Pensions are notoriously complex and different rules can apply to different pensions held by different companies.
After someone’s death, the benefit of their pension may be payable to the person they nominated when the scheme was set up.
Workplace and private pensions
Sometimes a workplace or private pension scheme will provide a lump sum and/or income to your beneficiaries after you die. This will be paid to the nominated person, but it is possible for a dependant to make a claim on the funds if they have been excluded.
When you reach retirement age, you may choose to remove a lump sum of 25 percent of the value of the fund from your pension. If this is still in your estate at the time of your death, then Inheritance Tax may be payable on it, depending on the size of your estate.
You can gift this during your lifetime if you choose, but if you were to die within seven years of making a cash gift, then all or part of its value will be taken into account when Inheritance Tax is calculated.
Leaving pension funds to a beneficiary
Where a joint annuity is held, payments, usually to a spouse or partner, can continue after the death of the pension holder.
If the pension guaranteed annuity payments for a certain period of time, then these will continue to be made to a beneficiary for that period of time.
The pension may entitle beneficiaries to receive a lump sum payment. If the deceased left children under the age of 18 or a dependent partner or relative, then the pension trustees may make the decision to award a payment to them.
Payment of Inheritance Tax
Pension funds are paid at the discretion of the pension trustees and do not usually form part of the deceased’s estate, in which case Inheritance Tax is not payable on their value.
However if the pension trustees are not able to make a decision as to who the pension funds should be paid to, they may make the payment into the estate, in which case the money would be included in the Inheritance Tax calculation.
Following someone’s death, you should speak to their pension provider to find out how and to whom any payments will be made.
Because pensions are such a complex area, it is advisable to take independent advice when writing a Will, dealing with pension funds or administering an estate.
If you would like to discuss your Will or a probate matter with one of our expert team, ring us on 01243 216900 or email us at firstname.lastname@example.org.
If you own a property jointly with someone else and you want to leave it in your Will, you need to understand the different types of joint ownership.
When you buy a home with someone else, you will either own it as joint tenants or as tenants in common. This affects who the property will pass to in the event of your death.
If you own a property with someone else as joint tenants, then on the death of either of you, the property automatically passes to the other, whatever the terms of your Will.
Tenants in common
If you own property as a tenant in common with another person, then your share in the property will pass in accordance with the terms of your Will.
This type of ownership also allows you to own a property in unequal shares. If you hold a property as a tenant in common, you should ensure you have a valid Will in place so that your interest passes to your choice of beneficiary.
If you don’t have a Will
If you haven’t made a Will, then your share of any property owned as a tenant in common will pass in accordance with the rules of intestacy. This leaves your estate to your closest family members, in strict shares.
If you are married, then your spouse will receive the first £250,000 you leave, together with all of your personal possessions. Of the remainder, half goes to your spouse, with the other half being split equally between any children.
Leaving a life interest in your home
If you own a property jointly, you might want to leave your share to your children, but allow your spouse or partner to live in the property during the rest of their lifetime.
This can be done by severing the joint tenancy, if there is one, and setting up a life interest trust in your Will. It means that the joint owner won’t have to leave the property, but once they no longer need to live there it will pass to the beneficiaries named in your Will.
This prevents any children being disinherited in the case of second marriage, and can also protect your share of any property from care home fees that the co-owner may incur in later life.
Whatever method of property ownership you have, it is always advisable to put a Will in place so that you can be sure your loved ones benefit from your assets after your death. It can also prevent disagreements arising between family members.
If you would like to talk to one of our expert lawyers, ring us on 01243 216900 or email us at email@example.com.
As well as naming the people who are to receive money from your estate, a Will can make various appointments, including those of Executor and Trustee.
When you make a Will you need to consider who you would like to administer your estate and be responsible for any money that is to be held in trust. These can be onerous roles and you should be aware what they involve so that you can discuss them with the people you would like to act on your behalf.
The role of Executor
An Executor is responsible for the administration of an estate in accordance with the terms of the Will. Duties are likely to include making funeral arrangements, valuing assets, collecting them in, arranging for their sale, calculating tax payable, drawing up estate accounts and distributing the estate to the named beneficiaries.
The job can be extremely time consuming, particularly if the deceased held a variety of assets with various stakeholders. Each will need to be notified and will have their own requirements for releasing funds. If there is a property, it will need to be insured, valued, cleared and a sale arranged.
Debts will need to be paid, including Inheritance Tax, which the Executor will be responsible for calculating, based on the value of the estate.
Because the job of Executor can be difficult and they will be personally liable for any errors they may make, you should discuss it first with anyone you might wish to appoint. If you do not have anyone who is willing and able to act, you can choose to appoint a professional executor. This is someone such as a probate solicitor who is experienced in the winding-up of estates and who will be able to prepare the necessary tax returns and estate accounts.
The role of Trustee
If your Will creates a trust, then you also need to appoint Trustees to administer it. You may want to leave money to children under the age of 18 or leave a life interest in a property or a sum of money to a spouse or partner.
A Trustee’s role can include dealing with the investment of money as well as taking decisions as to where it should be spent. For example, a child’s guardian may ask for a contribution towards maintenance or education and the Trustee will need to consider whether the request is reasonable and in accordance with the intentions of the deceased.
As well as looking after the assets included in the trust, a Trustee will also need to keep clear records and prepare accurate trust accounts.
The role of both Executor and Trustee can be demanding, with consequences for inadequate performance, so it is essential that your chosen appointees understand the job they are taking on and believe they are capable of carrying it out.
If you would like to talk to one of our expert probate lawyers on on 01243 216900 or email us at firstname.lastname@example.org.
If Premium Bonds form part of someone’s estate, they must be dealt with in accordance with the National Savings & Investments (NS&I) rules.
Many people hold Premium Bonds among their financial assets. They are issued by NS&I, a Treasury-backed government savings scheme.
The minimum investment is currently £25, although older Bonds may be for smaller sums. Each £1 unit has a unique number and is entered into a monthly prize draw, with a chance of winning an amount of £25, £50, £100, £500, £1,000, £5,000, £10,000, £25,000, £50,000, £100,000 or £1,000,000. There are usually two prizes of the highest sum, around 6 x £100,000, and increasing numbers of lower prize winners, depending on the amount of bonds in any particular draw.
No interest is paid on the Bonds, and the chance of any £1 unit winning is 1:24,500. A maximum holding of £50,000 is allowed.
When a Premium Bond owner dies
NS&I have a death claims form available via their website which will need to be completed by the executor or administrator of the estate and returned to them together with a Registrar’s copy of the death certificate and a certified copy of any Will.
Premium Bonds cannot be transferred to a new owner. On death, there is the option of leaving them in the draw for up to a year following the date of death, or they can be encashed.
If they are left in the draw, then any prizes are either paid to a beneficiary, if one has been named, or accrue to the estate.
If the beneficiary of the funds wants to invest in Premium Bonds, they would have to buy them in their own name. It is not possible to own Premium Bonds jointly with anyone else.
A Grant of Probate or Letters of Administration is required by NS&I if the amount the deceased held with them exceeds £5,000. This includes other NS&I assets such as Savings Certificates.
If the amount held is below £5,000, then NS&I will not need to be provided with a Grant of Probate or Letters of Administration, but it may still be needed for other assets held by the deceased, depending on their value.
Is tax payable on Premium Bonds?
No Income Tax or Capital Gains Tax is payable on Premium Bond winnings, however the value of any Bonds held by someone is included in their estate for Inheritance Tax purposes.
If you would like to discuss Wills or probate with one of our expert team, ring us on 01243 216900 or email us at email@example.com.
When you write your Will, you need to name one or more Executors who will carry out the administration of your estate when the time comes. We look at what this entails and what you need to take into account when choosing someone to take on the role.
The Executor to an estate has the job of bringing the deceased’s affairs to a close and distributing funds to the named beneficiaries. The task can be daunting and take many months, even years, so before appointing someone you both need to understand exactly what it entails.
The role of an Executor
There is usually a substantial amount of work involved in winding up an estate. Initially the funeral needs to be arranged and the death registered.
Asset holders need to be notified and the estate valued. Inheritance Tax should be calculated and paid, as well as any Income Tax that may be due.
Assets need to be valued, collected in and sold, to include any property, which may need to be cleared and insured in the meantime.
Estate accounts must be prepared and finally the estate is distributed to those named in the Will.
Choosing the right Executor
The Executor can be held personally liable for any mistakes made during this process, so it is important to ensure that the person you have chosen is willing to take on the role and capable of carrying it out proficiently.
Your executor should be aged 18 or over and have the mental capacity to act on your behalf.
More than one Executor
It is usually recommended that at least two Executors are appointed in a Will so that if one of them is unable or unwilling to act when the time comes, you still have someone else who can take on the role.
Two Executors can act jointly, or one can step back when the time comes and allow the other to do the work alone. You can also name a substitute Executor who would only act if one of those named could not.
If you don’t have anyone who can act for you
If you don’t have anyone willing or able to take on the task, you can appoint a professional Executor, such as a probate solicitor, to deal with the administration of your Will.
They will be familiar with the process, able to correctly calculate tax due and draft accurate accounts. A charge is made for the service, but it does mean that your loved ones will not have to struggle with complicated and sometimes frustrating paperwork following your death.
If you would like to talk to one of our Wills and Probate specialists, ring us on on 01243 216900 or email us at firstname.lastname@example.org.
When someone has died and their Will can’t be located, although you are certain there is one, there are several courses of action you can take to try and locate it.
If you make a Will, you should ensure that your loved ones know where it is being stored. Otherwise, there is a risk that they won’t know whether you had a valid Will in place or where it is located.
When you have a Will professionally drafted, your solicitor is likely to be willing to store the document for safekeeping for you. You will be given a receipt with their details on it, which you should keep with your important papers.
Searching for a lost Will
When a Will can’t be located, you should first search the deceased’s property and go through their paperwork. Even if you don’t find the Will itself, you may find some information about their solicitor, a receipt for the Will or even a copy of the document.
It is possible that the firm of solicitors that originally held the Will no longer exists, in which case you can contact the Solicitors Regulation Authority Intervention Archives department who store all documents held by firms which they close down.
The London Principal Probate Registry also store Wills that can no longer be held by the original law firm involved.
Finally, a firm called Certainty have a register of a certain number of Wills and will search that for you for a fee.
If you are acting as executor or administrator, it is important that you make an attempt to find a valid Will. By undertaking these searches, you will be able to show that you did everything reasonable to locate any Will, which could be important if potential beneficiaries raise any queries about your actions.
Using a copy of the Will
It may be that a signed copy of the Will is found. Application for grant of probate can be made to the Probate Registry using the copy, but it will need to be accompanied by a sworn affidavit detailing the attempts you have made to locate the original.
You will also need to explain the circumstances under which the Will has been lost and also provide information regarding anyone who would inherit under the rules of intestacy but not under the terms of the copy Will.
When the Will can’t be found
If neither the original Will nor a copy can be located then it will be necessary to proceed with administration of the estate under the rules of intestacy. These provide a strict order in which close relatives of the deceased will inherit, starting with any spouse, who will be entitled to the majority of the estate, and followed by any children.
If you would like to speak to one of our expert Will experts, call us on 01243 216900 or email us at email@example.com.
While it is possible for a single executor to administer an estate, it is usually recommended that two are named when a Will is written.
One of the main reasons for naming more than one executor is in case someone is unable or unwilling to act when the time arises. If a single executor is named in a Will, there is a risk that they may die first, or over time may lose mental capacity. In that event, it would leave the estate without a named executor.
Acting as a sole executor
If an estate does have only one executor, the administration will usually be possible in the ordinary way.
If the winding-up is simple, for example with everything left to the remaining spouse, then a single executor will be able to deal with matters fairly easily.
The benefits of a second executor
With a more complicated estate however, it can be beneficial to have more than one executor. The job of administration can be long and complex, involving the collecting in and valuation of assets, arranging for clearance and sale of any property, calculation and payment of Inheritance Tax, preparation of detailed estate accounts and distribution of the estate to beneficiaries.
It can be helpful for executors to share the burden, particularly if the winding-up takes many months and involves a large amount of correspondence. It can also be good to involve more than one family member to help avoid disagreements and distrust arising at what will be a difficult time.
If the Will creates a trust, then a sole executor is advised to take legal advice in respect of the appointment of trustees. It is always recommended that a second executor be appointed in the case of a more complicated estate.
A joint executor acting alone
If the Will appoints executors to act together, then they are known as joint executors. It will not then be possible for a joint executor to act alone in the estate administration unless the other executor(s) give their agreement.
If the other executor(s) are happy for one person to act solely, then they can either be served with a Notice of Power Reserved, meaning they can take up the position later on, should they choose to, or they can renounce their powers completely. It is advisable for executors to take legal advice before stepping aside.
Choosing your executors
When having your Will drawn up, you should ideally select two executors who you believe will be able to do a good job in estate administration. If you are unable to find suitable candidates, it is possible to appoint a professional executor to act.
If you would like to talk to one of our Wills experts, call us on 01243 216900 or email us at firstname.lastname@example.org.
A Living Will, also known as an advance decision, is designed to be used during your lifetime and sets out your wishes in respect of your care and medical treatment.
By making a Living Will, you can put in writing details of what is important to you and how you would like to be treated in the event that you are unable to make or communicate your wishes at a future date.
What you can include in a Living Will
As well as medical considerations, you can record your preferences in respect of where you would like to be cared for, personal preferences for your day to day life, such as diet and religious beliefs, and who is to be consulted about your care. You should ideally also discuss this with your family and those included in your Living Will.
You cannot include any instructions about what should happen to your estate after you die; this needs to go in a separate Last Will and Testament.
What to consider in respect of medical treatment
It is possible to refuse certain treatments, such as life support and antibiotics for life-threatening infections, but you cannot refuse basic care or food and water. Similarly, you can’t nominate someone to make decisions on your behalf.
If you have a specific condition, you should discuss the possible terms of any Living Will with your medical practitioners.
A Living Will can be made at any time, to help loved ones make difficult decisions in the future, and it is not necessary to wait until you are facing illness or incapacity.
Is a Living Will legally enforceable?
If your Living Will is within the bounds of what is legal and is valid and unambiguous, it will be legally binding on medical professionals.
Health and welfare lasting power of attorney
A health and welfare lasting power of attorney (LPA) is a document appointing someone to act on your behalf in respect of similar matters. If an LPA is signed after a Living Will is made, it may invalidate the Living Will if it gives the attorney the power to make the same decisions covered in the Living Will.
It is possible to write a health and welfare LPA that doesn’t invalidate a Living Will, however this would need to be carefully drafted.
A Living Will made after a health and welfare LPA would take precedence to the LPA in respect of life-saving treatments.
By putting a Living Will in place while you are able to make important decisions for yourself can be helpful and of comfort to your loved ones in the future.
If you would like to talk to one of our lawyers about a Living Will or an LPA, call us on 01243 216900 or email us at email@example.com.
If you own your home jointly with someone else, you should think about how you want to leave it when you write your Will.
There are two different ways in which you can jointly own a property. Only one type of ownership allows you to leave your share of your home to someone in your Will.
Owning your home as a joint tenant
If you and your spouse or partner own your property as joint tenants, then on the death of either of you, the property automatically passes to the survivor. Even if you leave all of your estate to someone else in your Will, a property owned by you as a joint tenant will become solely owned by the other joint tenant.
Owning your home as a tenant in common
If you hold your property with someone else as tenants in common, then your share of that property passes in accordance with your Will. If you don’t have a Will, then it will be subject to the rules of intestacy, which specify which of your relatives will inherit your estate.
This means that if a tenant in common dies, the surviving owner may be forced to leave the home if the person who inherits the other share wishes to sell.
Writing your Will as a property owner
It is always preferable to write a Will, whether or not you own a property, to ensure that your estate passes to those whom you would wish to benefit from it. If you do own a property jointly with someone else, think about what you want to happen after your death.
If you would like to leave your share to someone else, but you currently hold the home as joint tenants, it is possible to sever the tenancy so that ownership becomes as tenants in common. When you own a property in this way, it is also possible to hold unequal shares, for example one-quarter owned by one person and three-quarters by another. This needs to be put in writing at the time the tenancy is created. You can also put details of how you will agree any sale of the property into this document.
Creating a life interest trust
If you want your spouse or partner to live in the home after your death, but don’t want to give them your share of the property outright, your Will can give them a life interest in the home. This would give them the right to live in the property for as long as they want, but ultimately the house would pass to your choice of beneficiary.
This prevents the ‘sideways disinheritance’ trap, where a second spouse could choose to leave the property to their children, excluding the children of the first marriage.
If you would like to talk to one of our property experts or Will writers, ring us on 01243 216900 or email us at firstname.lastname@example.org.
It is a mistake to think that Inheritance Tax (IHT) can be avoided by giving away assets during your lifetime.
While it may often be the case that it is beneficial to pass on gifts during your life, you need to be aware that there could still be an IHT liability.
The tax rules on lifetime gifts
Gifts of cash or valuable items made in the seven years before death may need to be counted when the estate executor calculates IHT liability.
Up to £3,000 can be given tax-free each tax year, or £6,000 if no gift was made the previous year.
Each parent can give their child £5,000 tax-free towards a wedding, and a grandparent can give £2,500 and other relatives £1,000 towards a wedding.
When a gift is given in the seven years before death, it will need to be included in estate calculations for IHT. It is the job of the executor or administrator to find out what gifts have been made and account to HM Revenue & Customs for any IHT that may be due.
Where gifts exceed the amount allowed to be given free of tax, then they will be deducted from the nil-rate band, ie. the amount an individual can leave tax-free on their death. The figure currently stands at £325,000.
There is a sliding scale for calculating the amount of IHT payable on gifts. Where the sum was given less than three years prior to death, then IHT is payable at 40 percent. In the three to four years before death it is 32 percent and the sliding scale continues for each year at rates of 24 percent (four to five years), 16 percent (five to six years) and 8 percent (six to seven years).
Small gifts of £250 or below can be given free of tax, as can gifts made from income you receive and maintenance payments made to relatives or ex-spouses.
Tax-free giving to spouse or civil partner
As your whole estate can be passed free of IHT to your spouse or civil partner, it follows that lifetime gifts to them are also free of tax. However, if you put money into a trust, this may create a tax liability. It is a complex area of law and it is advisable to speak to an expert tax and trusts lawyer.
An experienced adviser will also be able to help you make the most of IHT allowance and suggest ways of structuring your assets to minimise the amount of tax payable. When done properly, this can make a substantial difference to your liability.
It is also possible to appoint a professional executor who would be responsible for calculating IHT liability and preparing estate accounts.
If you would like to speak to one of our expert tax and trusts professionals, ring us on on 01243 216900 or email us at email@example.com.