Category: Wills and Power of Attorney

Why Have an LPA?

Why Have an LPA?

A Lasting Power of Attorney (LPA) is a legal document that  allows you to appoint  individuals you trust (Attorneys’) to make decisions for you if you no longer wish to do so for yourself or if you reach a point where you are no longer able to make decisions.  There are two types of LPA,  one is in relation to your property and finances and the other one is in relation to your health and welfare.  You don’t have to  have both types of LPA although it is wise to consider having both in place.

Despite popular belief, LPAs are not just for the elderly. Planning ahead can ease the potential burden on your loved ones in case of a sudden injury or illness.   It is always a good idea to have an LPA in place at an early stage when you have the choice of appointing someone you love and trust to this position, otherwise the Court of Protection may intervene and manage your financial affairs for you or the Deputy appointed by the Court of Protection may not have been your choice for dealing with your affairs.

The benefits of having an LPA in place are:

  •  Saving Money – Without an LPA your family members may have no say in how your money is to be spent as the Court of Protection may step in to manage your finances and the legal fees in obtaining a Deputyship Order are generally considerably more than the cost of putting an LPA in place.  It will also be necessary for the Deputy to make annual reports and obtain valuations of your assets, all of which add considerably to the cost of handling your affairs on your behalf.
  •  Peace of mind – It’s always better to have someone that you trust and have chosen yourself to manage your affairs rather than someone appointed by the Court of Protection or the local authority who you’ve never met before.
  •  Save distress to your family – Your loved ones will find it very difficult to manage your financial affairs for you if you don’t have a Property & Financial Affairs LPA as they will have no legal authority to do so. This will only add to the stress  if they are unable to access finances to manage your personal needs due to an incapacity.  Many health professionals will only deal with family members in respect of your Health & Welfare when you lack capacity if you have a Health & Welfare LPA in place.  Without one your loved ones may have no say in your health care.  A Health & Welfare LPA also provides you with the ability to allow your Attorneys to give or withold consent to life sustaining treatment when you lack capacity to make the decision for yourself.
  •  Prevent financial hardship to your family – If one of the joint account holders looses mental capacity, the other account holder doesn’t automatically have a right of access unless an LPA was made prior to the incapacity or there’s a Court of Protection Order.   If the joint account is frozen this could result in a significant financial hardship for a spouse or a partner who will have no access to the monies in the account which they may require for their daily living expenses.

If you have any questions about LPAs contact Angie Newnham today on 01202 877 400!

What Does an Executor Do?

Many aren’t aware of the obligations that come with being an Executor of someone’s Will. Executors have a number of duties, depending on the complexity of the deceased person’s financial and family circumstances.

An Executor’s first task would be to find the deceased person’s property and manage it until it’s shared amongst the beneficiaries. This may involve deciding whether to sell land or securities owned by the deceased person. Making enquiries with both asset and liability holders and obtaining valuations for property, land, and personal chattels is the Executor’s requirement. After the enquiries have been made it will be clear to the Executor whether or not a Grant of Probate would be needed for dealing with the administration of the estate

A Grant of Probate is a document which authorises the executor to deal with the estate of the deceased. It enables them to deal with certain aspects of administering the estate like closing bank accounts and selling or transferring property. A Grant of Probate is not required to deal with the handling of all estates, however it is often the case that one would be required.

Once the assets and liabilities of the estate have been determined, the Executors will be required to submit an Inheritance Tax return which will confirm whether there is any Inheritance Tax due from the estate. The Executors will need to make sure that any reliefs have been applied and that the right sum of Inheritance Tax is paid. The Executors will also need to consider any lifetime gifts which the deceased made in the 7 years prior to their death as well as any trusts which they may have benefited from.

After completing the Inheritance Tax return the Executor will need to sign and swear an Oath. The Oath sets out information of the deceased and how the Executor has the right to deal with the administration of the estate. The Oath is submitted to the Probate Registry once it has been both signed and sworn. The Grant of Probate is normally issued in two weeks.

After receiving the Grant of Probate you would be able to progress with collecting in the assets of the estate. You will be able to arrange the closure of bank accounts and the sale and transfer of the property.

After all of the assets have been collected in and all of the liabilities have been paid, the Executors will then be able to distribute the estate according to the Will, or if there was no Will and the deceased died “intestate” then the estate will need to be distributed in accordance with the Rules of Intestacy.  A set of Estate Accounts should be produced and –  if requested – should be made available to beneficiaries and creditors of the estate.

The distribution of the estate to the beneficiaries is the Executor’s final task regarding its administration. An Executor is not required to administer an estate before the expiration of one year from the date of death (the “Executor’s Year”). However, if all of the assets have been collected in and all liabilities settled then there is no reason to delay paying the beneficiaries.

If you have been appointed as an Executor and you require any assistance in dealing with the administration of an estate please contact Angie Newnham on 1301202 877 400!

What Does an Executor Do?
Dying Without a Will: What Could Possibly Go Wrong?

Dying Without a Will: What Could Possibly Go Wrong?

Dying without a Will makes life even harder for those left behind following a bereavement and can be the cause of all kinds of disputes and family rifts. The law decides who gets what and how much when you don’t leave a will when you die – it doesn’t matter what your relationship with those people was like when you were still alive.

With the modern family things get even more complicated. Without a Will, your spouse or civil partner may not  inherit ALL of your estate automatically and common-law partners may not receive anything at all even to the extent of being forced out of their home.   Add to that, not having a Will can cause lengthy delays for your state dictated beneficiaries.

A good example of the possible issues that can arise from not having a Will is the case with Jimi Hendrix. The American rock star did not leave a Will after he died in 1970.  As a result of that his father Al Hendrix inherited his son’s £51 estate and left it to his step-daughter, which prompted a lawsuit by Jimi’s biological son.

Dying without a valid will is called intestacy or dying intestate.

The law about exactly who gets what is different in England & Wales, Scotland and Northern Ireland, but there are some common problems wherever you live.

Potential problems in case you don’t have a Will:

 

  • Your partner is not legally entitled to anything when you die if you’re not married and not in a civil partnership.
  • If you’re married, your spouse might inherit most or even all of your estate and your children might not get anything (except in Scotland). This is the case even if you are separated but not if you’re divorced.
  • If you have children under the age of 18, you need to appoint Guardians within a Will otherwise in the even of the death of both natural parents they children will become Wards of the Court who will decide where they live and how they are educated and this will not necessarily be with the people or family that you would have chosen for yourself.
  • If you have children or grandchildren, how much they inherit will depend on where you live in the UK – but if you make a Will you can decide this yourself.
  • Any Inheritance Tax that your estate has to pay might be higher than it would be if you had made a Will.
  • If you die with no living close relatives, your whole estate will belong to the Crown or in other words – to the government. This law is called bona vacantia.

 

Any assets that you own jointly with someone will pass by survivorship to the surviving joint owner and not under the intestacy rules. It’s important that you understand whether you own an asset as “joint tenants” or as “tenants in common” in order to establish who will inherit the asset or your share of the asset.

It is also important to ensure that you obtain professional advice when preparing your Will and that it is correctly drafted in accordance with your wishes, making the best use of the various IHT saving incentives available.   You should also ensure that your Will is drafted by a qualified and regulated professional (not an unregulated Will-Writer) and be wary about using “free Will Writing Services” as you are unlikely to be given proper professional advice upon the draft and sadly by the time a problem becomes apparent you may well have past and are unable to make any rectification to the problem but have left a problem for your beneficiaries.

It’s safe to say that everyone who has any type of asset which he/she would wish friends, relatives or charities to benefit from should have a Will. For any questions and queries regarding Wills, Probate and LPA contact Angie Newnham today on 01202877400 – Option Private Client/Wills & Probate.

This article is intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

So Why Do I Need a Will?

Current estimates suggest that approximately 30 million people (about 70% of the population) in the UK does not have a valid Will in place.  Of the 30% of the population that do have Wills, many have not reviewed the terms of their Wills for years and many Wills could now be outdated, or even invalid in some circumstances, due to changes in personal circumstances and/or changes to tax laws and later life care funding.

If you do not have a valid Will in place and die then the State decides who inherits your assets and this division may not be in accordance with your wishes had you taken the time to write a Will setting these out.

It is also important to take professional advice upon the terms of your Will as recent changes to in tax law and later life funding may well affect the way in which you should divide your assets in order to make the best use of the available exemptions and reliefs.  There is an old saying “you don’t know what you don’t know” and therefore cannot make provision for “what you don’t know” when drawing up your Will.

Sadly, it is frequently the case that “what you did not know” when drafting your Will without professional advice, only comes to light after your death, by which time it is too late for you to do anything about it.  Your beneficiaries are therefore left with the potential consequences of additional tax burdens and later life care fees not to mention assets passing to those you would have preferred not to benefit to the detriment of those that you would have liked to have benefited.

Even if you have little in the way of assets, but you have children, then it is vitally important that you appoint guardians for minor children within a Will in order that in the unfortunate event you pre-decease your children whilst they are still minors, people that you trust as guardians are appointed to look after your children in such circumstances.  If guardians are not appointed in a Will then it is left to the State to decide who looks after your children and this generally means that the children are cared for by Social Services and possibly a variety of foster carers chosen by Social Services and not necessarily by members of your family.

If you would like further advice or information regarding writing a Will then please do not hesitate to contact us on 01202 877400 and we will arrange for a member of our Private Client team to discuss your requirements with you in detail.

So Why Do I Need a Will?
All you need to know about Inheritance tax residence nil rate band

All you need to know about Inheritance tax residence nil rate band

What is the residence nil rate band?

When a person dies, inheritance tax(IHT) is being charged on their death. The inheritance tax rate is 40% based on the value of his/her assets. This 40% rate is only charged on any value above the nil rate band. The nil rate band (£325,000 in the tax year 2016-17) is the amount which is chargeable to IHT at a 0% rate. From 6 April 2017, an additional residence nil rate band (RNRB) applies so that you might pay less IHT when the family home is left to lineal family members.

The terms of your will can affect your ability to claim a RNRB. That’s why it is important to review your will now (or make one if you don’t have a will at all) in order to make sure that your family can claim the RNRB when you or your spouse or civil partner die.

How can I benefit from RNRB?

If a person has died on or after 6 April 2017 the RNRB can be claimed on their estate. Their surviving spouse or civil partner may still be able to carry forward the RNRB to be used when they die even if that person has died before that date.

Your estate will benefit from the RNRB, in addition to the main nil rate band, if you leave your interest in the family home to direct descendants such as children or grandchildren and some other individuals such as stepchildren or adopted children as well as the spouses or civil partners of any of these (“qualifying beneficiaries”). The RNRB could help those who inherit your assets make an additional IHT saving by increasing the part of your estate that is taxed at 0% rather than 40%. Claiming the RNRB could enable an additional £100,000 to £350,000-worth of assets to pass to the next generation without any IHT charges.

You can claim the RNRB if:

  • You die on or after 6 April 2017.
  • You leave an estate valued at less than an upper limit, which is initially £2 million but is set to rise with inflation from 6 April 2021. The RNRB is tapered down for estates worth more than this.
  • You leave your home to qualifying beneficiaries. Some trusts for these beneficiaries also qualify.

Even if you die before 6 April 2017, or you leave your home to your spouse or civil partner rather than children or grandchildren, the RNRB is not necessarily wasted as you have the option to carry it forward (together with any unused main nil rate band) for the benefit of your surviving spouse or civil partner.

If your property’s value is more than £2 million you should still review your will and property planning to see whether or not it’s possible to arrange your affairs so that you can claim the RNRB.

How much do I need to pay for RNRB?

The table below shows the RNRB levels that the government has announced (which can be added to the main nil rate band to increase the amount of assets in your estate that will be taxed at 0%). The combined nil rate bands could be worth as much as £1 million by 2021. These figures may change so it is important to check from time to time.

 

What happens if I sell my home?

The RNRB will still be available in the case where you have sold your home and have moved to a less valuable property, or even if you no longer own a property, assuming that you sold your home on or after 8 July 2015 and at least part of your estate is inherited by a qualifying beneficiary.

What happens if I move out of my home?

The RNRB will apply if you own a property that is no longer your residence when you die (for example, because you have moved into a care home), provided that it was your residence at some time during your period of ownership.

What if I have given my house to my children already?

Even if you have already given away your home to your children, if you still benefit from the property in some way without paying for it, for example, you continue to occupy it even though it has been given away or if you are living in it with your children after having transferred it to them, it may still be possible to claim the RNRB on your death. However, we’d still advise you to review your will.

What if my children do not want my home after my death?

It doesn’t matter whether or not the persons who inherit your home want to keep it. The RNRB will still be available even if they sell your home immediately after your death.

What if I have more than one home?

If you own more than one property that is (or has previously been) your residence when you die, your executors must choose which one will benefit from the RNRB.

Review your will or make one

To ensure you’re using the RNRB to its fullest effect we strongly recommend that you review your will (or make a will if you don’t have one). The conditions for claiming the RNRB are convoluted and you should seek expert advice to ensure that your family can benefit from the enhanced nil rate band when you or your spouse or civil partner pass away.

If you have any questions about RNRB or you need to update your will feel free to call Angie Newnham on 01202 877400!

The comments above are the writers opinion based upon the information so far available it does not constitute legal advice.

 

The Benefits of Using Multiple Trusts

Setting up a Trust is a flexible way of giving away assets without passing them absolutely to Beneficiaries (eg become part of the Beneficiaries estate).

In order to reduce the occurrence of periodic and exit charges we would advise the use of Multiple Trusts settled (signed) on different days, therefore becoming non-related settlements commonly referred to as Pilot Trusts or Asset Protection Trusts.

Here are some of the main reasons to consider Multiple Trusts:

  • Privacy

Compared to the Will, which is a public document that anyone can request a copy of once it has been admitted to probate, Trusts are semi-secret documents for the eyes of the Trustees alone. The Trust is a private document, the contents of which will not become public, therefore the information on whoever you have chosen to benefit from your Estate will remain private.

  • Different Beneficiaries

In order to ensure privacy and separation for all parties connected with the Trust, you can name different Beneficiaries in different Trusts.  The Beneficiaries of a Trust will not be involved in the use of funds for any other Trust if they are not parties to, Beneficiaries of, the settlement agreement.

  • Autonomy & Management

You can assign different Trustees to different Trusts if you need to, meaning that different people control and have decisions making powers for different Trusts. Trustees of any one Trust must act unanimously. This can become an issue where there are disputes between the Trustees and they are longer on good terms. Trusts can no longer operate as intended if the Trustees cannot agree on a course of action and it may be that the funds cannot be put to use for the benefit of Beneficiaries as a result. Allowing different Trustees to act across a number of Trusts means that each Trust can be managed independently of others. This once again allows privacy and separation for the Trustees  and Beneficiaries of each Trust.

  • Divorce

Where a Beneficiary of a Trust gets divorced, any benefits they have received from a family trust may be taken into account in a settlement. If the Beneficiary can benefit from a number of Family Trusts but to date has only received a benefit from one Trust, for example, it is likely that only the Trust they have received a benefit from so far is at risk of being included in any settlement. Any Trust or Trusts that a Beneficiary has not received a benefit from to date may not be included in a settlement, as they have not yet received anything from the Trust. This can be a good way of  protecting the assets, as the increased separation reduces the risk of attack.

  • Costs

In cases where the Trustees of a Trust are concerned with one Family or branch of the family as opposed to numerous members with different needs, the management of the Trust can be simpler, and therefore cheaper. A group of simple Trusts is much more manageable than a single Trust with many purposes, mixed assets, multiple Beneficiaries and more potential for arguments amongst them.  You will also need to discuss with your Accountant possible liability to periodic and exit charges.  However these are generally small compared with the potential 40% IHT payable if the assets are in the estate of your Beneficiaries

How many Trusts do I need?

There is no limit to the number of Trusts that you can create. Ideally, you’d have as many Trusts as you need for every significant asset or purpose.

For further information on how using Trusts may be of benefit to you and your Estate contact Newnham & Jordan Solicitors for a chat on 01202 877400

This article is intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

The Benefits of Using Multiple Trusts