Monthly Archives: February 2017

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?

By | Trusts | No Comments

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.