Category Archives: Estate Administration

Gift of Property between Spouses

By | Estate Administration, Lifetime Gifts, Uncategorised | No Comments

David and Sammy

David and Sammy were married 5 years ago and have a 2-year-old child together.

David and Sammy have 1 child each from previous relationships.

Property owned in David’s sole name.

Sammy sold her house when she moved in with David just before their wedding 5 years ago. Out of her sale proceeds she has injected £80,000 into David’s property in order to extend it, build a conservatory and modernise it.

Whilst undergoing their estate planning David confirms that he wishes to gift 50% share of his property to Sammy in order to equalise their estates. This is in recognition of the capital injection Sammy has invested into the property. They also wish to protect their assets against sideways disinheritance in the future and are considering having a Life Interest Trust (Property Protective Trust) written into their Wills.

David and Sammy are married and gifts between married couples are tax free

Making the gift

Unmortgaged property

Where a property has no mortgage, the gift is relatively straightforward.

David and Sammy will sign the Land Registry forms, which are then submitted to the Land Registry for the property title to be updated into both of their names as tenants in common.

They can now proceed to have their Wills drafted to include the Life Interest Trust (Property Protective Trust).

Mortgaged property

Where a property is subject to a mortgage the gift involves a little more work.

David and Sammy will sign the Land Registry forms but will also need to sign a Declaration of Trust which will confirm that David owns the equity in the property (the value of the property after the outstanding mortgage has been deducted) and it is this equity that is the subject of the gift.

As the legal title to the property cannot be changed (because of the mortgage) a restriction will be placed over the Land Registry title to the property which will state that if the property is sold then the sale proceeds will need to be distributed in accordance with the Declaration of Trust. This Declaration of Trust will confirm that the mortgage will need to be paid first along with any other associated charges and the value left is to be shared as detailed within the Declaration of Trust. As we are aware, David wanted Sammy to have 50% of the equity however, if he gifted her a difference percentage, this would be shown in the document.

What is the Nil Rate Band and how does it affect Inheritance Tax?

By | Estate Administration, Inheritance Tax, Trusts | No Comments

According to Benjamin Franklin, there are two certainties in life; death and taxes. However, one eventuality that Mr Franklin most likely did not prepare for is the notion of a tax on death. In the United Kingdom, Inheritance Tax is an issue that haunts many families each year and has done since its formal introduction in 1984. The Inheritance Tax charge is entirely dependent upon the value of the net estate on death. When the calculation is made, it takes into account everything you own wherever situated, including any property, money, personal chattels all over the world.

As it stands the first £325,000 (known as the Nil Rate Band) of your estate assets can be transferred Inheritance Tax free to your heirs, unless you pass everything to a spouse, charity or civil partner, in which case the tax is nearly always nil. However, if your children or non-exempt persons (anyone who isn’t your wife, civil partner or charity) are the beneficiaries of the estate, everything in excess of the Nil Rate Band is taxed at a rate of 40%.

For example, Oliver has an estate of £400,000 on his death who he bequeathed to his friend, Dan. After deducting the Nil Rate Band of £325,000, Oliver’s estate is left with a taxable estate of £75,000, which is then taxed at 40% and brings a total tax bill of £30,000. It is important to note that it is not the entire estate which is taxed at 40%, it is only the amount which exceeds the available Nil Rate Band.

If in your will you decided to bequeath 10% of your net estate to a registered charitable organisation, then you would only be charged at 36% rather than the normal 40%.

There are some ways that you can protect your estate from tax, but they are not without risk. You can make life time gifts (known as Potentially Exempt Transfers), which if they are made over 7 years before the date of your death will be removed from your estate when calculating the Inheritance Tax. If you were to adopt this method of gifting away assets and hoping you live seven years, you must not withhold a benefit in order to have them removed from your estate. The most common example is gifting the family home to your children and then continue to reside in it until your passing. As you withheld a benefit of residence, the property is never out of your estate and the seven-year clock never begins. Furthering this, if you die before the 7 years is complete, then the gifts may become part of your estate and fall into the calculation for IHT.

If you are married, then you can transfer your assets to your spouse or civil partner in life tax free whether that’s in lifetime or on death. This was famously done by Bruce Forsythe who transferred an estimated £11,700,000 to his wife free of Inheritance Tax by taking advantage of the spousal exemption rule. If this is the case and all assets were transferred to the spouse through the will or intestacy, the second spouses’ estate would also then benefit from a transferable Nil Rate Band from the first spouse’s estate, which can only come into effect upon the second spouse’s death. Introduce in 2007, the personal representatives of the estate are able to transfer the unused proportion of the Nil Rate Band to the second spouse’s estate from the first spouses’ to offset against any potential IHT charge.

This could essentially double your Nil Rate Band to £650,000 on the second death, meaning that if you had an estate valued at £700,000 only £50,000 would be eligible for Inheritance tax. Without the transferable Nil Rate Band £375,000 would be taxable and the inheritance tax from that amount would be tripled to £150,000.

Furthermore, since 6th April 2017, estates can now benefit from the Residence Nil Rate Band for qualifying residential property which passes to lineal descendants on death. The current rate of the RNRB is £125,000 and is due to increase to a maximum of £175,000 in the tax year of 2020/2021. Fortunately, the RNRB is capable of being transferred on the same principle as the NRB in the hope that in 2021, couple will be able to benefit from both the Transferable Nil Rate Band and Residence Nil Rate Band and passing up to £1,000,000 to their heirs free of Inheritance Tax.

You can bypass the Nil Rate Band through some trusts such as a Pilot Trust or a Bereaved Minors Trust but to qualify for these trusts you need to meet certain criteria and there are other tax implications that can occur.

For more information on the subject or to understand trusts in greater detail, please call the SWW Trust Corporation on 01522 581 570 for a confidential chat

Preservation of Assets

By | Estate Administration, Funeral Planning | No Comments

When someone passes away, it is important to make sure that the relevant people, companies and organisations are informed. You will also need to ensure that any assets of the deceased are preserved until such time when they can be collected, sold or distributed.

Informing the appropriate companies and organisations about the death of a friend or relative can be an emotional task at an extremely difficult time. However, doing this as soon as possible will help prevent any overpayments to or from the deceased into or out of any bank accounts; particularly any overpayments of benefit from any government organisations. It will also allow companies to put any accounts on hold and will provide you with more time to deal with assets and any liabilities in the long run.

Companies you might need to inform include:

  • Any government organisations (HMRC, DWP, DVLA, Passport Office, local council)
  • Banks, mortgage, pension or insurance providers
  • Investment companies or share registrars
  • Utilities (gas, electricity, telephone, broadband, water & sewage, TV licence)
  • Any other companies who you think might need to know (care companies, landlords, subscriptions or memberships, employers, health professionals)

You may call, write to or email companies and organisations to inform them of a death and most will require a copy of the death certificate for their records.

Some organisations offer assistance to make the process as smooth and as straightforward as possible. For example, when you register the death, often the registrar will ask whether you would like to use the ‘Tell Us Once’ service. This is a service that allows you to report a death to most government organisations in one go and helps to prevent overpayments. The registrar will either complete this service for you at the time of your appointment, or will provide you with a unique reference number to access this service You can also access this service online at:

https://idp-death-tellusonce.direct.gov.uk/Death/Enrich/BeforeYouStart

Information you will need to assist you in reporting the death includes:

  • Date of birth
  • Date of death
  • Address
  • National Insurance number
  • Any relevant reference numbers
  • Occupation
  • Marital status

Once informed, any bank accounts will be frozen, which will help preserve and protect any funds.  However, this will obviously also mean that any direct debits or standing orders will not be paid, so it is important that you ensure that all affected companies are informed.

 

Whether the deceased owned or rented a property, it is crucially important that steps are taken to preserve both the property itself and the assets and personal possessions kept inside the property:

  • If the property is owned, make sure that adequate insurance is in place for the building and its contents. If the property is unoccupied, make sure the insurance policy provides cover for this.
  • Ensure that all door locks and windows are secure.
  • Make sure that keys are kept in a secure place and that you are in possession of any other sets of keys or at least aware of who else may has a set of keys to the property.
  • Do not allow anyone to enter or remove anything from the property without consent.
  • Make note of any valuable items at the property (remove these or store these in a secure place if possible)
  • Gather all relevant paperwork together which will assist you in contacting the relevant companies and organisations to inform them of the death.
  • Also gather all original documents such as birth certificates, death certificates, marriage certificates, divorce papers and any Deed poll documents.
  • In Winter months ensure that heating is left on low or the system is drained down to prevent water damage and comply with insurance.

Once you have done all of this, you will have the relevant paperwork and information to allow you to begin dealing with the administration process for the deceased’s estate.

For more Information call SWW Trust Corporation on 01522 581 570 for more information

The Grant Application

By | Estate Administration, Registering land | No Comments

Once you have all valuations for the assets and liabilities in the estate as at the date of death, you have everything you need to begin putting together the application to obtain the Grant of Probate or Grant of Letters of Administration.

The Grant of Probate or Grant of Letters of Administration (collectively known as Grant of Representation) is the legal document issued by the Court (Probate Registry) providing the Executors, Administrators or Personal Representatives of the estate with the legal authority to deal with the deceased’s estate.

A Grant is not always required and there are some instances where the administration of an estate can be carried out without obtaining a Grant. For example:

  • Where a property is held in joint names (joint tenants) and passes by survivorship to the other joint owner(s)
  • Where there are joint bank accounts and only a death certificate is required in order to have the deceased’s name removed from the account and transferred into the survivors sole name
  • Where the amount in any solely held bank accounts is small (banks and building societies have limits as to the value of assets that they will release without seeing a Grant)

There is a common misconception that you if you have a Will, a Grant of Probate will not be required, which is certainly not the case. The need for a Grant is dependent upon the types of assets in the estate and the value of those assets.

Where there is any property owned solely by the deceased or where they own a specified share in a property (as tenants in common), then a Grant will always be required in order to sell or transfer that property/share of that property

What does being a Trustee involve?

By | Estate Administration, Trustees and Executors | No Comments

Because trust funds do not belong to the Trustees personally, as they are holding the funds for the beneficiaries, the law places heavy duties and a high standard of care upon Trustees. Being a trustee is not a responsibility that you should take lightly as there is a lot you need to know as well as a lot that you have to do to fulfil your responsibilities

In many ways the duties on Trustees are onerous and a lay person should give careful consideration to accepting an appointment as a Trustee.

The principal duties of a Trustee are as follows:

• To take reasonable care in exercising their powers as a Trustee. The main duty is contained in Section 1 of the Trustee Act 2000

• To read and understand the trust instrument (i.e. the settlement or Will setting up the trust).

• To act fairly between beneficiaries e.g. In the case of a life interest trust, the trustees should strike a fair balance between immediate income return for the life tenant and capital growth for the beneficiaries after the life tenant’s death. In the case of a discretionary trust, the Trustees must fairly consider the interests of the beneficiaries and make a decision on reasoned grounds. Their decision must not be bought about through malice or discrimination against any one particular beneficiary.

• To comply with the terms of the trust: the Trustees will be liable for breach of trust if they do not comply with express terms of the trust and the law relating to the trust. The beneficiaries may be able to take the Trustees to Court for compensation for a breach.

• To provide information and accounts to the beneficiaries on request.

• To act unanimously unless there is an express power in the trust instrument for decisions to be reached by majority.

• To act without reward: the general rule is that a Trustee cannot charge for his services, unless they are a professional Trustee.

• Not to make a secret profit from the trust e.g. by supplying goods or services to the trust through the Trustee’s own business.

If you want more information about Trusts and how the SWW Trust Corporation can help you then call 01522 581 570 to speak to one of our experts or email [email protected]

Severance of Tenancy

By | Estate Administration, Estate Planning | No Comments

Remember to Sever the Tenancy

Property Trusts and more specifically Life Interest Trusts are one of the more common type of trust put into a modern day Will. There is really no doubt that having a property trust in your Will is an extremely useful provision. Whilst the Trust ensures that your spouse can remain living in your home and receive any income once you pass away, it also ensures that your property is protected for your children for the future.

There are important things to remember when drafting a Will to include a Property Trust, which are crucial further on down the line. Namely, where there is a Property Trust included, a Severance of Tenancy will also need to be carried out, or the Trust will not take effect when you die and when your Will eventually comes into force.

Why is this?

Put simply, there are ultimately two ways of owning property, Tenants in Common and Joint Tenants. Most properties are owned as Joint Tenants initially, however, in order to set up this trust a property must be owed as Tenants In Common, which means that both parties own defined 50/50 shares in the property. Where a property is owned as Joint Tenants, there are no defined shares and subsequently, upon the death of one of the joint owners, the whole property automatically passes to the survivor by survivorship. Alternatively, with Tenants in Common, as both parties own defined 50/50 shares in the property, each may gift their share however they wish and leave instructions in their Will to that effect.

Where do the problems lie?

It is far more frequent that you may think, to reach the administration process once the first spouse passes away, with a Life Interest Trust in their Will, but to find that the tenancy was never severed, ultimately meaning that the Trust will fail.

There are ways of remedying the mistake, by way of Retrospective Severance, which is effectively a Deed of Variation treating the property as though it had been severed in the first place. However, this can be costly and of course incurs unnecessary costs from your estate.

It is also a frequent occurrence whereby a Will is drafted to include a Life Interest Trust and the tenancy is correctly severed at the time, but the parties then move to a new property and do not make a point of having the new property owned by way of Tenants in Common, rather than the more common Joint Tenants.

Ultimately, it is important to make sure that the correct provisions are in place whilst you are alive, in order to avoid extra costs and unnecessary action during the administration process when you die.

For further information on property ownership and severance of tenancy, you can visit the Government website by using the following link:

https://www.gov.uk/joint-property-ownership/change-from-joint-tenants-to-tenants-in-common

Distribution of the Estate

By | Estate Administration, Estate Planning, Gifts | No Comments

Distribution of the estate

Once you have collected in all estate assets and settled the estates tax affairs and any outstanding liabilities or disbursements, you will then be able to begin distributing the estate in accordance with the terms of the Will, or in line with the Rules of Intestacy.

Distribution of any estate assets should not be made prior to the expiry of the Statutory Notice to Claimants. This is where a notice is placed into the London Gazette and into a local newspaper and lasts for a period of 60 days. The purpose of this is to give any claimants or creditors 60 days to make a claim against the estate, after which time the estate will have some protection against any claims that may arise in the future. It is not recommended that the estate is distributed or finalised until after this 60-day period expires as it will protect the Executors/Administrators from any liability in the future.

Before any distributions are made, it is also recommended that you obtain identification for each beneficiary (generally photographic ID and proof of address will suffice), so that you can confirm and prove that each beneficiary is exactly the individual referred to under the Will or entitled under intestacy.

  • This is particularly important where any beneficiaries are referred to by ‘nicknames’ under the Will or where beneficiaries have become married, meaning that their name will differ from that in the Will.
  • This will avoid any uncertainty and will prevent distributions being made to the wrong individuals, as the Executor/Administrator will ultimately be liable should this be the case.

Any specific gifts or pecuniary legacies set out in the Will should be distributed first.

  • It is recommended that any payments of pecuniary legacies to any beneficiaries should be made by either cheque or bank transfer. This is because these are both traceable and can be referred to and proven at a later date should any queries arise.
  • You should ideally get some form of receipt from each beneficiary to confirm that each has received their correct entitlement from the estate.
  • If there are any gifts or legacies due to a beneficiary who is a minor it is sometimes possible to pay their legacy to their parent or guardian, who can provide receipt on their behalf, depending on the wording of the Will. Alternatively, where this is not possible, funds will need to be held upon Trust for any minors until they are old enough to provide valid receipt.

At this point, any property that has not already been sold, or any property specifically gifted in the Will, can be transferred into the name of the beneficiaries.

  • It is recommended that you seek assistance from a professional to transfer any property to any beneficiaries.

If there is direction in the Will that assets should be held in Trust, then you will need to arrange for the assets to be transferred to the control of the Trustees and execute the relevant documents to reflect this.

  • Unfortunately, the drafting and setting up of any Trusts is a reserved activity and you will need to contact a professional for advice and services in respect of this.

Finally, before any distributions are made to any residuary beneficiaries, you should put together estate accounts.

  • The estate accounts should outline all assets and liabilities in the estate, along with any payments that have been received or payments made, during the course of the estate administration
  • The accounts are required so that each residuary beneficiary may see the exact extent of their entitlement from the estate
  • Once completed, each residuary beneficiary and any other Executors should receive a copy of the accounts and approve them (it is advisable for each beneficiary to provide you with their written approval of the accounts).
  • Only when the accounts have been approved should you make any final distributions to the residuary beneficiaries. Again, you should ensure that you distribute any funds by way of a cheque or bank transfer so that any payments are traceable, and you should obtain a receipt from each beneficiary to confirm that they have each received their correct entitlement under the estate.

Once all distributions have been made and all matters have been finalised for the estate, you should ensure that all documentation and paperwork in relation to the administration is kept in a safe and secure place.

In line with the General Data Protection Regulation (‘GDPR’) all sensitive personal data relating to beneficiaries or any other living people which may be held on file, should be securely destroyed or deleted if there is no longer a justifiable reason for retaining it.

It is advisable not to destroy any original documentation as it may be that you will need to refer back to the paperwork in the future. It is good practice for Professional companies and legal bodies to keep and store files and paperwork for a minimum period of 7 years, in line with HMRC guidelines, so this may be something to consider.

If you have any questions or would like more information please call 01522 580571 to speak to one of our experts

Why Work With the SWW Trust Corporation?

By | Estate Administration, Estate Planning, Probate, Professional Trustee, Trustees and Executors, Trusts | No Comments

It is important to know what the benefits of working with the SWW Trust Corporation are.  There are significant benefits of choosing to work with us as you will see in this article.

We can help with the creation of the trust and liaise with the settlor to ensure that appropriate powers and duties are given to the Trustees, and register the trust with Inland Revenue & Customs Forms. We can help with the ongoing administration of trusts, including preparing annual accounts and completing the yearly tax return as well as the 10-year anniversary return. We can also put you in touch with independent financial advisors with experience of advising on trust investments.

We can advise Trustee on their powers and duties under the trust instrument or under statute. We can act as Professional Trustees and relieve you of the risk the role entails, and we can help bring trusts to an end when required because our business is built exclusively on providing Trustee and Executor services, you’ll get the very best service and advice available. Unlike solicitors or banks, we are specialists not generalists. Because this is all we do you can be assured you are receiving the highest level of service available.

Executorship in particular can involve a great deal of time, effort, stress and even financial costs. All of which can be overwhelming for an individual. You can place your trust and confidence in the SWW Trust Corporation. From the very first phone call our advisors are specially trained to be professional but empathetic with your circumstances. You will be allocated a personal estate manager who will work closely with you and your family throughout the process who will ensure you receive the service that suits you.

As a corporation, we will always be on hand to offer our services as an Executor or maintain the integrity of a Trust throughout its lifetime. No private individual can offer the same perpetual service. Choosing a close friend or family member as an Executor or Trustee runs the risk of subjectivity and opinion creeping in. By appointing an impartial body like The SWW Trust Corporation you can avoid any possible conflict of interests.

For all of this and peace of mind the SWW Trust Corporation can make your life easier while taking care of all the legalities in which we specialise with compassion and professionalism.

Failure of Gifts: Abatement and Ademption

By | Estate Administration, Estate Planning, Probate | No Comments

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.

What is a Grant of Representation?

By | Estate Administration, 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.