Leaving someone a life interest in your Will means they will have the benefit of the asset, for example a property, for the rest of their life following which it will pass to a beneficiary chosen by you.
There may be times when it is better to leave someone a life interest, rather than give them an asset outright. By setting up a trust in your Will, you can arrange for a loved one to have use of the asset for as long as they want or need, then give it to a third person. There are two main reasons why someone might wish to proceed in this way.
To prevent the ‘sideways disinheritance trap’
The so-called sideways disinheritance trap occurs when someone with children from a previous relationship remarries. If their estate passes to their new spouse when they die, then their children may receive nothing. This can happen either because their new spouse makes a Will leaving the estate elsewhere, the new spouse fails to make a Will meaning that the estate passes to their relatives (this does not include step-children) or because the new spouse uses all of the funds, for example for care home fees.
To protect assets from care home fees
If a couple leaves all of their assets to each other, then there is a risk that the last to die will use up all of the funds in paying for care home fees. The local authority will not provide financial support until the value of a person’s assets, to include any home, falls below a set threshold, currently £23,250. This means that very little from the joint estate may be left to pass on to any children.
Using a life interest trust to protect assets
By including a life interest trust in a Will, rather than simply leaving the whole estate to a spouse, the sideways disinheritance trap can be avoided.
You can leave your new spouse the right to live in a jointly owned property for the rest of life. They would still be able to move house if they wanted, and retain a life interest in the new home. But on their death, your interest in the property or other assets would pass to your chosen beneficiaries as detailed in your Will. To pass only a life interest in a property, it must be owned as tenants in common and not as joint tenants, otherwise the property automatically becomes solely owned by the other joint owner on the death of the first to die.
Similarly, by leaving a spouse the right to live in a property for the rest of their life, but not passing them your share outright, you can prevent your half of the property being included in local authority calculations for any care home fees they may incur.
It is advisable to seek professional advice to ensure that your assets are adequately protected and that they will ultimately pass to your choice of beneficiary.
If you would like to speak to one of our wills and probate experts, ring us on 01243 216900 or email us at firstname.lastname@example.org.
Normally when someone dies, their executor or administrator needs to apply for a Grant of Probate or Letters of Administration. If the estate is small, however, it may not be necessary.
After a death, an executor or administrator is responsible for collecting in the deceased’s assets, valuing them, arranging for sale, preparing estate accounts, to include payment of any tax that may be due, then distributing the funds to the beneficiaries named in the Will or under the terms of the Rules of Intestacy.
The job usually includes application to the Probate Registry for Grant of Probate or Letters of Administration, unless the estate is small enough to be wound up without this document.
What constitutes a small estate?
There is no exact legal definition of a small estate and whether a grant is required depends on individual asset holders.
For example, each bank has its own probate threshold, which can vary widely, with limits usually ranging from £5,000 to £50,000.
The same applies to share registrars, life insurance companies and pension administrators. Some institutions take account of the amount held with them, while others look at the entire value of the estate when making their decision.
Where a property was jointly owned by the deceased with another person and it was held as joint tenants, then it will automatically become owned by the survivor, with no grant needed to transfer ownership.
If a property was owned in any other way, then a grant of representation is usually required.
How to decide whether to apply for a grant
By making enquiries of all of the individual asset holders, the deceased’s representative will be able to gauge whether a grant is needed. If it is not certain, then it is worth obtaining professional advice, as it can complicate matters to find out partway through an administration that a grant should have been applied for.
Winding up a small estate
Where it has been established that a grant of representation is not needed, then most financial institutions will need to see a certified copy of the death certificate and will require a Small Estates Declaration. This is a document executed by the executor or administrator, stating that the estate’s value is below the threshold of the financial institution.
The Declaration will include an indemnity whereby the representative agrees to indemnify the institution against any claims as well as an agreement to provide a grant of representation in the future if required.
If you would like to talk to one of our Wills and Probate experts, ring us on 01243 216900 or email us at email@example.com.
A Lasting Power of Attorney (LPA) is an official legal document appointing someone to act on your behalf should you one day become incapable of managing your affairs.
There are two types of LPA, one for financial matters and one for health and welfare. You can have one or both in place. They do not have to be used immediately they are signed, but can be registered so that they are ready when needed.
What happens if you don’t have an LPA
If you do not have an LPA in place and you should one day be unable to manage your affairs or make decisions, then no-one automatically has the right to act on your behalf, even if they are close family members.
They would need to apply to the court for a Deputyship Order, which can be a lengthy process and is considerably more expensive than making and registering an LPA. As well as the initial costs of a deputyship application, there are ongoing charges including the annual supervision fee and annual security bond fee.
Putting an LPA in place
An LPA is a fairly simple document appointing someone you trust to deal with your affairs on your behalf in the event that you cannot do so yourself.
A property and financial affairs LPA
A property and financial affairs LPA can come into effect when you choose, so you do not need to wait until you no longer have the mental capacity to make decisions. This can be useful if, for example, you have mobility issues, as your Attorney could go to the bank and other financial institutions on your behalf.
You can word the LPA to give your Attorney the power to deal with all of your property, money and other assets or you can choose to limit it to certain specified transactions or accounts.
A health and welfare LPA
This type of LPA allows your Attorney to make decisions about medical treatment, care and other welfare issues.
You can opt to expressly give the Attorney the power to make decisions about life-saving treatment.
A health and welfare LPA can only be used by your Attorney once you are no longer able to make decisions for yourself.
Putting an LPA into force
An LPA needs to be registered with the Office of the Public Guardian before it can be used. By registering it straight away, it will already be in place when required. Otherwise there may be a delay of up to three months while the court processes the application.
If you would like help in making an LPA, speak to one of our expert lawyers on 01243 216900 or email us at firstname.lastname@example.org.
Legalmatters are pleased to announce the appointment of Nigel Glennie as Managing Director. Nigel brings valuable commercial experience to legalmatters, having run his own enterprise for over thirty years. He replaces Martin Langan, who has become Chairman and Innovation Director.
Martin Langan explained, “We are a fast growing firm and Nigel has impressed with his operational excellence. His appointment enables me to adopt a more strategic role, combined with continuing to put legalmatters at the cutting edge of technological advancement for the benefit of our clients.”
Nigel Glennie commented, “I’m delighted to be confirmed in this important role for legalmatters, an innovative and modern law firm dedicated to the highest standards of care for our clients, and I look forward to furthering our success and working with a great team.”
Nigel’s appointment brings the number of Directors to four, including Legal Services Director Lucy Thomas and Property Law Director Rosie Cowley.