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Writing a Will when you don't own your home

Making a Will even when you don’t own your own home…

If you don’t own a property, it is easy to assume that you don’t need a Will. In fact, there are several good reasons why you should still make one.

Leaving a Will can be of great comfort to loved ones, as you can set out your wishes with regard to what you would like to happen after your death. You can also appoint people to take on various responsibilities. If you put your requests in writing in a formal legal document, it can also help avoid disagreements between family members at a difficult time.

What your Will can contain

As well as giving details of who you would like to receive your estate, you should also choose someone to administer your estate. This can be an onerous task, as your assets will need to be collected in, valued, sold, estate accounts prepared and the money distributed in accordance with your Will. If you don’t have anyone prepared to take on this role, you can appoint a professional executor.

Your Will can include your wishes regarding your funeral and resting place, and you can also leave your personal belongings to your choice of beneficiaries.

Looking after children in your Will

Your Will can appoint a guardian to look after any children who may be under the age of 18 and you can also leave money in trust for them and appoint trustees to administer the trust fund.

This means that your children will be able to benefit from the money you leave, at the discretion of your trustees, before they actually inherit it. You can also choose the age at which you would like them to inherit, for example 25, if you feel that 18 is too young.

Why it’s never too soon to write you Will

Even if you don’t own a property or have any children, it is still a good idea to put a Will in place so that your loved ones know what you would like to happen to your estate after your death.

As you go through life, you are likely to accumulate assets and responsibilities, so making a Will now means that you can be sure your chosen beneficiaries will receive what you would like them to have. A well-drafted Will can take account of potential future changes, for example if you become a home owner.

You can also leave a Letter of Wishes, explaining your choices to your loved ones, and even detail what you would like to happen to your online assets and accounts.

It is a good idea to periodically review your Will, particularly in the event of any major life changes, for example the birth of a child. If you get married, your Will automatically becomes invalid, so it is particularly important to write a new Will then.

If you would like to talk to one of our expert Will writers, ring us on 01243 216900 or email us at info@legalmatters.co.uk.

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Inheritance Tax

Review your Inheritance Tax situation in the New Year…

Inheritance Tax (IHT) can be a nasty surprise during the administration of a Will. New Year is the ideal time to check that you’ve done all you can to minimise the burden.

Increasing property prices has had the effect of increasing the amount of Inheritance Tax many people are paying. There are ways of reducing the amount due if you plan in advance.

The IHT threshold

IHT is payable at the rate of 40% of the value of an estate above £325,000, for example on a £400,000 estate, IHT is 40% of £75,000, ie. £30,000. The person who is appointed as executor or administrator of a Will is responsible for valuing the deceased’s estate and calculating the amount of IHT due, then making payment within six months of the date of death to HM Revenue & Customs.

IHT is not payable on money left to a spouse or civil partner or to charity. When the remaining spouse or civil partner dies, the unused IHT allowance of £325,000 is added to their allowance. If some of the allowance has been used, then only the remaining balance is passed on.

Leaving property to a family member

If you leave your primary residence to your children or grandchildren, to include step-children, then a ‘main residence nil-rate band’ is applied. This is £150,000 per person for the tax year 2019/20, rising to £175,000 as from April 2020.

This means that where your main home is gifted to your children or step-children, the total IHT allowance rises to £475,000. Any unused portion of this allowance can be passed on to a spouse or civil partner, meaning they could potentially pass on assets valued at £950,000 free of IHT, rising to £1m in April 2020.

Giving gifts

Some gifts given during your lifetime may also have the effect of reducing the amount of IHT payable. The sum of £3,000 can be given in any tax year and any unused portion of this can be carried forward to the following tax year, although not beyond a single year.

In addition, gifts of up to £250 can be given to anyone and wedding gifts can be given to children in the sum of £5,000, grandchildren of £2,500 or others of £1,000.

Larger gifts are known as potentially exempt transfers and when someone dies within seven years of making them, IHT is payable on a sliding scale.

Setting up a trust

It is possible to leave assets to your loved ones via a trust to reduce IHT payable. Professional advice should be sought to ensure your beneficiaries receive what you want them to have and that your assets are adequately protected by the trust.

If you would like to talk to one of our expert tax, wills and probate solicitors, ring us on 01243 216900 or email us at info@legalmatters.co.uk.

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Homeowner mortgage

What happens when a homeowner with a mortgage dies

When someone who has a mortgage dies, it is important to notify the lender as soon as possible. If the property has been left to you in a Will, you should ask them about the options for taking on some or all of the mortgage if it cannot be repaid.

After a death, notifications need to be sent to all of the organisations where the deceased held an account. This includes any mortgage lender.

What happens next

The monthly payments will still need to be made while the estate is administered. If the mortgage was in the sole name of the deceased, then the mortgage company has the right to ask for the repayment of the amount owed in full.

If the property is passed to someone else and they are able to meet the mortgage payments, then the mortgage company may consent to transferring the mortgage debt to that person.

It is important to speak to the lender early on after the death, so that they can set out the options.

If the property is sold, then the mortgage will be repaid from the proceeds of sale.

Where there is a joint mortgage

When a property is held with someone else as joint tenants, then the property and the mortgage will automatically pass to that other person on the death of the other owner.

This means that they will be responsible for making the mortgage payments. If this is not possible, then the property may have to be sold to repay the debt.

If the property is held as tenants in common, then the situation can be more complicated as the deceased’s share of the property becomes part of their estate and will pass in accordance with the terms of their Will or the rules of intestacy.

If the remaining owner does not inherit the rest of the property, there may be an option for them to purchase it.

To prevent a tenant in common being forced to leave the property, it is possible for property owners to leave each other a life interest in their share of the home. This means that the surviving spouse or partner would be able to continue to live in the property after death of the other. Following the survivor’s death, the share of the property owned by the first to die would still pass in accordance with their Will.

It is particularly important to think about what you would like to happen to your property after your death if you have a mortgage over it. You need to consider whether others would be able to afford to take on the debt and, if not, how you can secure their future, for example, by leaving them a bequest or taking out a life insurance policy.

If you would like to talk to one of our Wills or property experts, ring us on 01243 216900 or email us at info@legalmatters.co.uk.

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Writing a future proof Will

Writing a Will that is future proof

Over time, changes in circumstances can mean that a Will becomes out of date and doesn’t accurately reflect your wishes. We look at how to ensure your Will can cope with changes.

It is a good idea to make a Will, even if you are young. It helps keep your financial affairs organised and if anything should happen to you, it will be of comfort to your loved ones to know your wishes. You should review your Will from time to time, and update it if necessary. But careful drafting will help it stand the test of time.

Executors and guardians

When you write a Will you need to appoint one or more executors to deal with the administration of your estate. This can be a time-consuming and complicated job, so you should ensure that whoever you choose is able and willing to take on the role.

Over time, their circumstances may change however, and if you have appointed more than one executor, along with substitutes, then there is a good chance that even if someone cannot act, one of your other choices will be able to take over.

Similarly, if you are appointing guardians for children who are under 18, then you should consider alternatives in case your first choice cannot take on the role.

Beneficiaries

If you leave bequests to children by name, then babies who are born after your Will is written may be excluded.

It is possible to draft a Will that takes into account future births, and includes them alongside those who were already living at the time the Will was made.

Marriage

Although it is possible to take a number of steps to future-proof your Will, you should note that upon marriage or civil partnership, any Will you have made becomes invalid, unless it was specifically made in contemplation of that marriage or civil partnership.

Change in the value of your estate

Over time, your estate may alter in value considerably, for example if you come into money or if a substantial amount of money is used in care home fees.

This can affect the proportions of any gifts you leave under your Will. Specified sums are paid out first, then the remainder is split between your choice of named beneficiaries. If the amount in your estate decreases, this could leave those inheriting the residue with less than you envisaged them having.

Even if you are confident that you have future-proofed your Will as far as possible, it is still advisable to review it regularly, and re-draft it if necessary.

If you would like to talk to one of our Wills experts, ring us on 01243 216900 or email us at info@legalmatters.co.uk.

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Pension when you die

What happens to someone’s pension after their death?

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 info@legalmatters.co.uk.

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Jointly owned property

Leaving a jointly owned property in your Will

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.

Joint tenants

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 info@legalmatters.co.uk.

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Executor vs Trustee

The different roles of an Executor and a Trustee in probate

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 info@legalmatters.co.uk.

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Premium Bonds

What happens to Premium Bonds after someone dies?

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 info@legalmatters.co.uk.

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right choice

Choosing the right Executor for your Will

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 info@legalmatters.co.uk.

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Lost Will

What happens after a death when you can’t find the deceased’s Will?

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 info@legalmatters.co.uk.

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