Removing Unwanted Executors

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Removing Unwanted Executors

 

The role of the executor is chiefly to oversee the estate administration, account for all assets, pay all taxes and liabilities, and ensure that the estate is distributed in accordance with the wishes of the beneficiaries as efficiently as they can.

However, some beneficiaries may grow suspicious of the estate’s executor. They may feel unfairly overlooked and neglected, or believe that the executor is abusing their powers or failing to meet their duties.

The bad news is that removing an executor can be extremely difficult.

If the executor is unwilling to retire from their role, they may need to be removed by a court order. This is particularly problematic if the executor has already successfully obtained Probate in their name and / or received estate assets.

In order to remove an executor, a beneficiary must demonstrate that the executor is failing their “fiduciary duties”– their duties of faith – to the detriment of the estate. This could include poor accounting, mistakes which constitute negligence, loss of the executor’s capacity during the administration, refusing to take notice of beneficiaries, failure to submit tax returns, fraud, or other abuses of power.

If a beneficiary can show sufficient proof of a breach of duty, they can apply to the court for an order to have the executor removed and substituted. Note though, the evidence must demonstrate a clear, specific breach of a fiduciary duty: personal dislike, or vague assertions that the executor may not be acting in accordance with a beneficiary’s own desires, will never be sufficient.

In addition to this, quite apart solid grounds of breach being found, applying to the court will take additional money, time and legal assistance.

It can therefore be considerably difficult to remove an executor. The best advice is to select suitable executors in the first instance. The old adage that “prevention is better than the cure” very much applies to appointment of an inappropriate administrator.

What is a Grant of Representation?

By | Probate | No Comments

Many people are familiar with the idea of the administration or probate process; however, most do not actually know what a Grant of Representation is, or that there are different types.

Ultimately, the Grant of Representation is a document sealed and issued by the Court, which provides the Executors or Administrators of an estate with legal authority to access, collect in and distribute the deceased’s assets.

Before issuing the Grant, the Court will look at two elements:

  • Whether or not there is any document which can be considered a testamentary document, capable of being admitted to probate or annexed to a Grant of Administration; and

 

  • Who is entitled to a Grant of Representation of the deceased’s estate (regardless of whether there is any testamentary document).

Once issued, the Grant is effectively conclusive evidence of the terms of any Will and its execution, or that the deceased died without a valid Will. It is also confirms the authority of the Executors/Administrators to act.

There are also different types of Grant of Representation:

Grant of Probate

A Grant of Probate is issued only to an Executor appointed by a Will or codicil. Up to four executors can be named on a Grant of Probate and if there are more than this, power will be reserved to them. Any of the executors named in the Will are authorised to take out the Grant of Probate and deal with the administration of a deceased’s estate.

Grant of Letters of Administration with Will Annexed

This is issued under circumstances where the Executors of a Will appoint someone else to apply for Grant and deal with the estate on their behalf, because they cannot or do not wish to deal with the administration for any reason. A Grant of Probate cannot be issued because the appointed Executors under the Will are not the people applying for the Grant. In this instance, a Grant of Letters of Administration is issued with a copy of the Will annexed. This may also apply where the appointed Executors are minors and require someone else to apply for a Grant on their behalf.

Grant of Letters of Administration

A Grant of Letters of Administration is issued when there is no Will available or capable of being admitted to proof and the deceased therefore died intestate. The order of entitlement to apply for the Grant in these circumstances follows the same order of entitlement as under the rules of intestacy. A personal representative can be appointed to act on behalf of the beneficiaries, however, all of the entitled beneficiaries must generally consent to that person applying for a Grant.

 

 

Generally, a Grant is required before any estate can be dealt with after death, however, there are some circumstances where a Grant may not be required. For instance, there is no need to obtain a Grant where any property is owned as joint tenants and will pass to a spouse or joint owner automatically by survivorship. When some liquid assets held, i.e. bank accounts, investments or policies, are below a specific value then there may also be no need to obtain a Grant. Some banks will release funds in an account up to the value of £50,000; on the other hand, some banks have a lower limit and anything above this means that they require sight of a Grant before they will release funds. This is, of course, purely at the discretion of the individual institution. There is also a common misconception that if you have a valid Will then there is no need for a Grant to be obtained. However, the need to obtain a Grant is ultimately dependent on the assets held by the deceased and the value of those assets, regardless of whether there is a Will or not.

Probate fees increase – further guidance issued

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In response to the recent changes to probate fees, the Ministry of Justice (MOJ) has now issued further guidance to help clarify how the proposed increase in fees will work in practice.

 

A common concern was the “Catch 22” scenario, as outlined in our previous article of 3rd March, whereby Executors would be unable to obtain probate without paying the proposed fee, but would be unable to access the assets in the estate to pay the fee without first obtaining the Grant of Probate.

 

In response to this particular issue the MOJ have advised that Executors will be able to ‘apply to the probate service to access a particular asset for the sole purpose of paying the fee’. It is not yet clear how wide the scope of this access will be, and may not provide any relief where the main asset in the estate is the property, as this must be sold in any event once probate has been granted. It may however be beneficial to Executors handling an estate with significant assets in stocks & shares and investments, as ordinarily such assets cannot be accessed without first obtaining probate, irrelevant of the value of the holding or number of shares held.

 

In addition to the above the MOJ have also advised that it will be possible to submit an early application for probate pending the required approval from HMRC (approval is required by HMRC in cases where inheritance tax is due or the estate is otherwise classed as non-exempt). Any applications submitted before May will not be subject to the proposed fee increase, regardless of how long HMRC may subsequently take to approve any inheritance tax account and provide the necessary clearance paperwork after the implementation of the new fees.

 

Whilst this will certainly be a relief for Executors who are currently in the early stages of estate administration, it is likely that Probate Registries across the country will soon face a barrage of applications over the coming weeks. It is not yet clear whether any measures have been taken to help HM Courts & Tribunal Service cope with the additional workload and continue to provide an acceptable level of service to customers.

Signing your Will – It’s pretty important

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When you make a Will, it is obviously important that it is signed and attested correctly, to ensure that it becomes legally valid document. But what steps should be taken where a Testator cannot physically sign their Will, or where the Testator is blind or illiterate?

Generally, any mark made by the Testator and intended to be their signature will be effective. However, in some circumstances extra precautions should be taken in order to avoid the eventual need for Affidavit evidence by the Probate Registry, to demonstrate that the Testator knew of and perfectly understood the contents of the Will. It should be noted however, that where a signature is incomplete or appears frail, then the Probate Registry may require Affidavit evidence anyway to ensure that the Testator appreciated the significance of what they were doing.

Section 9 of the Wills Act 1837 states:

“No will shall be valid unless—

(a)it is in writing, and signed by the testator, or by some other person in his presence and by his direction; and

(b)it appears that the testator intended by his signature to give effect to the will; and

(c)the signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and

(d)each witness either—

(i)attests and signs the will; or

(ii)acknowledges his signature, in the presence of the testator (but not necessarily in the presence of any other witness),

but no form of attestation shall be necessary.”

There is no requirement for a Will to have an attestation clause and the lack of one does not invalidate a Will. However, the inclusion of an attestation clause provides more certainty that the Testator intended and approved the contents of his Will and can prevent the need for the admission of further evidence by the Probate Registry in the future. For most Will writers, the inclusion of an attestation clause is standard practice.

In the event that the Testator is blind or illiterate, including an attestation clause is particularly important and amendments should be made to a standard clause to demonstrate that they cannot physically sign their Will or that they are blind or illiterate. It is essential that the Will is read out to the Testator by someone independent to ensure that they understand and approve the content and then have the attestation clause adjusted to demonstrate this. It is recommended that the witnesses are present when the Will is read out to the Testator, so that they themselves can guarantee that the Testator understands the content. It may also be advisable to record who reads the Will to the Testator, should they be required to provide evidence in the future.

In some cases, where there is absolutely no possibility that the Testator can sign their name or make any mark, then it possible to have someone sign the Will on their behalf. An example of the attestation clause that might be used in this instance is as follows:

“Signed by _______________ with the name of the Testator in his/her presence and at his direction, the Will having previously been read over to him by _________________ and the Testator having acknowledged his complete understanding and approval of the contents of the same, in our presence and then signed by us in his presence”.

It is ultimately always important to ensure that any Testator intends, approves and understands the content of their Will, however, in special circumstances such as those outlined above, there is a greater need to prove this and so extra care, precaution and steps must be taken in order to do so.

Failed Will Trusts: A Mistake Even Experts Make

By | Gifts | No Comments

A lot of Will trusts over houses ensure that an occupant (be it spouse, partner or another relative) can live in the deceased’s property for life, while protecting the underlying equity for the benefit of children. This is very useful, for example, where a testator wants their new spouse to remain in the property after they die, but wants their children from their first marriage to have their interests in the property secured.

Most property trusts involve a “life tenant” who is given rights of occupation, and “remaindermen” beneficiaries who obtain the capital on the death of the life tenant. This sets up the “two-tier” rights for most scenarios: e.g. stepmother can live in the property for now, but on death, the children can take the house entirely.

However, a fatal flaw often arises in these Will trusts where the life tenant is accidentally included as the remainderman. This can happen because of a drafting error, or an oversight on behalf of the Will writer.

In those cases, the life tenant then becomes entitled to the underlying equity instead of the remaindermen. This hands the whole property over to them, defeating the whole purpose of the trust to protect the remaindermen’s shares.

It is possible to correct this: either through a deed of variation (but only if the life tenant is willing, which in difficult stepfamily scenarios may not be viable); or through a Court order to have the Will rectified. Both of these options involve additional legal work, time and expense.

Prevention is better than the cure. Check your Will and consult with your Will writer now if you have any such life interest trust in your Will, and see whether your family’s interests are secured precisely as you intended. It could save a great deal of grief in the long term.

Controversial changes to Probate fees

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Enormous and controversial changes to Probate fees

 

Despite resounding criticism from Probate lawyers and other experts, the Government has proceeded with controversial changes to the Probate fees chargeable from estates, which could cost some estates £20,000.

The proposals, which are expected to be implemented in the coming months, will see many executors struggling to find adequate finances from estates in order to pay the fees upfront before the Grant of Probate can be obtained.

Particularly with “property-rich, cash-poor” estates, liquid assets will not be available to pay fees which will have increased by up to 129 times their original cost. Furthermore some banks do not provide cash from estates to pay administration costs upfront. Where cash is unavailable, HMCTS recommends that executors seek a loan (depending on their credit rating), pay upfront themselves, or simply renounce.

In such “Catch 22” situations, where the Grant is needed to receive sufficient estate assets to pay for said Grant, executors may face additional expenses and delays: all of which ultimately will affect beneficiaries in the long run.

The proposed fee tiers were met with fierce disapproval. To quote the Government’s own response to the consultation: “We received 831 responses to this question. 13 respondents agreed with the proposal.” The Government nevertheless intends to proceed implementing these proposals into law.

The only two groups who stand to benefit are those who are administering to estates under £50,000 – which in many circumstances do not require the Grant of Probate anyway – and insurance companies whose policies the Government recommends as a means of cushioning the blow.

The government has yet to comment on whether the fee increases for estates over £50,000 constitute unlawful taxation, i.e. levies on taxpayers without Parliamentary approval.

The following table demonstrated the estate tiers to be implemented, alongside the percentage of estates estimated to be affected and the new fee applicable.

 

Up to £50,000 or exempt from requiring a grant of probate 58% £0
£50,000 – £300,000 23% £300
£300,000 – £500,000 11% £1,000
£500,000 – £1m 6% £4,000
£1m – £1.6m 1% £8,000
£1.6m – £2m 0.3% £12,000
Above £2m 0.5% £20,000

Who are your beneficiaries?

By | Gifts | No Comments

It is extremely important that any named beneficiaries in a Will can be easily identified. An Executor must be able to say with certainty that an individual either is or is not a beneficiary under that Will. There are many things that you can do to assist your Executors and make your beneficiaries as identifiable as possible:

 

  • Include each the full name of each beneficiary and where possible, their relationship to you as the Testator. Simply gifting “£1,000 to John Smith” with no explanation or obvious link to you as the Testator is not sufficient and will make it extremely difficult for the Executor(s) to identify a beneficiary when dealing with the estate.
  • Any names by which the beneficiary is also known may also be included “my friend John Smith, also known as “Jonny”.
  • Full addresses of each beneficiary should be included. Even where beneficiaries have moved after the Execution of the Will and where the address in the Will has not been updated to reflect this, it will provide useful as one of their last known addresses – any address is better than no address in helping to track down an individual.
  • Think about including a list of addresses to be stored with your Will – this will assist the Executors when required to contact beneficiaries.

There is no legal requirement to include specific details of individual beneficiaries in a Will, however, these will prove useful when contacting beneficiaries during the administration process once the Testator has passed away.

You should always bear in mind that ultimately, where there is uncertainty of who a legacy or gift is intended for in a Will, then that gift shall fail. It will then subsequently either fall to an alternative beneficiary, fall to residue, or in severe cases, mean that the estate is partially intestate.

‘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

By | Gifts | No Comments

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.