‘Changing’ a Will after death

By | Deed of Variation | No Comments

Post Death Variations

 

After death, the estate of the deceased devolves either according to the terms of their Will or by the Rules of Intestacy, where no Will exists.

 

In certain circumstances, the beneficiaries of the estate may wish to change the way the estate is distributed. This can be achieved by executing a ‘Deed of Variation’ and all beneficiaries who are to be affected by any changes must agree in writing to the variation.

 

There are various reasons why a Deed of Variation may be executed and common examples include making the estate more efficient for Inheritance or Capital Gains Tax, to create a trust or add additional assets to an existing trust, to resolve any flaws or issues with the wording of the Will or to provide for somebody who is left out.

 

There is no formal template or wording required for a valid Deed of Variation, provided it meets certain requirements. These are helpfully outlined by HMRC in a checklist which can be found here https://www.gov.uk/government/publications/inheritance-tax-instrument-of-variation-checklist-iov2

 

It is important to note that any Variation must be made within 2 years of death and in the event that any Variation increases the amount of Inheritance or Capital Gains Tax payable for the estate, then HMRC must be notified within 6 months of the Variation.

 

There are also certain cases where it is not possible to execute a Deed of Variation. This includes situations where beneficiaries who are required to sign are unable to do so as they are minors or lack sufficient mental capacity. Thought must therefore always be given to the nature of the estate and the wording of the Will, if one exists, to determine whether a Deed of Variation is in fact possible.

 

For any further information regarding Deeds of Variation then please contact the SWW Trust Corporation.

Can I put my mortgaged property into trust?

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Can I put my mortgaged property into trust?

 

If you own a mortgaged property and wish to place this into trust during your lifetime, we may be able to assist.

Ordinarily, property trusts must have the legal title in the name of the trustees. This means that, for the trust to be registered correctly, the legal owner needs to transfer their title to the trustees.

However, if there is a mortgage on the title, the lender has the ultimate say over any transfer of legal title. They almost always refuse to pass title from the mortgagor to their chosen trustees.

But the mortgage need not stop you from making a property trust altogether. A different means of achieving your goal can still be found.

Instead of changing legal title, as is usually the case, settlors of mortgaged properties must keep hold of their legal title. But they can still create a declaration of trust which dictates that their remaining equity (or a proportion of this) is to be held for the trust. Upon sale, the trustees receive their share, very much as they would under a normal property trust.

A “restriction” in favour of the trust is made with the Land Registry, with a charge in favour of the trust: much like the mortgage lender’s own charge on the deeds, but in favour of the trust. This keeps the trust’s interest in the sale proceeds securely registered.

This work still needs to be undertaken by a legal professional – everything from the declaration of trust to the restriction on the registered title – so those who do wish to place a trust over their interest in property should seek expert advice and assistance.

There is no need to let mortgage worries interfere with your estate planning: speak to a Member of the Society of Will Writers, and see how they and the SWW Trust Corporation can help you.

 

Call us on 01522 581570

Failure of Gifts: Abatement and Ademption

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Failure of Gifts: Abatement and Ademption

 

When making a Will, there are various types of gifts that a testator may wish to include: general, specific and demonstrative legacies. Before considering the effect of failure of gifts in a Will, it is important to identify each of the types of legacy available to a testator.

 

A general legacy, as the name suggests, comes out of the testator’s estate generally, and does not specify a particular item or class. This includes pecuniary legacies – general gift of funds from an estate “I gift the sum of £500.00”. By comparison, a specific legacy identifies a particular item “my Rolex watch”. Finally, a demonstrative legacy outlines a specific fund out of which the gift is to be made “I give £1,000 from my Lloyds Bank ISA”.

 

Quite often a significant amount of time passes by from a Will being written to the death of the testator and circumstances can change meaning that the testator’s estate is vastly different upon death. On some occasions, assets referred to in a Will may no longer exist or be owned by the testator, or the estate may have insufficient funds in which to settle all legacies in full. This will result in the failure of the gift by either Abatement or Ademption

 

Abatement

Abatement is the rule which applies where the testator’s estate is solvent, but unable to satisfy all legacies in full following the payment of any tax and administration expenses. As a result, the gifts in the Will are reduced in a certain order depending on the nature of the estate.

 

The order in which legacies in an estate abate are as follows:

 

  • The residuary estate abates first as this is everything remaining after the payment of all other legacies, tax and administration expenses
  • General legacies abate next, which usually means pecuniary legacies but also any demonstrative legacies where the designated fund has ceased to exist (as above, should the Lloyds Bank ISA no longer exist at the date of death)
  • Specific and demonstrative legacies abate last and all in proportion to one another

 

It is important to note that the order of Abatement is subject to any contrary intention by the testator in the Will.

 

Ademption

Ademption applies where the subject matter of the gift no longer exists at the date of the testator’s death. Any disposal of an intended gift – sale, loss or destruction will result in ademption.

 

The intended beneficiary of a gift which fails by ademption will have no automatic right to any cash equivalent where the subject matter was sold by the testator, or proceeds of an insurance claim if the asset was destroyed, unless there is an express provision by the testator in the Will.

 

The issues of Abatement and Ademption can provide complicated and frustrating for both Executors and Beneficiaries of an estate upon administration. The likelihood of any gifts failing by either Abatement of Ademption can be reduced greatly or avoided altogether by regular review and update of your Will to ensure that it accurately reflects your estate.

 

For any further information regarding gifts in a Will, the principles of Abatement or Ademption of the drafting of a Will then please contact the Society of Will Writers.

 

Reasons why your client may require a trust

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REASONS WHY YOUR CLIENT MAY REQUIRE A TRUST

If you ask your client if they want to create a trust you will receive varied responses: for example, ‘It’s a good way to save tax’.  According to research the main reasons why people want to create a trust is to control the assets: for example, to prevent children from gaining access to money before they are mature enough to handle it safely and effectively. Tax planning was secondary to this.

The suggestion of the creation of a trust is generally as a result of you, as the advisor, after addressing the client’s chosen objectives. You will do this by assessing the client’s objectives first and then offering a particular type of trust as a means to achieve these goals. By addressing the objectives in this way your client will be more interested in the idea of creating a trust.

Why would you be suggesting the provision of a trust as a solution to your client’s objectives?

 

In order to protect the assets

As we all know, our clients and families work hard for their property, business and the building up of a particular asset and thus wish to protect these from any future unfortunate relationships, connections, poor business decisions and spendthrifts.

Also, it may be that there are no substantial assets, there may be just a reasonable ‘nest egg’ for the family: parents may wish to safeguard funds to prevent them from being dissipated sooner rather than later. For example, your client may have a son or daughter who may have an addiction.

It may be that your client wishes to protect or preserve the assets so that funds will be available to provide assistance for more than one group of beneficiaries.

Another concern of your clients may be that if they die they want to ensure that funds will be available for their surviving spouse, but also that the funds pass to their child/ren in the event that the survivor forms a new relationship.

 

The protection of beneficiaries

Some clients believe that their children will never learn the value of money and therefore wish to protect their hard-earned savings from their shopaholic children. Unfortunately trusts cannot prevent beneficiaries from making poor choices. They can, however, provide a reasonable hand (in the form of a trustee) to act as a guide or disciplinarian to requests by beneficiaries for money or other resources.

Your client may be concerned as they have a child with learning disabilities who will never be able to manage their own financial affairs. What can be done at a time when both parents have died to protect their vulnerable child from potentially unscrupulous friends and carers?  Discretionary trusts are a useful tool to preserve some or all of the family’s estate which can then be used for positive benefits for their disabled child.

There are some parents that have able-bodied children who have sadly chosen the wrong path and have become addicted to drugs or alcohol. Your clients will obviously worry that if they were to inherit a large amount of cash they would endanger their lives.  In these circumstances your client may wish for their assets to be managed by someone so as to provide a roof over their child’s head which the child is unable to sell. Small and regular distributions can be provided to the child to meet everyday costs.

 

For maintaining control over assets and beneficiaries

Your client may wish to transfer assets into a trust but maintain control over these by being one of the trustees.

 

For treating income and capital of a gift in different ways

Your client may want certain categories of people they would like to benefit, maybe their surviving spouse/partner and their children.  It may be that the spouse/partner is financially dependent on your client and would need to have access to the trust funds should your client die. If capital was given outright to the surviving spouse/partner it could be used for any purpose as they see fit, and the children may not benefit from this.

By using an IIP Trust (interest in possession) the trust income can be released appropriately ensuring that the capital fund is preserved for the children.

This particular trust is often used when clients have children from a previous relationship.

It may be that your client has an elderly relative that may require financial assistance with outgoings and will require income to do this but does not require the capital. The capital can then be directed elsewhere upon the demise of the relative.

The provision of income for beneficiaries who are too young to manage large amounts of cash is a popular reason for creating a trust. It may be that your client wishes the fund to be used for the purpose of school fees and day-to-day maintenance whilst they are under a particular age. Upon attaining that certain age the children would be deemed responsible and the capital would pass to them.

Attesting the Execution of a Will

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Having your Will witnessed correctly is especially important in making the document legally valid. Many people are not aware that you should be particularly careful in who attests the execution of your Will. Being a witness can also mean far more than simply providing your signature on a document, which people are unaware of when they agree to attesting the execution of a Will.

So who can witness my Will?

Any person who is named as a beneficiary under the Will cannot be a witness, as this means that they shall forfeit any legacy that they were to receive. It is generally always advisable to have someone completely unrelated to the Testator and independent from the estate attest the execution of the Will, in order to avoid any conflict or complications further down the line. In addition to this, although it may seem obvious, it is also important that a witness has capacity. Someone who is blind cannot act as a witness as they is physically incapable of seeing the signature.

Section 15 of the Wills Act 1837 states:

“If any person shall attest the execution of any will to whom or to whose wife or husband any beneficial devise, legacy, estate, interest, gift, or appointment, of or affecting any real or personal estate (other than and except charges and directions for the payment of any debt or debts), shall be thereby given or made, such devise, legacy, estate, interest, gift, or appointment shall, so far only as concerns such person attesting the execution of such will, or the wife or husband of such person, or any person claiming under such person or wife or husband, be utterly null and void, and such person so attesting shall be admitted as a witness to prove the execution of such will, or to prove the validity or invalidity thereof, notwithstanding such devise, legacy, estate, interest, gift, or appointment mentioned in such will”.

Do my responsibilities come to an end once I have witnessed the Testator’s signature?

When individuals agree to being a witness, they are also often unaware that they may be called upon in the future during the process of obtaining Probate, should the validity Will or Testator’s signature be called into question. As above, section 15 of the Wills Act 1837 states that such person “shall be admitted as a witness to prove the execution of such Will, or to prove the validity or invalidity thereof”. For this purpose, it is important that a witness provides their details (address, full name and occupation) when they sign the document, as this will prove helpful should an Executor need to contact them in the future. An Executor can request that they swear an Affidavit to prove the Execution or validity of a Will and, in matters where an estate becomes contentious, a witness can even be called upon to provide evidence in Court.

People often under estimate the importance of attesting the execution of a Will, however, it is ultimately much more important than you may think.

 

For more information feel free to contact admin@swwtrust.co.uk

Trusting Your Trustees: Removing Troublesome Trustees

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Trusting Your Trustees: Removing Troublesome Trustees

 

The role of trustees is chiefly to manage the assets in their trust for the advantage of the beneficiaries: property trustees ensure that the house is protected, insured, secure and available for the life tenant; trustees of money must invest the fund wisely, seeking tax advice and making fair decisions as to how money is advanced for the use and benefit of the beneficiaries.

However, some settlors or beneficiaries may grow wary of their trustees. They may feel unfairly side-lined and neglected, or believe that the trustees are abusing their powers.

So, how can settlors and beneficiaries remove troublesome trustees?

In some lifetime settlements, the settlor may retain a power to replace trustees. This must be explicitly provided in the trust documentation itself. Failing this, there are very few powers to easily remove trustees.

If the trustee is unwilling to retire from their role, they may need to be removed by a court order. In order to remove a trustee, a beneficiary must demonstrate that the trustee is failing their duties of faith – their “fiduciary duties” – to the detriment of the trust. This could include negligent accounting, loss of capacity, refusing to take notice of beneficiaries, failure to submit tax returns, embezzlement, or using the fund for their own purposes.

If a beneficiary can demonstrate such a ground for a breach of duty, they can apply to the court for an order to have the trustee removed and replaced. But the evidence must clearly show a specific breach of duty: simply not getting one’s way, or personally distrusting the trustee, would be insufficient.

Even if good grounds are found, applying to the court will take time, money and legal assistance.

As such, it can be incredibly difficult to remove a trustee. The best advice is to select capable and conscientious trustees in the first instance. Otherwise, it is an uphill struggle to correct an unsuitable appointment at a later stage: and even then, ordinarily, only at a time when harm has already been caused to the beneficiaries.

Ames v Jones Strikes Blow to Claims of Disinherited Adult Children

By | An update | No Comments

Child unemployed as “lifestyle choice” fails to show being disinherited was unreasonable: Ames v Jones 2016

A daughter’s claim for financial provision from her late father’s estate was rejected on the grounds that her unemployment was a “lifestyle choice”.

The deceased left his estate (Approximately £1 million) to his wife of thirty years. The deceased’s only child, Miss Ames (41), an unemployed mother of two, lodged a claim against the estate under the Inheritance (Provision for Family and Dependents) Act 1975 (the “1975 Act”), claiming that his Will failed to make reasonable financial provision for her given her financial circumstances.

Under the 1975 Act, an adult child does not have an automatic right to inherit their parent’s estate: this can only be granted where court considers unreasonable provision in the circumstances has been made. The claimant must show that the estate does not make reasonable financial provision for their maintenance. This is a very context-specific rubric.

In Miss Ames’ case, the court considered all aspects of the 1975 Act including the financial needs and resources of the claimant. The court found that, though Miss Ames alleged to be in a poor financial position, she failed to provide good evidence that she was unable to earn her own income to meet her needs. In comparison, her stepmother was a pensioner and submitted evidence that she had little disposable income.

Most notably the Judge decided that Miss Ames’ lack of employment was a “lifestyle choice”, and that this entirely undermined her claim.

The Judge concluded that the mere fact an adult applicant is a child of the deceased is unlikely to be decisive.  These claimants are unlikely to succeed unless it can be demonstrated that the balance comes down in their favour when considering all the factors under the 1975 Act.

Miss Ames therefore had to pay her own costs of £47,000, and those of her stepmother’s at around £85,000.

This is just one example of the current 1975 Act caselaw. It is however a clear example of how these cases depend on evidence that is only properly tested by the court on the day of trial. Given the complexities, vagaries and context-specific factors, this case is a reminder of how the legislation and caselaw can only go so far in providing accuracy and confidence in how individual claims might resolve.

Will a trust really help protect my house from my insolvency?

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There are many reasons people may wish to place their assets into trust during their lifetime. Some do so to keep their property outside of the Probate process, to speed up sale upon death, to protect vulnerable or reckless beneficiaries, or to reduce the risks of someone challenging their Will. Some people, especially sole traders, wish to use trusts to keep their family home away from creditors.

An asset held in trust is deemed not to be owned by the person who set it up – the “settlor” – but is instead owned by the trustees. This does provide a strong protection over those assets: they are “no longer the settlor’s assets” to be divided up by the creditors.

However, nothing is ever that easy.

The Insolvency Act provides that the court may set aside transfers into trust five years prior to any claim that leads to bankruptcy: within two years of the bankruptcy, any such transaction can be set aside; between two and five years before bankruptcy, they can be set aside if the donor was insolvent at the time or made insolvent by the transfer.

In addition, there is no time limit to the court’s power to set aside a trust where the reason for the settlement was to put assets beyond the reach of someone who is or may at some time make a claim, or to otherwise prejudice such a potential claimant’s interests. This is a real obstacle for those who want to protect their properties precisely for these reasons.

As such it can be dangerous to place assets into trust with these motivations in mind. Similar problems are faced by those who wish to place their property into trust to avoid it being used for care fees.

Trusts can only be used safely if they are settled with proper motivations in mind: otherwise, they may even make matters worse for the settlor and their family.

Funeral Planning

By | Funeral Planning | No Comments

If you still don’t have a funeral plan, consider these 5 problems you will be facing

A staggering number of people still do not have funeral plans in place. As unappealing as the subject can sometimes be, your funeral is always going to be one thing you will never be able, sooner or later, to avoid paying. So why do people avoid the subject?

Partially it is because it is considered “morbid” or “ghoulish” to dwell on these matters, particularly while we are young and healthy. But that is precisely the best time to start considering options. Another reason is because, quite frankly, in everyday life people do not consciously consider their funeral to be “something that needs dealing with.”

We are none of us immortal, of course, and at some stage the funeral is going to have to be planned and paid for. This can either be done by our relatives, at one of the most distressing and difficult times of their lives and with little guidance as to our truest funeral wishes; or it can be done now, affordably and with the utmost certainty that everything will go as we hope for.

Common problems we see in dealing with estates where there is no funeral plan include:

  • It can’t be afforded. Lack of liquid assets in the estate can make even simple, minimalist funeral arrangements unaffordable.
  • There are delays. It can take weeks or even months for relatives to discuss and decide on suitable arrangements. During this time the deceased remains in the chapel of rest, or worse still, a mortuary.
  • Whether it’s because they do not know the deceased’s true wishes, or because they cannot agree on their own ideas and notions, frequently unplanned funerals can lead to feuds over everything from the religious features of the service down to the floral tributes.
  • The Funeral Directors chase relatives for money. If the bill isn’t settled promptly charges and interest might apply. If the deceased has little cash, this can be very distressing for loved ones.
  • Uncertainty. Unless a full plan is in place, our relatives may never truly know how we want our final commemoration to go. Also, some funeral directors may be unable to undertake our precise wishes, and not knowing in advance what is possible can scupper the entire event.

All these difficulties are alleviated by a little forward planning, and without breaking the bank. Funeral plans can be arranged in small monthly instalments or lump sums, depending on what suits you.

Do feel free to speak to us if you think that getting a plan in place will give you that little more peace of mind.

The role of an Attorney

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What can an Attorney do?

Attorneys have very broad powers over financial affairs, acting with nearly the full legal authority as if they were an “extension” of the donor.  This can make scenarios with some lay attorneys very dangerous, providing vast powers without instant recourse to legal challenge in the event of abuse. Even loving relatives can misuse attorney powers.

Furthermore, attorneys have onerous responsibilities with regard to legal duties, administration and consultation. Even a well-meaning attorney can find themselves failing their “donor” and causing irreparable harm to that vulnerable person, opening themselves to litigation. It can be detrimental to the interests of not only the vulnerable individual, therefore, but also the attorney upon whom they have imposed this burden.

A professional attorney, conversely, will have the expertise, legal acumen and transparency to ensure that the interests of the donor are entirely met, mitigating any risk of abuse or negligence that could otherwise emerge.

 

Our role as a professional attorney

We will encourage you to make any decisions for yourself but will be here to help when required.

We can help with, inter alia:

  • Opening, closing or operating any bank / building society account
  • Buying or selling property
  • Claiming and using on your behalf all benefits, pensions, allowances and rebates
  • Receive income, inheritance or other entitlement and ensure it is used in your best interests
  • Manage your tax affairs
  • Pay your mortgage /rent and household expenses
  • Insure, maintain and repair your property
  • Invest your savings to achieve the best return
  • Make gifts to your family and friends for birthdays, weddings and at Christmas or continue making gifts to your preferred charity
  • Pay for private medical care and residential / nursing home fees
  • Apply for any entitlement to funding for NHS care, social care or adaptations
  • Obtain any equipment or other help you may need

 

If you ask us, or it becomes necessary, to help with household bills and living expenses we can contact the companies concerned and deal directly with them, leaving you with the peace of mind that everything is in hand.

 

What are our duties as your Attorney?

 

Our chief duties in protecting your financial affairs are:

  • To keep accounts and protect your money
  • To comply with the directions of the Court of Protection
  • To keep your affairs confidential

 

However, crucial to these responsibilities, we need to act under a very strict duty of care towards you:

 

  • To follow the legal statutory principles imposed by the Mental Capacity Act

We have a legal responsibility to follow the legislation and to help you make decisions regarding your finances with minimal intervention. This helps you to maintain control for as long as you feel able to but with the reassurance that we are there to help you as much as you need.

  • To act in your best interests

We always have your best interests in mind when helping you make decisions or making decisions on your behalf. We take into account your views and beliefs, and may consult family and friends who also take an active interest in your welfare.

  • To only make decisions that we have the authority to make

We take into account any restrictions you may have written into your LPA. Under a Property and Affairs LPA we cannot make decisions about your personal care or medical treatment.