circumstances.  Flexible Wills can also be perceived as complex, but they can be very simple with clear instructions in your Letter of Wishes. The point is to preserve the ability for decisions to be made at a later point, but only in the context of your intentions, and if it is in the best interests of your Estate and beneficiaries to do so. A well drafted flexible Will can adapt to changes of instructions by tweaking the Letter of Wishes. In the long run this may be cheaper than making a new Will every time something changes.

The long goodbye

People often consider making a Will as a ‘grudge spend’ rather like insurance, and that it doesn’t really matter, as they’ll be dead and gone by the time it comes into effect. You might save money with a cheaper Fixed Will, or even a DIY option, but do you want your legacy to potentially also include upsetting your loved ones and being the cause of all sorts of family strife?  Probably not.

Summary of the benefits of Flexible Wills

• Decisions can be made on your actual personal and financial circumstances when you die, rather than what you imagine they will be
• It enables you to keep your instructions up to date in your Letter of Wishes without the need to constantly redo your Will. This obviously is cost effective and time efficient
• It can accommodate changes to tax and local authority legislation
• It can be an effective way to minimise inheritance tax
• It can deal more effectively with a dispute within the family after you die
• It is potentially possible to divert assets away from a spouse or beneficiary who does not require them
• It can protect your assets from contingencies of life affecting beneficiaries at the time of your death

Get in touch

Our experienced and friendly team would be pleased to hear from you if you would like to make a Will and can advise you on which type of Will would be best suited to your personal situation.  You can call us on 01872 241408 or email info@penderlaw.co.uk

Features of Fixed and Flexible Wills

Feature	Fixed	Flexible
Appoints Executors and Beneficiaries	Yes	Yes
Can protect assets from contingencies of life	No	Yes
Contains a Letter of Wishes	No	Yes
Can minimise IHT	No	Yes
Can be changed / varied as necessary by your Trustees	No	Yes