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Going on holiday

Making a Will before you go on holiday

While no-one really wants another task to do before they go away on holiday, it really is a good idea to make sure you have a valid Will in place before you travel.

Taking a trip will always involve a small risk, and many people take out insurance just in case something happens. Think of a Will in the same way; it probably won’t be needed, but once you have it in place, you can forget about it and enjoy your break.

Increased risk level on holiday

When we’re away, we often try activities we wouldn’t at home, and they may well be things we’re not proficient at. While there is rarely a problem, very occasionally things can go wrong.

Some countries have lower road safety levels than the UK, meaning a higher risk of an accident while travelling. Some places face regular natural disasters such as flooding, subsidence, earthquakes or tsunamis.

There are diseases in some countries that can on occasion be fatal or a risk of injury or poisoning from the local wildlife, and medical care might be of a lower standard than you would wish.

While these are not common occurrences, insurance companies understand that the risks do exist. It makes sense to put a Will in place, in the same way that we might arrange an insurance policy.

Why you should make sure you have a Will

If you die intestate, ie. without a valid Will in place, your money and assets such as your home and personal possessions will pass under the Rules of Intestacy, to particular members of your family. You may have wished to leave your money elsewhere, or in different proportions, but without a Will, no-one will be able to carry out your wishes.

You can also include requests about your funeral, what should happen if you die overseas and details regarding care of any minor children if you have them. This can cover not only who you would like to become their legal guardian, but also financial provision.

It is always a good idea to have a Will in place, even if you aren’t planning any travelling. This applies to every age group, not just older generations. If you have any assets, then it makes sense to make your wishes clear, so that they can go to those you choose.

While no-one enjoys thinking about writing their Will, once it is in place there is usually a sense of relief, knowing that your wishes have been recorded and will be carried out should anything happen to you. In the meantime you are free to relax and enjoy life, including any trips you have planned.

If you would like to talk to someone about writing your Will, speak to one of our team at legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Why you shouldn’t try and draft your own Power of Attorney

Giving someone the power to deal with your affairs can be a good idea, but if the document isn’t drafted carefully it can lead to expensive financial and administrative problems.

A Lasting Power of Attorney is the document which gives someone the authority to deal with financial affairs on behalf of another. It is often signed by older people in anticipation of the time when they may become unable to deal with matters by themselves. It must be executed while the donor is still mentally capable of understanding the authorisation they are giving.

Problems can arise if the document isn’t carefully drafted, clearly and unambiguously setting out exactly what the donor wants the attorney to do for them. There are many decisions to be made, including the following:

How many attorneys?

More than one attorney can be appointed. The document needs to state whether they are able to act jointly and severally or just jointly. If they are only able to act jointly, then every attorney will need to be a party to each individual transaction, for example signing a cheque or authorising a financial transaction.

There is also the option to name replacement attorneys who would step in if one of the original attorneys died. Again, their role will depend on whether the original attorneys were acting jointly or jointly and severally. If the original attorneys had to act jointly, then on the death of any one of them, all of them would be forced to stand down and the replacement(s) would step in.

When can the Power of Attorney be used?

The donor can choose to allow the Power of Attorney to be used before they become incapacitated, for example, to facilitate dealing with banks where mobility is an issue. Alternatively, they may want to manage their own affairs until such time as they are mentally unable to.

Restrictions

The Power of Attorney can cover all financial affairs, or it can contain restrictions, for example, not permitting sale of a house or large cash gifts. It is important that any restrictions are clearly drafted, with no ambiguity.

Other Powers of Attorney

The donor may also have drawn up a personal welfare Power of Attorney to deal with health and welfare matters. If different attorneys are named on that document, financial attorneys may need to cooperate with them to find the best way forward for the donor.

Having a Power of Attorney document professionally drafted by experts is well worth the expense. If a document contains errors or is poorly worded it could end up being contested or being declared invalid. In that case, any legal action or application to the Court of Protection to appoint a deputy would be expensive and could result in the donor’s affairs not being administered as they would have chosen.

If you would like to speak to a lawyer who specialises in drawing up Powers of Attorney, ring us on 01243 216900 or email us at info@legalmatters.co.uk.

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Is probate necessary if the deceased left a Will?

On some occasions it may be possible to deal with someone’s estate without needing to apply for probate.

When someone dies, the person named as executor in their Will is responsible for collecting in, valuing and distributing their assets.

Whether or not that person needs to apply for probate depends on the value of the estate and how any assets were held.

Small estates

If an estate only has a modest amount of money, it may be classed as a small estate and probate might not be necessary.

There is no exact definition of a small estate, although as a rough guide estates worth less than £5,000 may qualify.

Each bank has its own different threshold under which it will close an account and release funds without requiring a Grant of Probate, ranging from around £5,000 to £50,000.

The same applies to share registrars, life assurance companies and pensions administrators. Where the estate is fairly small, then it is worth enquiring of the asset holders what documentation they will need.

Property

Where the deceased owned a property in their sole name then probate will be needed to deal with the sale or transfer.

Similarly, if the property was owned as tenants in common with others, probate is required.

However, if a property was held by the deceased as a joint tenant, then it will automatically pass to the other owner(s).

Jointly held assets

Similarly, joint bank accounts and other jointly held assets will pass automatically on death to the survivor(s).

It is therefore always worth checking whether probate is necessary. If most of the deceased’s property passes automatically, then it may be possible to avoid the time and expense involved in applying for a Grant of Probate.

What documents will asset holders need?

If probate is not needed, asset holders will need to see a copy of the death certificate and may require the executor to complete a form called a ‘Small Estates Declaration’.

They may also ask to see a copy of the Will and identification, such as birth or marriage certificates.

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

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Is Capital Gains Tax payable on an estate?

When someone dies and their assets are sold at a profit, their executor will need to calculate whether Capital Gains Tax is payable.

When an executor or administrator is dealing with the administration of an estate, part of their job is to account to HM Revenue & Customs for any tax which may be due. This includes Inheritance Tax, Income Tax and Capital Gains Tax.

Capital gains or losses during the tax year leading up to death will be taken into account when making the tax calculation, as well as any capital gains made on assets from the date of death until their sale.

This means that if for example the deceased leaves a property that is subject to Capital Gains Tax, ie a second property and not their main residence, then if the value of that property increases between death and sale, tax will be payable on the increase if the amount exceeds the Capital Gains Tax allowance.

Expenses can be deducted from the gain, for example estate agents’ or solicitors’ fees, or in the case of shares or valuables, stock broking or auction house fees.

Capital Gains Tax allowance 2019

An executor is given a Capital Gains Tax allowance of £12,000 per annum for the three tax years following death.

Once this allowance has been used up, Capital Gains Tax is payable at the rate of 28% in respect of residential property and 20% for other assets.

Beneficiaries’ liability for Capital Gains Tax

Where a beneficiary inherits a valuable asset and then proceeds to sell it, they may become personally liable for Capital Gains Tax.

They can use their Capital Gains Tax allowance and may only be liable to pay the tax at a lower rate if they are a lower rate tax payer. This means they would pay 18% on gains from a property sale rather than 28%, and 10% on gains from other assets rather than 20%.

Where a beneficiary occupied the property as their principal private residence and is entitled to at least 75% of the net proceeds of sale, the executor may use principal private residence relief to avoid the need to pay Capital Gains Tax on any increase in value.

Valuing inherited property

The value of an asset to be passed on to a beneficiary is the full market value as at the date of death.

Where the asset in question is a property, it is preferable for the executor to obtain a proper ‘red book’ valuation from a member of the Royal Institute of Chartered Surveyors, rather than simply an estate agent’s quote.

For advice on Capital Gains Tax and the most effective way of passing on assets, speak to one of our team at legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

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Pets in your Will

Making sure your pets are cared for after your death…

There are an estimated 51 million pets in the UK, but only a small proportion of them are mentioned in their owner’s Will.

In England and Wales, pets are considered to be the property of their owners and as such, can be left to someone in a Will.

The RSPCA estimate that there are 12 million pet-owning households in the UK, with 26 percent of us owning a dog and 18 percent a cat.

What happens to your pet when you die

If you haven’t made specific mention of your pet in your Will, then he or she will pass to the person receiving your personal possessions. This could mean that your pet ends up with someone who doesn’t want them or who is unable to care for them.

Planning for your pet after your death

Ideally you should think about who you want to care for your pet at the same time that you make your Will.

Talk to the person you have chosen and make sure that they are completely happy to take on the animal, bird or reptile. Then make sure that your wishes are clearly communicated in your Will and also to your friends and family.

How to look after your pet in your Will

If you’ve found someone to take care of your pet, name them in your Will and specify which pet they are to receive or, if they are agreeable, you can include any future pet.

You can also leave them money to cover vets bills and other expenses. This can be by way of a cash gift, contingent upon them accepting the pet, or by way of a trust. Leaving the money to them in trust, with them as trustee, means they can avoid losing any state benefits they may be receiving, which might be in jeopardy if they were to receive a lump sum of cash. You can specify what is to happen to the remainder of any trust money once your pet dies.

Consider leaving a ‘letter of wishes’ alongside your Will, setting out how you would like your pet to be cared for. While this will not be legally binding, it will help the person taking on the pet to know what your wishes are.

How animal charities can help

Some charities offer a pre-need registration service. You can contact them to discuss how you would like them to help your pet after your death.

The RSPCA, Blue Cross and Cats Protection are charities which take in pets without owners. If you do make arrangements with a charity, make sure this is specified in your Will so that your executor knows exactly what your wishes are.

To speak to someone about writing your Will, call one of our specialist team at legalmatters, on 01243 216900 or email us at info@legalmatters.co.uk.

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Inheritance Tax rules on lifetime gifts

Giving gifts of cash or valuables before your death means that you can see your loved ones benefit from your generosity. But make sure you understand the Inheritance Tax situation before you give.

Inheritance Tax rules are complex, particularly when it comes to working out what might be due on gifts given before death. Research by Brewin Dolphin found that only 12% of those questioned knew what the annual tax-free gift threshold is.

If money or a valuable item (a lifetime gift) is given within the seven years before someone dies, then there is a possibility that Inheritance Tax will be due if the donor has given away more than the tax threshold amount of £325,000. In that event it would be the recipient of the gift who would be asked to pay the tax.

How much can you give tax-free?

An individual is permitted to give £3,000 per year, with no tax implications. This allowance can be carried over to the following year if it isn’t used, but it cannot be carried over for more than one year.

Amounts above £3,000 are added to the value of the estate if they were given within seven years of the donor’s death. If the total value of the estate exceeds £325,000, Inheritance Tax may be payable.

What is a lifetime gift?

As well as cash, any valuable item constitutes a gift and the value is added to the estate total for the purposes of calculating Inheritance Tax. This includes selling a property at below market value, for example to your children. In that event, the amount of the reduction is added to the value of the estate.

Exemptions

As well as the tax-free £3,000 per year, there are a number of other exemptions allowing you to gift money without needing to consider Inheritance Tax:

  • Any money given to a spouse or civil partner;
  • Single gifts of up to £250;
  • Donations made to registered charities or political parties;
  • £1,000 given as a wedding gift, rising to £2,500 for a grandchild or £5,000 for a child;
  • Money given to an elderly or infirm relative or a child who is under 18 to support them;
  • Gifts from surplus income, for example for birthdays or Christmas, providing it does not affect your standard of living.

The rules can be complicated and it is always worth seeking professional advice before distributing money.

To speak to someone about gifting, call one of our specialist team at legalmatters, on 01243 216900 or email us at info@legalmatters.co.uk.

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Are there any restrictions as to who can make a Will?

There are certain restrictions as to who can make a Will, including age and capacity.

In England and Wales you generally need to be 18 before you can make a Will. It is always advisable to make a Will once you reach that age, even if you feel you might not have anything much to leave.

You can include your wishes for social media accounts as well as leave gifts of items other than cash which you may want friends or family members to receive from you.

If you own your own home or are involved in a business you should make sure you have a Will.

Those under 18 may be allowed to make a Will if they are in the armed forces on active duty or they are sailors at sea. A law introduced during the First World War allows young people in these circumstances to make a Privileged Will allowing them to leave their possessions as they wish.

Other restrictions on making a Will

You are required to have ‘testamentary capacity’ to make a Will. This means that you must fully understand the nature of the document and its effect.

You also need to know the extent of the property you own.

Finally, you need to be able to understand the moral obligations you should consider, for example whether you have any dependents who are more in need of financial help than others, through illness or incapacity or because they themselves have dependents.

When should you make a Will?

You should make a Will straight away if you don’t already have one, and plan to review it regularly, particularly as life changes.

You may want to have your Will rewritten on the arrival of children or grandchildren or if you get divorced.

If you marry, any Will you have will become invalid and you will need a new one or your estate would pass under the Rules of Intestacy.

If you own a business or are in a partnership you should have a Will drawn up taking this into account.

If you are co-habiting then making a Will ensures that you can leave that person something if you wish. If you die without making provision for them, it is possible they will receive nothing.

A recent survey found that three-quarters of adults questioned did not have a Will. Whatever your circumstances, if you clearly set out your wishes it not only means that the administration process will be easier for people, but you can be assured that your beneficiaries will receive exactly what you want them to have.

To speak to someone about writing your Will, call one of our specialist team at legalmatters, on 01243 216900 or email us at info@legalmatters.co.uk.

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Is there a time limit for claiming a share of an inheritance?

If you believe you are entitled to something from someone’s Will, you may be able to make a claim, but beware of the time limits.

If a relative dies and you have not inherited what you feel you have a right to, you may be able to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the Act).

It may be that you believe you were left less than you are entitled to, that you have been left nothing or that because there is no Will you have not been made a beneficiary.

If you can show that you are entitled to ‘reasonable financial provision’ then you can ask the court to grant you a share of the estate.

How long do you have to make a claim?

The Act has a strict time limit for making a claim of six months from the date of the Grant of Probate or Letters of Administration.

In very exceptional circumstances this may be extended to allow a late claim, but as a rule you must stick to the six month deadline.

Who is entitled to claim?

A spouse or civil partner may make a claim under the Act as well as a former spouse or civil partner where they have not remarried, a person living in the same household as the deceased for at least two years prior to the date of death, a child of the deceased, anyone who was treated as a child of the family such as stepchildren and anyone who was being financially maintained by the deceased.

What will the court consider?

The court will look at the applicant’s financial resources and needs as well as their future needs. This could include whether they are employed, able to work, whether they have a dependent family or are a carer.

The physical and mental capacity of the applicant will be considered at along with the obligations the deceased may have had to them.

The financial resources and needs of the beneficiaries under the Will is also taken into account together with the size of the estate.

Other factors such as the applicant’s behaviour towards the deceased will also carry weight.

The court will not simply ignore the wishes of the deceased, so it is important to put together as persuasive a case as possible.

It is also essential not to miss the six-month deadline for making the claim.

If you would like to speak to our expert probate team, ring us on 01243 216900 or email us at info@legalmatters.co.uk.

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joint bank account

Implications of using a joint bank account instead of a Lasting Power of Attorney

A recent survey has revealed that a staggering number of people have granted relatives informal access to their bank accounts.

A Lasting Power of Attorney (LPA) is a formal document by which an individual can give one or more people access to their financial affairs and the power to spend money on their behalf.

It is relatively simple to set up and register, but it seems that many older people are choosing to give others informal access to their bank accounts instead.

A recent survey carried out by the Co-operative Society found that a quarter of over-45 year olds have been given access to the bank account of someone other than their spouse.

While this may seem like an easy solution to allow people to help out older relatives, the truth of the matter is that there are serious implications for all involved.

Why granting informal access to a bank account should be avoided.

Firstly, there is no protection for the owner of the bank account. The access will not be supervised in any way and it may become increasingly hard for the person granting the access to keep a check on their finances.

It offers great scope for abuse by the person to whom the access is granted. While they may start out with good intentions, the temptation to misappropriate funds might be hard to resist.

If the person owning the bank account dies, the administration of their estate may be delayed as investigations are made into any improper use of funds by the person with access.

There is also room for suspicion by other relatives if there has been no supervision over years of informal access.

The advantages of using a Lasting Power of Attorney.

By using a formal document to give someone official access to your financial affairs, everything is kept above board and visible.

There is far less scope for abuse as the document is registered with the Office of the Public Guardian (OPG) once it is put into use and the OPG will supervise the attorney’s activities.

If the OPG suspects that the best interests of the person granting the LPA are not being observed, they have the power to investigate. They can remove the attorney and appoint a replacement if they find any impropriety.

How to set up a Lasting Power of Attorney

An LPA can be completed before it is needed and then kept until the time that you decide you need an attorney to help with your affairs, when it will be officially registered.

To speak to one of our expert team about setting up an LPA, call us on 01243 216900 or email us at info@legalmatters.co.uk.

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Partner's assets

A quarter of people don’t have details of their partner’s assets…

Research carried out by Direct Line Group has found that 25% of people who are married or co-habiting don’t know where their partner’s money is.

This could cause problems in the event that someone dies. If the extent and whereabouts of their assets isn’t known, the administration of their estate could be delayed for a long period of time while searches and enquiries are made. In the worst case scenario, money could simply be lost.

32% of those questioned did not have any details of their partner’s workplace pension and 28% had not shared details of their savings account.

Women share fewer details than men and were found to be five times more likely to keep secret savings.

A study by GoCompare found that on average secret savings amounted to just over £10,000, with a fifth having more than £25,000.

What happens when details of assets aren’t shared

An estimated £2 billion exists in unclaimed bank accounts, with many billions more believed to be in lost pensions, life assurance policies and other investments such as shares.

If assets can’t easily be located after death, there is a risk they will be lost. Executors will need to conduct searches to try and locate what they can, but unless there is a clear list of all holdings, some may well be missed.

How to ensure assets can be located after death

If you don’t want to give your partner details of your financial affairs you can draw up a list of your assets to be placed with your Will and stored by your solicitor at their offices.

This should include the names and account numbers of your holdings and you should aim to regularly update the list.

If you have bank or building society accounts that aren’t used, then remember to check them from time to time. Banks may archive the account after a number of years if you don’t respond to enquiries by them and an unattended account may fall prey to hackers.

As banks and building societies merge or are taken over, it is easy for accounts to be forgotten. Old pension accounts can also be overlooked as people move on to new jobs.

Make an inventory of your financial affairs and ensure that you are in control of your money and aware of its location.

Check that your Will is up to date and reflects your wishes. Let those close to you know where your Will is stored or keep a letter from your solicitor confirming that they have the Will with your personal papers.

To find out how we can help, call one of our experts at legalmatters. Call us on 01243 216900 or email us at info@legalmatters.co.uk.

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