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Wills and updating your Will

Making a will is important but it is something we tend to put off for a number of reasons. Making a will need not be complicated as a will enables you to protect the interest of your family, friends and dependents. Many believe that their wishes can be carried out without a will - but this is not the case.

If a person dies without making a will the rules of intestacy will govern who benefits from your estate and this may not have been your intention. Unmarried partners have no right to your inheritance and this can lead to conflict.

Issues which can be incorporated into your will include:

It is therefore essential that you have a will drawn up.

You may already have a will but it may be out of date. It is essential that your will is reviewed on a regular basis to ensure that your will ensures the best protection for your family. Amendments to your will may be needed in one of the following circumstances

Updating your will need not be a complicated affairs but should be done to give you peace of mind that your wishes will be carried out after your death.

Property Protection Trusts

It is not surprising that few have considered what the effect might be on our savings and investments, or even our home, if we ever needed residential care later in life.

Most people assume that assets will pass to their children or other relatives in due course, yet this may not always be the case unless careful arrangements have been made to protect our assets from being taken to pay care home fees.

THE CURRENT SITUATION

Currently, anyone with assets in excess of £23,250 (this includes the family home) would not be eligible for any state help with their residential care fees. If you have more than £14,250 but less than £23,250 you would only be entitled to partial assistance.

The net result is that anyone who owns their own home is unlikely to receive any assistance even though they do not have large amounts of cash assets.

Even if you don't have the cash readily available, the Department of Social Security can still place a charge against the family home, which allows them to recover the moneys owing when the property is eventually sold.

THE PROPERTY TRUST

A 'Property Trust' is based around three basic elements: the basis on which you own your property, the Trust terms, and your Wills, which contain the Trust instrument.

The Property trust can only be created whilst both partners remain alive and the property must be owned as Tenants in Common. The Trust instrument is then included in both Wills but does not come into force until after the death of the first.

Upon the first death their share of the property, typically 50%, is placed into the Trust.

The surviving spouse, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second spouse the trust comes to an end and the property passes absolutely to the beneficiaries.

There are two types of Property Protection Trusts, these are a Life Interest Trust and a Right to Occupy Trust. If you decide to include a Property Protection Trust in your Wills you will need to decide which type of trust you want.

1. Life Interest Trust

Under this type of arrangement the first spouse/partner to die leaves his/her share of the family home in trust so that the surviving spouse/partner has the right to live in the property for life. If the property is rented out or sold and the money invested, the surviving spouse/partner has the right to receive any income from those funds for life. When the surviving spouse/partner dies the shares of both spouses/partners in the property or, if the property has been sold, their shares in the proceeds pass on to the children or whoever else was named as the eventual beneficiaries in the original Wills.

In addition to the basic form of Trust you can include additional provisions to provide more flexibility for the surviving spouse/partner, for example:

2. Right of Occupation Trust

Under this type of arrangement the share of the first to die is left to the children/ other beneficiaries subject to the surviving spouse/partner's right of occupation. The right can be for life or for a specified number of years or until the spouse/partner gets re-married, cohabits or moves into permanent long term care. When the right ends the house can be sold and the share of the deceased spouse/partner goes to the children or beneficiaries. The Will includes a clause that the property cannot be sold without the written consent of the occupier. This may be suitable if for example you wish for an adult child rather than a spouse to be able to remain in occupation after your death.

Inheritance Tax, Asset protection and estate planning

Inheritance Tax or IHT is levied on a person's estate when they die. We can offer effective inheritance tax advice, so that a part of your estate is not lost in paying taxes. Asset Protection Trust is one way of dealing with this.

By transferring your property into a Family Trust/Asset Protection Trust it will give you more security than transferring assets outright to others. A right to reside is usually included for the person transferring the asset and should be incorporated into the Trust Deed.

The Trustees of the Family Trust usually includes the person transferring the property and two family members. The Trustees will control the Trust assets as well as any sale proceeds. It should be noted that by putting property into a Family Trust the property does not belong to the owner for the purposes of financial assessment (As of current legislation)

If one or more of the Trustees die, divorces, or becomes declared bankrupt it will not affect the running of the Trust as beneficiaries do not become entitled until the trust fund is distributed.

Disposal of the property to family members or into an Asset Protection Trust does not avoid Inheritance Tax and may not be effective to avoid the payment of nursing home fees

Trusts

Trusts are an effective way of protecting your assets from inheritance tax or affecting means tested benefits. Trusts for the vulnerable and disabled or mentally handicapped are a traditional means of providing for those who may not be capable of managing their own property and affairs.

They are also a way of ring fencing and preserving property for those in receipt of means tested benefits. They are intended to supplement, but not replace, any means-tested benefits to which the disabled individual may be entitled.

Disabled Trusts are established for working-age adults or children who want to retain their entitlement to means tested benefits, now or in the future, such as:

Under the current rules - if you have over £6,000 capital you are at risk of having some or all of your benefits reduced. If you have over £16,000 then you are at risk of losing them all entirely.

A traditional Disabled Trust is usually set up by a third party for the benefit of another e.g. a parent for a child with a disability.

A Disabled Trust can have certain tax and other advantages apart from fulfilling a protective function. By including a disabled trust in a Will can ensure that you make provision for the "extras" that you want your family member to have. These can include things like holidays and particular equipment to enhance their quality of life.

Another option is a Discretionary Trust These can be incorporated in the body of your Wills or set up in a separate trust deed during your lifetime (you would need to be aware of any tax implications of estate planning during your lifetime and it may be advisable to speak to a tax planner)

Discretionary trusts are very flexible arrangements and can enable you to provide for one or more of a group of potential beneficiaries in the future. Your appointed trustees can then "wait and see" and take account of the circumstances at the time and then decide who out of the group receives assets from the trust. You can provide guidance as to what factors you would like them to consider when making their decision. Factors such as the needs of the individual; their age, financial position, whether they are vulnerable or would be unable to cope with the assets, whether they would waste the assets or to hold off giving a particular beneficiary assets perhaps due to the individual being in the process of divorcing or being involved in insolvency proceedings. Due to the fact that a potential beneficiary only has a "hope" of receiving something from the trust, the individual cannot be classed as being beneficially entitled to the assets and so they are protected from claims by possible creditors, ex wives and their position if they are in receipt of state benefits, or indeed long term care.

The class of beneficiaries has to be more than one individual and have to be in existence when you draw up your Will, so you could include "my children, nephews, nieces etc" Your letter of wishes to your Trustees would provide guidance as to who should receive the trust funds.

A discretionary trust is subject to inheritance tax every 10 years after the creation of the trust. The rate at which the tax is paid at current rates is not more than 6% of the market value of the trust's assets at the time of the charge and a nil rate discretionary trust will often escape tax altogether.

Lasting Power of Attorney

Everyone owns some kind of asset, whether it is a small amount of savings in a bank account or a business empire. No one, not even your spouse or business partner has the automatic right to deal with your assets if you lose mental capacity. Most banks and Building Societies now require sight of an LPA, Deputyship Order or Enduring Power of Attorney (pre October 2007) before they will provide information let alone access to your account.

An LPA allows you to plan ahead to protect your assets by appointing someone of your choice now to act as your attorney. It is the only legal document you can now use to appoint someone to deal with your property and affairs (and health and welfare) under any circumstances, including loss of mental capacity.

Making an LPA is money well spent because the alternative is costly and time consuming. If no Attorney has been appointed and you become mentally incapable, relatives would have to apply to the Court of Protection for a Deputy to be appointed. This requires a doctor's certificate, a volume of paperwork and a Hearing to prepare an Order. The costs of this can be significant. There is a Court fee of £400.00 to commence the application and further Court fee of £400.00 on each application. There are administration costs to pay including annual administration charges up to £800 per annum, plus annual accounts have to be prepared. When the person dies a further charge is levied to wind up the finances along with an annual charge until the final receivers account is issued. Professional service fees will also need to be paid. All of these costs will be taken out of your resources – effectively removing financial control from your family.

Types of LPAs

Types of LPAs There are two types of LPA's, one for your financial affairs and one for your personal welfare. These documents are called Lasting power of attorney - Property and affairs and Lasting power of attorney - Personal welfare. They are described below in greater detail.

Lasting power of attorney - Property and affairs

The "Lasting power of attorney - Property and affairs" deals with matters relating to your financial affairs. If someday you lack capacity to look after your own financial affairs, this document will entitle your property and affairs attorney(s) to do the following types of things:

Lasting power of attorney - Personal welfare

The "Lasting power of attorney - Personal welfare", deals with matters relating to your personal welfare, i.e. you social and health care needs. If in the future you lack the ability to look after your own personal welfare, this document will entitle your personal welfare attorney(s) to do the following types of things:

Court of Protection

The Court of Protection deals with all issues relating to those who do not have capacity to make decisions relating to a number of issues from property and financial decisions to health and welfare decisions.

The Court will make a decision as to who is suitable to look after the affairs of the person who lacks capacity - sometimes this can be a family member or a professional deputy ( e.g. a Solicitor). In certain situations the Local Authority may be appointed to look after a person's affairs. Once the Court has made this decision it will grant a 'Deputyship order' to that individual. Being appointed as a Deputy is a responsible role as you are in effect making decisions in the best interests of the person who lacks capacity.

The process of being appointed as a Deputy can take upwards of six months and can be an expensive process. There are also ongoing costs during the term of the Deputyship.

We are able to prepare applications and assist with the Administrative task of being a Deputy.

Grant of Probate

If you have a deceased family member whose affairs are straightforward and whose estate falls under the current Inheritance Tax threshold we offer a fixed price probate service where we will obtain a grant of probate and then leave you to collect and administer their property

Estate Administration

If you have a deceased family member whose affairs are more complicated or you wish to not have to deal with their estate at all we offer to deal with the administration of their estate at the Law Society's recommended rate. A solicitor's knowledge and experience of the Probate Registry's procedures saves the family and friends having to undertake complicated legal work at a distressing time. Once the Grant of Probate is obtained, assets of the estate have been collected and liabilities discharged. This can involve time consuming work dealing with a number of organisations. A solicitor such as BBH Legal Services Ltd has a dedicated specialized department dealing with Wills and Probates. Your estate will be dealt with quickly with the least amount of inconvenience to your beneficiaries. We will ensure that experts are dealing with the Revenue at all times.