Big rise in contested estates attributed to DIY wills…

The continuing rise in numbers of contested Wills is being attributed to more and more people attempting to write their own Will.

The number of cases heard by the High Court went up from 227 in 2016 to 282 in 2017 and 368 in 2018.

Drafting a Will

Drawing up a valid Will can be a complicated undertaking. Matters to be considered include whether to leave beneficiaries lump sum gifts or a percentage of the estate, who will inherit first if your estate is smaller than expected, how to ensure first and second families are both provided for, even if you die before your new spouse and how to minimise Inheritance Tax liabilities.

A small error made in drafting a Will can mean that it is invalid. If this happens, then there is a risk that the estate will pass under the rules of intestacy. This details which relatives will receive the estate and in what proportions. Unmarried partners and stepchildren do not inherit anything under the rules.

Why a Will might be challenged

If the wording of a Will is ambiguous or the wrong terminology is used, there may be an opportunity for someone to challenge it in court. Even the incorrect execution of a Will by the signatory and witnesses can mean that a Will is invalid. Mistakes are easy to make in this complicated area, with the risk that will result in a long and expensive court case.

What happens if a Will is challenged

Dealing with a death can be difficult and when family members feel that they have not been left what they felt they were entitled to, problems can arise. When emotions run high, if there is ambiguity or an error in the Will, then they may take the opportunity to bring a legal case. These can take years to resolve and are likely to be expensive. Saving a few pounds now by drafting your own Will can result in the loss of thousands later on if the Will is proved to be invalid or ambiguous.

Why a professionally drafted Will is always recommended

Speaking to an expert Will writer allows you the opportunity to explain exactly what you would like to happen to your estate. If, for example, you have remarried and you would like your spouse to live in your home after your death, but ultimately want it to pass to your children, a professional will be able to explain to you how this can be done and draw up a Will that you can have confidence in.

They will be able to help you avoid pitfalls, such as leaving cash gifts that might reduce your residuary estate far lower than you anticipate and will be able to translate your wishes into a legally binding Will. When a Will has been clearly thought out and well drafted, it significantly reduces the risk that your family will start to wonder if it was exactly what you meant to do.

To speak to one of our expert Wills lawyers, call us on 01243 216900 or email us at info@legalmatters.co.uk.

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Help with will writing or administration

Administering an estate when the Will creates a trust…

When someone dies leaving a Will that creates a Trust, it can have implications for the person dealing with the administration of the estate.

A Will may leave property or assets to a Trust so that an individual may benefit from them during their lifetime without actually owning them. For example, the deceased may have wanted their partner to be able to continue to live in their home, but might want it to pass eventually to children. Or they may want to leave money to children for their maintenance and education.

Estate administration and Will Trusts

The need to set up a Will Trust doesn’t alter the need for an executor to obtain probate. In some cases, where the assets fall below a certain threshold, probate might not be required.

Setting up a Will Trust

The executor is responsible for creating the Will Trust. They will ensure that assets are properly transferred to the trust and that the trustees named in the Will have access to them and are aware of their obligations under the terms of the Will.

Once the assets have been transferred, the trustees will be responsible for looking after them and distributing them to the beneficiaries as specified.

Types of Will Trust

A Life Interest Trust gives a beneficiary the right to benefit from an asset during their lifetime. This could include maintenance payments or living in a property. Once the beneficiary has died, the assets pass in accordance with the terms of the original Will.

A Discretionary Trust gives the trustees the right to distribute funds to named beneficiaries as they see fit. For example, there may be a request to fund education or provide a lump sum towards the purchase of a home.

Money held in Trust for a Minor will be looked after by the trustees until the child reaches the age specified in the Will. This doesn’t have to be 18 – it may be 21 or 25 or even older if the deceased wished.

A Nil Rate Band Trust may have been included in a Will as part of Inheritance Tax (IHT) planning. While it is no longer a requirement, older Wills may still contain this type of trust, which transfers assets amounting to the maximum sum the deceased could give under a Will without being liable for IHT.

Help with Will drafting and administration

Creating a valid Will that does exactly what you want and makes the best use of assets in the light of IHT and other considerations can be complicated.

Dealing with the administration of a Will and setting up of a Will Trust may also have tax implications. Obtaining professional advice means that you can be sure that assets are maximised.

To speak to one of our expert probate lawyers at legalmatters, call us on 01243 216900 or email us at info@legalmatters.co.uk.

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Legal Power of Attorney

Why a Lasting Power of Attorney is preferable to a Deputyship Order…

A Lasting Power of Attorney (LPA) allows you to appoint an attorney to deal with your affairs once you are no longer capable of doing so yourself. If you do not have an LPA, then your family will have to apply for a Deputyship Order to allow someone to help you.

There are two types of LPA: one for dealing with your property and financial affairs and one for your health and welfare.

You can choose a different attorney for each LPA if you wish, and the document will not come into effect until it is registered, allowing you to execute it well before it is needed.

If you don’t have an LPA

If you become unable to manage your affairs and you have not executed an LPA, then your family will need to apply to the Court of Protection for a Deputyship Order to appoint a deputy to act on your behalf.

This application can take several months to process and will need supporting evidence, such as a medical assessment.

It is also an expensive procedure, with court application and hearing fees of several hundred pounds each, medical assessment fees and, if a professional deputy is appointed, their ongoing charges. There will also be legal expenses if your family need help navigating the process.

In contrast, the cost of executing an LPA is relatively low, and the registration fee is currently £82.

Why an LPA is the best solution

As well as being a difficult, expensive and time-consuming process to appoint a deputy, it can mean that for a time no-one is able to help you with your affairs.

If you have become unable to deal with them yourself, there may be several months when your finances cannot be managed. This can be a big strain on those trying to help you, particularly if bills need to be paid or services ordered.

With regard to your health and welfare, the Court of Protection prefers not to appoint a deputy to act in respect of all of an individual’s health and welfare needs. The court will rule on single issues if agreement cannot be reached, but generally a collaborative approach is preferred, with family and healthcare professionals acting together.

Therefore if you want to choose someone to act for you in health and welfare matters, you should execute an LPA in their favour. It will not be used until and unless you become unable to make your own decisions.

If you plan in advance and execute LPAs, you also have the option of appointing more than one attorney and including back-ups in case they are unable to take on the role. You can talk things through in advance with them and explain what you would like them to do for you.

To speak to one of our expert solicitors, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Funeral arrangements

Who has the legal right to organise a funeral?

A funeral is usually arranged by close family members of the deceased, but what happens if they disagree, or if someone else has the legal right to arrange the funeral?

If the deceased has left a valid Will, then the named Executors have the right to organise the funeral and either a burial or cremation. If there is no valid Will, then the Rules of Intestacy govern the appointment of an Administrator to deal with the deceased’s affairs, including funeral arrangements.

An Administrator will always be a family member, but it is possible that an Executor won’t be, for example if the deceased appointed a friend.

In that case, the Executor can choose to step aside and let the family arrange the funeral that they want.

When disagreements arise

If the Executor has different wishes to the family and a dispute arises, it is the Executor who has the right to make the arrangements.

If people have differing views on what should happen, it can be very upsetting at a time that is already difficult. The best way to proceed is to keep communicating and compromise if you can, to try as far as possible to avoid conflict.

If the parties involved cannot agree on funeral arrangements, then an application can be made to the Court, who may decide in favour of the legally appointed Executor or Administrator provided they have acted reasonably.

Where the disagreement is between two or more appointees, the Court will decide the matter on the facts. If the deceased has expressed any wishes in the Will, these are taken into account, although these wishes are not in themselves legally binding.

The importance of leaving a Will

Leaving a valid Will that includes an expression of funeral and burial or cremation wishes may help to avoid expensive and upsetting disagreements after death.

It is possible to request a professional Executor in a Will, such as a solicitor, who will act in accordance with the deceased’s wishes as far as possible. This can also help to avoid disagreement between relatives.

If an unmarried person dies without making a valid Will, then their partner can be left with no say in the funeral decisions as well as receiving nothing from the deceased’s estate, as the Rules of Intestacy do not include those not directly related.

A Will can be a record of what the deceased wants to happen after their death, as well as ensuring that their estate is distributed to chosen family and friends.

To speak to one of our expert probate solicitors, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Inheritance Tax planning

What is the transferable nil rate band in Inheritance Tax and how can you claim it?

When someone dies, the first £325,000 of their estate is exempt from Inheritance Tax (IHT). If they don’t use all of this allowance, it can be transferred to their spouse’s or civil partner’s estate in due course. This is known as the transferable nil rate band.

This increases the exempt amount for the partner’s estate when they die, meaning they could have a potential IHT threshold of up to £650,000.

The relevant dates

The transfer of the nil rate band can be applied for if the remaining spouse or civil partner died on or after 9 October 2007.

In respect of civil partnerships, the transferable nil rate band can be claimed only if the first partner died on or after 5 December 2005, the date that the Civil Partnership Act became law.

How much nil rate band is transferable?

Where the first spouse or partner to die leaves all of their assets to the remaining spouse or civil partner, no IHT is payable, so the entire £325,000 can be passed to the remaining spouse, subject to the deduction of any non-exempt gifts made during the previous seven years.

How to apply to transfer the nil rate band

Two forms need to be sent to HM Revenue & Customs (HMRC). The first is the standard IHT form, while the second is the application to transfer the unused allowance. There are two options for this second form.

Form IHT217 Claim to Transfer Unused Nil Rate Bank for Excepted Estates

This form should be used when the estate of the first person to die is an excepted estate, ie. IHT was not payable, for example where the estate is worth less than £325,000 or where the assets are left to charity.

Form IHT402 Claim to Transfer Unused Nil Rate Band

Where some of the £325,000 IHT allowance was used by the estate of the first spouse to die, then only the remaining balance can be transferred to benefit the second estate. Other financial information will need to be included on the form, for example gifts made within the last seven years and pension details.

Both forms need to be signed by the estate Executor or Administrator and sent to HMRC together with the main IHT form, IHT400.

A probate lawyer will be able to work out the correct figures to be included on the form, which isn’t always straightforward, for example in the case of disposal of cash or assets by the deceased prior to their death or where gifts are made to charities, which could potentially reduce IHT liability.

To speak to one of our probate specialists, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Starting a family

Why you should make a Will when you start a family…

When you’re expecting a baby there’s a long list of things to do to get ready. Making a Will isn’t usually at the top of the list, and for many people it isn’t even something they think about at all. But in reality, it’s an important job that could seriously impact your family’s future.

Nobody wants to think about a situation in which children lose their parents, but covering every eventuality means that once you have children you can relax and enjoy life safe in the knowledge that you have drawn up plans for their future care should the worst happen.

When parents don’t make a Will

If anything happens to you and you haven’t made a Will, then those left behind will not necessarily know what your wishes were with regard to your children’s upbringing.

The authorities will have the right to place your children with the guardian they decide upon, and there could be a delay in finalising this, which could be even more unsettling for all involved.

Failing to plan and talk things over with family members could also cause disagreement between them.

As far as financial provision is concerned, this will be governed by the Rules of Intestacy, and you will have lost the opportunity to appoint your choice of trustees to look after the money you leave and decide how it should best be spent.

Writing your Will when you’re a parent

Writing a Will allows you to clearly set out who you would like to care for your children should you die. You can also make financial provision for your children, choosing the age at which you would like them to inherit any money you leave them. For example, you may decide that you don’t want them to be given a large sum of money at 18, and that you would prefer them to inherit it when they are older and more settled in life.

You will appoint trustees to administer the money until that time and leave instructions for how they can use it for your children as they grow up, for example a private education or money towards the purchase of a home.

The trustees will also be able to pay money to your children’s guardian, for everyday expenditure such as food, clothing and school expenses.

Appointing trustees

Choose people whom you trust implicitly and whom you believe are capable of carrying out your wishes as well as looking after the money that you leave. This fund will eventually be inherited by your children so it is important that it is properly managed.

If you would like to talk to one of our expert wills and trusts lawyers, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Client Testimonial

Client Testimonial…

When you lose someone you love it is always a difficult time. Having to deal with the paperwork involved in administering an estate after a death – and when you’re grieving – can be extremely upsetting.

That’s why at legalmatters we will always try to make the process as pain-free as possible for you – and why we’re always delighted to hear from a client when we’ve helped a family or an individual through such a stressful time. So thank you Jane for your kind words.

“Thank you and Megan, and all in the office staff for making my journey – sorting my dad’s estate through yourself and legalmatters – a professional, reassuring and stress free time. It’s been a pleasure and I would highly recommend you to friends.”

Choosing someone to act as your attorney

Signing a Lasting Power of Attorney (LPA) document authorises someone to deal with matters on your behalf, should you become unable to do so yourself.

There are two types of LPAs, one covering property and financial affairs and one covering health and welfare.

It is possible to ask your attorney to deal with your property and financial matters while you are still capable, for example if you have limited mobility and find it difficult to get to your bank. Your health and welfare matters can only be dealt with by your attorney once you can no longer make decisions for yourself.

You can choose to sign only one type of LPA if you wish.

Who should you appoint?

You should choose someone whom you trust implicitly, as they will potentially have a great deal of say over your life and financial affairs.

Your attorney needs to be aged 18 or over and in respect of a financial and property LPA you cannot appoint anyone who has been declared bankrupt or who is subject to a debt relief order.

If you do not feel that you have a family member or close friend who can act on your behalf, it is possible to appoint a professional such as a solicitor, who will charge a fee to deal with your affairs and who will be under a duty to act in your best interests.

Once your LPA is registered with the Office of the Public Guardian (OPG), your attorney will be supervised by them. This could include a visit to you or contact to ensure your attorney is acting effectively. After the first year it is likely that the supervision will be fairly minimal.

What your attorney needs to know

You should ensure that your attorney is happy to be appointed, and that they know what responsibilities this will entail. For example, they will be required to submit an annual report to the OPG explaining the reasoning behind the decisions they have made on your behalf and why they believe the decisions were in your best interests, as well as submitting financial details such as bank statements.

Give your attorney as much information up front as you can, letting them know what you will expect them to do for you and the scope of what they will be dealing with.

Let them think it through carefully and without pressure so that they can make the right decision. If they do choose to act, then discuss your wishes with them so that when the time comes, they will know how you would like them to proceed.

It is a good idea to have a second-choice attorney in place, in case your first-choice is unable or unwilling to act when you finally need them to.

If you would like to discuss appointing an attorney, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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UK Inheritance Tax

What Inheritance Tax liability do non-domiciled residents have in the UK?

When someone is classed as being domiciled outside of the UK, Inheritance Tax will only be payable on their UK assets.

A person’s domicile is usually their home or permanent place of residence.

However some people may claim the place that their father was born as their domicile, or if their parents were unmarried, then the place of their mother’s birth.

Even if someone was born, educated and works in the UK, it is still possible for them to be a so-called ‘non-dom’, ie. not domiciled in the UK. There are rules requiring an annual remittance to be paid to HMRC each year from the seventh year of residency onwards, but by way of benefit non-doms can avoid paying tax on foreign income or gains, provided the money is not brought to the UK.

Inheritance Tax benefits for non-doms

This benefit also extends to UK Inheritance Tax liability. Property outside of the UK can be excluded when calculating Inheritance Tax liability if the deceased was classed as a non-dom at the time of their death. For those classed as domiciled in the UK, Inheritance Tax is payable on all assets, wherever in the world they may be situated.

Property excluded from Inheritance Tax payments

  • Property situated overseas
  • Property situated overseas and held in trust where the settlor was not domiciled in the UK
  • Foreign currency bank accounts
  • British government securities, national savings and War savings certificates

How to benefit from non-dom status

If you have non-dom status, then by setting up an excluded property trust such as a discretionary off-shore trust can protect your assets from UK Inheritance Tax.

This can be beneficial for those who may have lived in the UK for more than 15 out of the previous 20 years, as it will mean that they are considered as UK-domiciled.

By setting up an excluded property trust, assets will not attract Inheritance Tax even if the settlor then acquires UK domicile.

To talk to one of our experts about tax planning, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Life interest in your Will

Leaving someone a life interest in your Will

When making a Will, it is possible to leave someone a life interest in your property or assets.

It may be more prudent in certain circumstances to leave your spouse or partner a life interest in your assets rather than giving them outright ownership.

In particular this can be advantageous if you want to make sure any children you have receive something in the future.

Possible problems in leaving assets outright

Married couples often make duplicate Wills, leaving everything to each other and then after both their deaths, to their children.

The problem with this is that after the death of the first parent, unforeseen circumstances could mean that either the Will becomes invalid or the money in the estate is spent before it can be inherited.

For example, if the remaining parent remarries, any previous Will automatically becomes invalid. If the parent fails to make a new Will, their assets will pass under the Rules of Intestacy, with the majority of the estate going to the new spouse, who is then free to leave it elsewhere in their own Will. Even if they intend to honour an intention to pass the money to the children, it may be spent, for example on care home fees.

Similarly, if a new Will is written, any previous Will is superseded. This could mean that after the death of the first parent, the remaining parent is free to leave the whole estate elsewhere and not to the children.

Finally, if the remaining parent moves to a care home, then assets in the estate can be swallowed up in fees. At present the local authority will only step in to assist with payments when the patient’s total worth falls below £23,250.

How a life interest works

By leaving someone a life interest, you can be sure that ultimately your assets will pass to those you choose.

For example, you can leave your spouse a life interest in your home, which means they can live there as long as they want, but once they have died or left, your share will pass in accordance with your Will and cannot be given elsewhere.

This also prevents your share being used to pay their care home fees.

Similarly you can leave a life interest in other assets, including cash and shares. This allows your spouse access to money and interest for living expenses, but means that the money remaining after their death will go to your children, or whoever you have chosen.

If you would like to discuss whether leaving a life interest in your Will might be suitable for you, call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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