From the SWW College of Will Writing
Modernising Succession: Law Commission Consultation
Last month (13th July 2017) the Law Commission launched a consultation paper to tackle issues surrounding the law of Wills, chiefly aiming to bring Wills into the modern age. The Law Commission has highlighted the age of the current legislation as a root of the problem and suggested that the law needs to be modernised to reflect changes in society, technology and medical understanding – we’ve come a long way since the Wills Act was first introduced in 1837.
This month’s paper will examine some of the main proposals put forward by the Law Commission, focusing mainly on matters related to capacity.
WHY THE NEED FOR MODERNISATION?
The underpinning statute for succession law is the Wills Act 1837 (WA 1837). This has been updated over the years as changes in societal norms have called for it, for example the latest significant amendment was the addition of section 18(5) and section 18D to take account of the provisions of The Marriage (Same Sex Couples) Act 2013. Before that the WA 1837 saw the addition of sections 18B-C to reflect the introduction of Civil Partnerships via the Civil Partnership Act 2004. So while the WA 1837 has been updated over the years, perhaps after nearly 200 years it’s time for a review.
Our understanding of mental health and capacity has also moved forward since the main case setting out the legal test for capacity was decided in 1870 (Banks v Goodfellow  LR 5 QB 549).
Modern families need a more modern approach to succession. More people are cohabiting without marrying or forming a civil partnership, and more people are remarrying and merging families.
More needs to be done to address digital legacies and the increased reliance on technology, possibly by introducing electronic Wills in future.
THE MAIN PROPOSALS:
For ease of reference to the summary of the consultation paper this paper uses the same headings.
To meet the formality requirements of s9 WA 1837 a Will must be in writing. Currently a Will may be prepared electronically using a word processor or Will writing software, but at some point it must be printed and sent to the client to be executed. A wet ink signature by the testator and witnesses is required.
People are become increasingly reliant on technology and expect to be able to manage many of their affairs online; from mobile banking to managing billing accounts online, so why not their Will? The Law Commission proposes developing this area of law so that Wills could be validly executed electronically, making the whole process digital and introducing ‘electronic Wills’. This could make the whole process of Will drafting cheaper and more convenient for the Will Writer and testators. Page 2 of 6
Electronic Wills could make making a Will more convenient, thereby increasing the amount of the population who make a Will. They could be especially convenient for testator’s with physical disabilities who would be more likely to engage with a fully online service. They could also be stored more securely, with much less chance of being lost than a physical copy tucked away in a drawer in the testator’s home. There is also potential for an electronic Will system to be linked to an electronic probate system that would streamline the whole process of admitting a Will to probate.
No other jurisdiction has successfully introduced electronic Wills. To do this new legislation would need to be introduced to recognise electronic signatures in the context of executing Wills. The Law Commission has identified two main challenges to introducing electronic signatures to Wills. These are security and infrastructure.
In terms of security the electronic signature must be more than the testator’s named simply typed. This is too susceptible to fraud as any electronically typed name looks the same no matter who types it. Similar problems apply to digital images of written signatures. More complex methods would be required such as biometrics or encryption based signatures that could be linked to the testator more reliably. The Law Commission concludes that electronic signatures must obviously be at least as secure as handwritten signatures, and as there are various means of making an electronic signature special legislation will be required to address how to assess what is a secure enough electronic signature for a valid Will.
Regarding infrastructure, the systems used to enable making and executing a Will electronically must be accessible. Adopting too rigid requirements could have the opposite effect and discourage people from adopting electronic Wills. There would be similar barriers to overcome with cost; if the price of developing a secure electronic Will system is too high people will not take it on.
A formal support scheme has been proposed for assisting those with diminished capacity to write a Will. Many people with capacity issues are supported by their friends, family, and carers who help them make decisions. Currently the system allows for supporting testators in their decision making to an extent, for example by providing extra assistance to help a testator with communication issues, or by using various methods to help a testator understand the extent of their estate. However, the current legal test for capacity does not actively promote supported decision making so new legislation may be required moving forward.
It is suggested that a system of supported Wills would assist these people and fill the gap between those who have the capacity to make their Will and those who lack capacity and who must apply for a Statutory Will.
This may give more people the ability to write a Will, giving people with diminished capacity greater testamentary freedom. Of course this will still need to be balanced with providing protection for testator’s and preventing people being unduly influenced.
This would ensure that fewer people with diminished capacity would need to apply to the Court of Protection in order for a Statutory Will to be prepared; keeping costs down for them as any formal support Page 3 of 6
scheme would be cheaper than the process of applying for a Statutory Will, although it would likely be publicly funded.
Since the introduction of the Mental Capacity Act 2005 (MCA 2005) there has been debate over whether the statutory test should be applied when assessing testamentary capacity or whether the common law test should continue to be applied. It is proposed that testamentary capacity should be governed by the capacity test in the MCA 2005 rather than the current common law test in Banks v Goodfellow, effectively putting an end to that uncertainty.
The language of the common law test could be described as archaic, so bringing the language up to date would be beneficial for testator’s and practitioners seeking to apply the test.
This leading case on the legal test for capacity was decided in 1870, and since then our understanding of mental health and disorders that can effect capacity has greatly improved. In the case of Key v Key  EWHC 408 the effect on a testator of bereavement was considered when applying the common law test, which was not made with this in mind. To address the needs of an aging population and reflect our greater understanding of disorders than can affect a person’s capacity it is suggested that a new test of capacity is needed.
The two-part capacity test offered by section 2 of the MCA 2005 applies in multiple contexts and should be familiar to Will Writers, legal professionals, medical practitioners and others whose opinion will be sought when assessing capacity. Applying the statutory test would also unify the laws approach to capacity, as currently there are circumstances where the statutory test is applied, for example in relation to Lasting Powers of Attorney and when determining capacity for Statutory Wills, and other circumstances where the common law test applies.
The presumption of capacity, unless otherwise proven, is particularly important in the Law Commission’s view, as it draws attention to the English legal system’s ‘functional approach’ to capacity and the fact that capacity must be assessed on a case by case basis. The starting point must always be to presume that a testator has capacity, a drafter cannot assume that a testator lacks capacity on the basis of advanced age or medical condition as this alone is not enough to prove a testator lacks capacity.
The consultation recommends providing statutory guidance for doctors and others carrying out capacity assessments. The MCA 2005 is already supported by a code of practice, and the Law Commission proposes including guidance on applying the statutory test specifically to those writing Wills to this code of practice.
As an alternative to the above, the consultation paper also discusses the merits of bringing the common law test up to date by statute. This would mean that the common law test could be redrafted and made more accessible by using modern language. It would also bring it up to date with current medical understanding of capacity, defeating the criticism that the current test is outdated and was decided at a time when mental health and the range of factors that can effect capacity were not properly understood. Furthermore, it would also be an opportunity to clarify key aspects of the test. Page 4 of 6
Knowledge and approval
A testator must know and approve of the contents of their Will at the time of its execution. This is clearly closely linked to capacity. A testator may have the required testamentary capacity but fail to understand the content of their Will. A testator may still have sufficient knowledge and approval even if they do not understand the language used by the drafter exactly, for example technical legal terms, as long as they know the effect of their Will.
Where a testator lacks knowledge and approval their Will is invalid. It is for the person propounding the Will to establish that the testator had knowledge of and approved the contents of their Will (In the Estate of Sherrington, Sherrington v Sherrington  EWCA Civ 326,  3 FCR 538).
Where a testator has read their Will or had it read over to them before execution, or where the contents have been brought to their intention in any other way such as through sign language, and the Will has been executed, a rebuttable presumption that the testator knows and approves of the contents of their Will arises.
Currently there is overlap between knowledge and approval and undue influence. There are many cases where a Will has been challenged on the grounds of lack of knowledge and approval when it would be more appropriate to challenge it on the grounds of undue influence. The full consultation paper identifies 3 main reasons for this, but combined they all highlight a failing in the application of undue influence. These reasons summarized are as follows:
Where lack of knowledge and approval is alleged the burden of proving the testator had knowledge and approval lies on the person propounding the Will, whereas the onus lies on the person challenging the Will when undue influence is alleged. Worse, the person who challenges the Will on the grounds of undue influence and loses their case will find themselves paying the court costs.
People are generally reluctant to accuse a family member of fraud or undue influence, so a claim of lack of knowledge and approval is preferred
Claims of lack of knowledge and approval can be used to ‘cloak’ what is really a claim of fraud or undue influence, as was the case in Wintle v Nye  1 All ER 552
The Law Commission’s proposal is to narrow the scope of knowledge and approval to make it clear that the test of whether a testator knew and approved of the contents of their Will is entirely separate from the question of whether they freely executed the Will and were not coerced.
Signing on a testator’s behalf
A Will must meet the formalities of s9 in order to be valid. A key requirement is that a Will must be signed by the testator, but may be signed by some other person in the testator’s presence and at their direction (s9 (a) WA 1837). This is all the legislation has to say on the matter. Under the current law no restriction is imposed on who may sign the Will on the testator’s behalf; this could be a witness, the drafter, or even a beneficiary of the Will. Page 5 of 6
It is suggested that the law should place restrictions on who can sign on the testator’s behalf as the current position is too wide and could leave a testator open to fraud. It seems reasonable to place restrictions on who may sign a Will on behalf of the testator, as there are already restrictions on who may witness a Will so logically it makes sense for similar restrictions to be imposed on who may sign it.
If a Will is made as a result of the testator being subjected to fraud, fear, or undue influence it is invalid; however the onus is on the person claiming the undue influence, there are no presumptions to assist the person challenging. There is also a high burden of proof on the person claiming undue influence. Testamentary undue influence appears to be limited to cases where the testator was coerced, or enough pressure was applied to overpower the testator’s freedom of action. The courts are more inclined to find undue influence where the testator is physically or mentally weak, as where a testator is mentally weak less pressure may be required to overbear their Will.
This is in contrast to undue influence where lifetime gifts and contracts are concerned, as here there are a number of presumptions. The main presumption is the existence of a ‘relationship of influence’ between certain parties, which may give cause for the gift to be explained. Where there is a presumption of a relationship of influence, there may not necessarily have been any undue influence. There is a presumption of a relationship of influence where a gift is made by:
a child to a parent or guardian
a beneficiary to a trustee
a client to a solicitor
a patient to a doctor or other medical practitioner
a follower to a spiritual leader
If there is a relationship of influence, the person alleging undue influence must also show that the gift calls for explanation.
The Law Commission believe that the current system of setting a gift aside due to undue influence is too narrow in comparison to proving undue influence with a lifetime gift. Two approaches are proposed for a doctrine of testamentary undue influence; a structured approach or a discretionary approach.
The structured approach would be based on the lifetime gifts rules and would be a two-limb test. Under this, a presumption of undue influence would be raised if:
there exists a relationship of influence; and
the gift calls for explanation
Relationship of influence would be presumed in respect of gifts to:
a medical adviser
a person who prepared the will for remuneration
a professional carer
Page 6 of 6
For all other types of relationship there is no presumption and the fact a relationship of influence exists would need to be proven.
When considering if the gift calls for explanation, the court would consider two factors:
the conduct of the beneficiary in relation to the making of the will; and
the circumstances in which the will was made
There is also a suggestion that where a beneficiary was instrumental in the preparation of the Will there should be a presumption of undue influence.
Under the alternative discretionary approach, the court could instead presume undue influence if it were satisfied that it is just to do so in all the circumstances of the case. This approach would still consider relationships of influence and calls for explanation, but they would only need to consider them alongside the general facts of the case instead of having to be individually satisfied of the two criteria as under the structural approach.
Under either approach, if the presumption is raised it would be up to the person defending the gift to rebut the presumption.
This paper has been by no means a full summary of the Law Commissions proposed reforms to the law surrounding Will Writing, only an examination of some of the key proposals. We would urge Members to read the full report or the official summary by following the links provided below.
The full Law Commission Consultation Paper No 231 and summary can be read by following this link:
The consultation is open to responses until 10 November 2017.
An absolute essential for every Sole Owner, Director or Partner of a business in 2017
As a business owner it is important to consider what might happen to the business if you should be incapacitated by illness or injury, who would take over the running of the business and its financial and property affairs, and what would it mean for your employees’ financial future
Whilst there may be ‘an understanding’ amongst your colleagues of what would happen should illness or injury take you away from the business, in the eyes of the law this isn’t sufficient. Unless you have appointed an attorney, fundamental business operations may not be possible – access to bank accounts may be denied, suppliers won’t get paid, contracts could be compromised or lost, insurance premiums won’t be renewed, and salaries could go unpaid. Without an attorney appointed to take care of the business, the disruption to your company could be catastrophic, and it won’t take long for the impact to be felt.
As a business owner, you matter. You commit time and money to your business and have staff and suppliers who are reliant upon you.
Business owners may have had the foresight to purchase Key Person Insurance, but this will not assist with the practicalities of running the business if that key person is ill or injured and unable to work or take decisions. For that reason, LPAs are frequently being used by prudent business owners to protect their business interests in the event they become incapacitated (it is becoming common for people to make a specific LPA for business purposes and one for personal affairs).
If a person does not make an LPA and loses mental capacity, an application to the Court of Protection is required to access their finances which often is expensive and time-consuming. In a commercial sense, this may also hold-up the running of the business (cheque signing, payment of wages, renewals of insurance etc.).
Worryingly, many financial institutions respond to a business owner’s lack of capacity by calling-in loans and freezing bank accounts. By having an LPA in place for your business interests you can ensure that your company runs smoothly even when you are unavailable.
It is therefore a necessity for any business owner to consider the worst to ensure continuity and to protect hard earned success. A professionally drafted Business LPA is as important to your business as insurance is.
Each type of business must be assessed according to its structure. For sole traders, the owner can execute an LPA to appoint any attorney to act in the event of mental incapacity.
LPAs use in partnerships depends on whether there is a partnership agreement which allows for an attorney to act on behalf of an incapacitated partner. Where no such agreement exists an application to court may be needed to remove a partner who is incapable of adhering to the partnership terms.
For companies, Directors cannot delegate their functions as a Director unless the articles specifically provide otherwise. In many cases the Director will also own shares in the company. Therefore a solution is for the owner of the shares to have an LPA to ensure business continuity by the attorneys who can appoint a new Director in the event of the Donor’s incapacity. The LPA and the articles of association need to work alongside one another.
The benefit of a business LPA is that you decide on who will deal with your affairs on your behalf. You can also place very specific instructions and restrictions upon your attorneys as well as providing guidance on how they should deal with your business affairs.
This can all sound daunting but under the Mental Capacity Act 2005 your attorneys must act in your best interests and follow a Code of Practice, this includes considering any views and beliefs you have expressed in the past. You can also revoke your LPA at any time as long as you have capacity.
As a busy professional it is easy to brush these matters aside but as a business owner you have additional responsibilities to consider and a business LPA can give you, your partners, staff and suppliers the peace of mind that your hard earned success is protected at the worst time.
Contact us for more information 01325324515 or07971957945Read More
E.M.P SOLUTIONS Home Protection Scheme
Key Facts and Benefits
The Home Protection Scheme
Property ownership is an aspiration for most of us because there are many advantages such as:
Having complete control over your home and the ability to do
whatever you want with it
The security it provides
Property is generally an appreciating asset
The comfort of knowing that when you are gone, your loved ones
will get the benefit
Financial difficulties such as not being able to pay creditors, tax problems or bankruptcy
Health issues that mean we need long term care
We want to make sure that our home is protected for us and for those we want to leave it to
However, life is never certain and all too often personal circumstances can change and things occur that put the home at risk either for us or, for the ones we want to leave it to when we have passed on.
It’s a sad fact that every year 100,000’s of people in the UK lose the homes they have worked so hard for simply because their financial circumstances have changed or, because they need to go into care.
Even if we remain fit, healthy and financially solvent until the end, who can predict what will happen to our home once it has been inherited by our loved ones?
They too could lose the property due to financial pressures or poor health, and the security we hoped it would provide them is gone forever.
The Home Protection Scheme is designed to protect your home or, the equity you have in your home if you have a mortgage, by placing
it into a Protective Trust. Placing your property into a properly drafted Protective Trust would mean that you retain all the benefits of home ownership. Additionally benefits for you and the ones you want to leave your home to could include:
Protection from creditors
Protection from care home fees
Making sure your home passes to those you love exactly as you have planned
How you own your home can protect it for you, and the ones you love
There are many benefits to the Home Protection scheme and on the following pages there are details on what is involved in setting up the scheme, how it works and the benefits but, everyone’s circumstances are different and it is essential that you seek advice from a professional and discuss everything with your family or, those you want to inherit your assets.
What Is A Protection Trust?
A Protection Trust is probably one of the most useful and versatile estate planning tools available. They have been used in the UK for hundreds of years and for most of that time, the general perception of what a Trust is used for is the preservation or reassigning of assets for the wealthy with large estates.
The production of a Trust is deemed ‘Reserved Legal Work’. Therefore, has to be completed by either a Solicitor or Barrister and are typically quite expensive to produce.
However, we do not believe that it should be cost prohibitive for anyone to take advantage of such a useful estate planning vehicle and we will produce a Trust for a fraction of what some law firms charge without compromising on quality. In fact, all of our Trusts are produced exclusively by Barristers with extensive knowledge and expertise in this area.
It’s reassuring to know that experienced Barristers have
drafted your estate planning documents
A Protection Trust is a legally created vehicle designed to take over the direct ownership of certain assets which often includes the family home.
A Protection Trust is an alternative to traditional ownership that provides many additional and important estate planning and protective benefits. Whilst, strictly speaking, placing assets into a Trust does mean that ownership is relinquished to the Trust, it certainly does not mean that the control or the benefit of those assets is given up.
With traditional ownership you have complete control over your assets and you can benefit from them as and when you like. Upon death, complete ownership of your assets has to pass to those beneficiaries named in your Will.
Because they are legally either your assets or, those of the beneficiaries named within your Will, they are vulnerable to being used to repay creditors or to fund care home costs.
Creating a Trust and placing your assets within it means that the Trust now owns those assets.
However, as Trustees you retain complete control over those assets and can benefit from them in just the same way as if you had direct ownership.
Because the Trust will survive you, there is no need to transfer ownership of the assets to loved ones. Instead, you transfer the control by making them
Trustees and the benefit by making them Beneficiaries.
As the Trust is designed to survive you and retain ownership of the assets within it, you can plan for how those assets are to benefit loved ones once you have passed on. You don’t have to transfer ownership.
Assets owned by the Trust are considered to be beyond the reach of unsecured creditors and should not be considered when calculating what can be paid towards care home costs.
Why set up a Protection Trust?
Estate Planning Advantages
Whilst a Protection Trust does provide significant advantages to you during your lifetime in relation to protecting your assets, for most people, the main reason for setting up a Trust is because they want to make sure that their loved ones receive the maximum benefit from their assets once they have passed on. Below is just a small selection of the Estate Planning Advantages.
Avoiding hefty probate costs
Typically, upon death all our assets are placed into ‘probate’ which is basically a state of suspended animation until such time as the appointed Solicitor or, your bank complete the probate process for which they will make a significant charge to your estate (often between 3% & 5%).
Because your Protection Trust survives you and as long as it has been properly drafted with details of the Trustees /Beneficiaries who replace you upon death, there is no need for probate.
Ensuring that your wishes are fulfilled expediently upon death
As above, those assets placed into a Protection Trust will not be included within the probate process and therefore the beneficiaries will receive the benefit as you have stipulated immediately.
Effective way of dealing with inheritance if the family circumstances are complex
Unlike a Will, a Protection Trust CANNOT be contested. Because with a Protection Trust there is no transfer of ownership of the assets it is far easier for you to ensure that upon your death the benefit of those assets are distributed exactly as you want them to be. This is ideal for families where marriages have broken down or if there are step children or step grandchildren involved.
Ensuring beneficiaries who need help are looked after properly
Many of us have someone that we worry about, or feel we need to ‘look after’. Whether it is physical need or simply that they aren’t always capable of making sensible decisions we worry that simply leaving our assets to them after we have died, they won’t be capable of managing them to provide long term security.
A properly drafted Protection Trust allows you to determine how those individuals you care about receive the benefit of your assets after you have passed on enabling you to plan for their long term security.
Protecting inheritance from beneficiaries creditors
Most of us will want to leave our assets to our children and other loved ones to help them achieve financial security.
If you simply leave your assets in a Will, upon death the value of those assets transfer to whomever you have left them to.
In this current economic climate it may be the case that the people you want to inherit your assets may well be in financial difficulty and therefore their inheritance could be seized by their creditors.
Because the Trust survives after your death your assets remain in the trust and are therefore beyond the reach of the creditors of the beneficiary although, the beneficiary can still receive the benefit.
Why set up a Protection Trust?
The motivation for placing assets within a Trust should always be for Estate Planning reasons such as those detailed on the previous page.
However, your assets could benefit from a far greater level of protection if they were in a Trust as opposed to being owned in the traditional sense.
Whilst the protection advantages are extensive, it has to be understood that you should not place assets within a Trust with the sole motivation of simply depriving anyone who might have a legal claim on them.
Never the less, below are just some of the protection advantages afforded to assets placed into a Trust for Estate Planning reasons:
Protection against care home fees
The days of our government looking after us from the cradle to the grave are long gone and we are now expected to contribute to the costs incurred in caring for us in our twilight years.
Care home fees are not cheap. Care can cost from between £2000 and £5000+ per month and your local authority will be expecting you to contribute towards these costs.
They will look at every asset you own, including your property, and if these total more than £14,000 then your local authority will expect you to make some contribution towards the cost of your care. In fact, if your assets are above £23,000 then they will expect you to meet ALL of those costs and if this means selling the family home, then so be it.
Placing your assets in a properly drafted Protection Trust means that they should no longer be part of the Local Authority’s evaluation, safeguarding them for your family.
An option that some people have taken in the past is to simply transfer their property to their children. However, the aggressive nature of Local Authorities often results in such a transfer being reversed or, a charging order being granted.
Because a Protective Trust is a legal entity in its own right, the Local Authorities can not apply the same rules as if the property had been gifted to a relative.
However, critical to the success of the Protective Trust will be the length of time the trust has been in place and whether or not, entry into a care home was even an issue when it was formed.
Current legal opinion estimates the Trust should be in place for at least 12 months before going into care. However, the longer the Trust has been in place the better and it is advisable to consider at least an18 month period to bemire appropriate.
Protection against unsecured creditors
None of us can see what is round the corner and recent years have shown us that changes in general economic circumstances can overnight put thousands of previously solvent people into financial difficulty.
Unsecured creditors can seek what is called a ‘charging order’ against a borrowers home and potentially force the sale if the borrower does not maintain the contractual payments.
If the property has previously been placed into a properly drafted Protection Trust, the creditor may still be able to obtain a ‘charging order’ on the borrower’s property but, it will sit below the Trust itself and the interests of the beneficiaries. In short the creditor will not be able to force the sale of the home nor, will they be able to lay claim tony of the asset value.
Protection Advantages (continued)
Protection against Bankruptcy
If the trust has been set up for less than 2 years and you are made bankrupt the Official Receiver will be able to include the property in the bankruptcy as an asset (ss.339-342 of the Insolvency Act 1986).
After 2 years, the property does not need to be included if it can be shown that when the trust was set up the personas solvent.
Protection against the creditors of someone else for whom you have stood as guarantor
If you have stood guarantor on a loan or mortgage for one of your children (or anyone else) and they default on that loan or mortgage, a properly drafted Protective Trust will protect your assets.
Protection against business creditors
If a sole traders business fails or, if they are not able to meet their business credit commitments as and when they fall due, a properly drafted Protection Trust can protect personal assets keeping them beyond the reach of creditors.
However, the Trust must have been produced within a timely fashion i.e.: not at the time when the business fails and not simply to deprive creditors.
What can be included?
Quite literally any assets including real property, cash investments and
life insurance policies etc can be placed in a Protection Trust.
However an individual can only place up to £325,000 (£650,000 per couple) worth of assets into a Trust before there is any tax liability. Anything above £325,000 per person will attract a tax liability.
Whilst there is no limit to the value of the assets that can be placed into a Protective Trust, the reasons for exceeding £325,000 per person would have to outweigh the tax liability and specialist tax advice should be obtained. The use of multiple Trusts should be considered for those with assets exceeding current tax thresholds.
Placing a property or any other asset into a Protection Trust does not mean that you relinquish any control over those assets.
In the case of a property, you can still sell the property and decide whether to, leave the proceeds within the Trust or remove them. You can use the proceeds to buy another property and place that in the Trust or remove it.
As a Trustee you can also ‘unwind’ the Trust at anytime if it no longer suits your requirements.
Why don’t more people have Protection Trusts?
One simple answer is that despite Trusts having been around for hundreds of years, how they work and how useful they are isn’t widely known or understood.
Also, because the production of a Trust is reserved legal work they have always been relatively expensive to produce and therefore the preserve of the wealthy with significant assets. In these circles, the use of Trusts has always been very common.
Our Trusts are designed to be affordable to all so that everyone can benefit from what is probably the most versatile and useful estate planning tool.
Setting up a Protection Trust
When considering setting up a Trust to hold your property and other assets
there are four main stages to consider.
Individual circumstances can vary a great deal and there is no way of telling
whether or not a Protection Trust or, any other form of estate planning is
right for you without carrying out a complete review of your affairs.
You should obtain good advice from a professional Estate Planer or a qualified and experienced Financial Advisor who should make a thorough evaluation of your circumstances before making any recommendations.
Consult your family and those you intend to benefit from your estate
If, after receiving good advice you are considering putting your assets into Trust, you should discuss your decision with family members and or, trusted friends and anyone that you want to be either a Trustee or Beneficiary of the Trust.
Be confident that your Protection Trust has been drafted properly and is tailor made
As mentioned earlier, the drafting of a Trust is considered to be ‘Reserved Legal Work’ meaning that it can only be done by a Solicitor or Barrister.
You should make sure that the Solicitor or, Barrister is suitably experienced in the drafting of Trust documents and what is required to enact them. They should also carry suitable levels of professional indemnity insurance so that you can be compensated if their drafting is flawed and the Trust doesn’t perform as it was intended.
Make sure your wishes are honoured without burdening loved ones
Once your Trust is drafted and in place, it is possible and often advisable, to appoint a professional Trustee. This person or organisation should NOT be a beneficiary of the Trust and their powers should be limited to ensuring that your wishes and the rules you put in place when the Trust was set up are respected and honoured.
Who would produce your Trust Documents?
All of our Trust documents are produced by the highly experienced Barristers
When it comes to protecting our most valuable assets including our home and considering how we want those assets to be distributed once we have passed on, it would be remiss to say the least, not to consider the setting up of a Protection Trust.
A Protection Trust is one of the most flexible, useful and protective Estate Planning tools available. No matter how old you are or how much there is in your estate, it is often the ideal way to ensure that what you have worked so hard to acquire is removed from danger during your lifetime whilst also providing the maximum benefit and security to those you love after you are gone.
Avoids hefty probate costs
Ensures that your wishes are fulfilled expediently
Provides an effective way of dealing with inheritance
if the family circumstances are complex
Ensuring beneficiaries who need help are looked
Protection against care home fees
Protection against unsecured creditors
Protection against Bankruptcy
Protects inheritance from beneficiaries creditors
Protection against the creditors of someone else for
whom you have stood as guarantor
Protection against business creditors
Frequently Asked Questions
Q: Who would benefit from a Protection Trust?
A: A Protection Trust is designed for singles or couples who own their own home or have a reasonable level of savings/investments.
Q: Who will be the beneficiaries of my Trust
A: It is up to you as to whom the beneficiaries are. During your lifetime you can either nominate yourself as a beneficiary or, make sure that you have what is termed a ‘lifetime interest’. It is also up to you how the beneficiaries receive their inheritance. You can place any requirements or conditions that you require. This way you can safeguard your bequests from being squandered or lost.
Q: What happens if one of us dies?
A: If you have a joint Trust everything remains exactly the same. The survivor can keep the benefits of the trust and keep control over the trustees. Basically, it is up to you to set the rules at the point when the Trust is being set up.
Q: Can I sell my house if it is in a Trust?
A: Yes, as Trustees you can sell any asset within the Trust and decide what to do with the proceeds of the sale. For example, you could take the funds out of the Trust or, leave them in. You could use the Trust to buy a new home that would then sit within the Trust. Basically, it’s up to you as Trustees.
Q: What type of assets can I place in a Trust?
A: It is usual to put property or, properties into a Trust along with other savings, investments and life insurance policies. However, virtually all tangible assets can be put into a Protection Trust.
Q: Can I add other assets at a later date?
A: Yes you can.
Q: Can I unwind a Trust if I change my mind?
A: Yes, if your circumstances change or you simply decide that you no longer want to have your assets in a Trust, as Trustees you can unwind the Trust and release the assets back into your direct ownership.
Q: What is ‘deliberate depravation of capital’?
A: When a local authority conducts a means test financial assessment, it will check when assets were placed in a trust to establish whether they were placed there solely for the purpose of avoiding being included in the assessment. This is known as ‘deliberate deprivation of capital’.
Q: How can I avoid being accused of ‘deliberate depravation of capital’?
A: The best way to avoid it is to place your assets into a Trust when the thought of having to enter a care home anytime in the near future is simply not an issue.
If those entering assets into the Trust are a couple, then the family home carries a ‘disregard’ status if one of the couple has to enter into care.
There is also passage of time. This means the time between when the Trust was set up and when care financial assessment became an issue. This needs to be of such a length that a local authority would be unable to prove deliberate deprivation and whilst no set time period is given, an ideal minimum would need to be at least 18 months. It is worth noting that a local authority will be allowed to inspect all medical and financial records when conducting their assessment.
Estate Planning Conundrum: What to do when a beneficiary has a substance abuse problem
Many parents have raised the issue of what to do when a child or grandchild struggles with substance abuse. With the recent death of Whitney Houston and her connection to substance abuse, it reminds me of what this means during the estate planning process. These parents are heartbroken and need guidance on how to address this difficult situation in their estate planning documents. Substance abuse – whether it’s alcohol, prescription drugs, or illegal narcotics – affects many of the families we advise. As a result, we developed a list of questions for families to consider when designing their estate plan:
I have noticed that substance abuse often masks other underlying mental health issues, including undiagnosed or untreated schizophrenia, bipolar disorder, and depression. That these issues are often part of a larger family pattern makes having the discussion much more difficult, but much more essential.
Families in Conflict An addicted child may have already taken a significant emotional, physical, and financial toll on the entire family. Parents who find it difficult to handle this child become increasingly disturbed when they consider who would step in if they are unable or unavailable. This helplessness often leads to anger, frustration, and conflict. One parent may want to cut off the beneficiary while the other parent cannot consider doing so. One parent may want to kick the child out of the home, while the other parent believes that doing so would make matters worse. These conflicts add stress to their marriage and the family at large. Grandparents may have different opinions than the parents. Siblings may already be resentful of their addicted sister or brother. In many families, the troubled child has already received significant emotional and financial assistance. His troubles have already taken centre stage at the dinner table. His presence in the home and attitude toward the family may have already created constant disruption. Estate Planning Tools and Options As complex and emotional as these issues are, families must address them. And they will welcome having an impartial, yet compassionate adviser to provide guidance, suggestions, and choices. One planning tool for parents to immediately consider is for that child to designate them as the agent under his health care proxy and his attorney in fact under the durable power of attorney. Without these documents, HIPPA will prohibit the parents from being involved with his treatment. Also, these documents give parents legal access to his health and financial records, which could be extremely important if it becomes necessary to apply for government benefits. Inevitably, an estate planning discussion will include disinheritance. In my experience, this is a subject frequently discussed and rarely implemented. No matter how angry and frustrated they are, parents still want to provide some sort of safety net for their child. This pressure to disinherit the troubled child may come from the sense that he has already taken more than his fair share of the family’s resources, possibly at the expense of the other, more responsible children. As the family’s adviser, however, you should ask the parents:
Establishing a Trust Rather than disinheriting him, a common solution is to establish a trust that includes him as a permissible beneficiary – or is only for his benefit during his lifetime. The hard decision, however, is who will serve as trustee after both parents die. Parents are understandably reluctant to place that burden on their other children or on other relatives. If there are significant assets, then choosing a corporate trustee is the simple choice. The other children or trusted friends or advisers can then have the right to remove or replace that trustee during the trust duration. If there are not sufficient assets to warrant a corporate trustee, then the parents must identify friends or trusted advisers – who should be paid for their services. The trustee should review the trust document to ensure that he has the right to resign from his office, and understand the mechanism for subsequent trustee appointments. The document should provide the trustee with the authority to expend funds for purposes such as counselling, detectives, drug testing, and private security. Trust
Terms and Provisions After deciding on the line of succession and identifying who will operate the trust, parents need to focus on the various purposes for which the trustee may or may not distribute income and/or principal from the trust to the beneficiary. If the beneficiary is likely to require government assistance, then the terms of the trust must contemplate that. The trust document may also give the trustee authority to withhold payments if deemed advisable. This is often preferable to asking that trustee to determine whether a beneficiary is drug-free. Those suffering from substance abuse can be clever, and making such a determination is tricky. Many parents have a sense of shame or denial, and may rightly choose not to make these troubles public, or put them in a trust document that others can access. I encourage parents to write an annual side letter to the trustee that describes their observations and offers details that they are reluctant to share while living. This letter could be placed in a sealed envelope, kept with the original estate planning documents, and updated/revised as circumstances change. It can be comforting to the trustee to understand more about the parents’ goals and objectives from their own voice. Planning for the beneficiary with a substance abuse issue is complex and can have consequences that affect the entire family. Remind parents that life is a movie, not a snapshot. A plan created now should be good enough to handle today’s circumstances, yet flexible enough to contemplate the unknown. Encourage parents who are dealing with this difficult situation to revisit their plan every few years as circumstances change and evolve.Read More
Weddings are wonderful and it is most certainly one of life’s main events and can be a complicated affair, just the planning of them causes couples to have some very serious conversation’s together and with both sides of the families.
Some issues often discussed:
Yet all these questions being relevant the most important question is often never discussed and is one really important question which should be talked about before a couple get married but often isn’t: the question of what happens when one of them dies.
Couples usually spend the pre-wedding period surfing on a wave of optimism and looking forward to a life of wedded bliss and of course marriage is about a new beginning.
Who wants to think about their future husband or wife dying and put the mockers on the whole day, and yet it is of the utmost importance to consider this question.
Sadly, for some couples a tragic event end the happy ever after take Kirsty Maxwell who fell from a 10th floor whilst on a friend’s hens party in Benidorm and who had just been married 7 months earlier a complete accident no one could have predicted.
Unfortunately, random events like this do sometimes occur early on in a marriage and when they do the remaining partner is left having to deal with a newly created joint estate. This is never a pleasant task but if couples have never discussed how they would like their assets to be distributed then it is infinitely more difficult and distressing.
As morbid as it may seem, if you are getting married, while you are planning your exciting future together you need to ensure that future includes a plan for what happens when one of you inevitably dies. Hopefully that will be far in the future after you’ve celebrated your golden wedding anniversary but none of us can ever know.
Getting married automatically invalidates any pre-existing wills and in the absence of a new will, an estate is subject to intestacy laws. It is possible for fiancés to make a will declaring that it is made in anticipation of an upcoming marriage and that it should not be invalidated once the marriage has taken place and you should consider doing this.
The residence nil rate band – do I qualify and should I change my Will?
A key promise in the Conservative Party’s manifesto prior to the last election was an increase in a married couples’ “nil rate band” (the amount they can ultimately pass to their children or others free of inheritance tax ) from £650,000 to £1 million. The Party had picked up on a growing disquiet that the nil rate band hadn’t kept up with house price increases which were pushing more and more families into the inheritance tax net. The standard nil rate band has been capped at £325,000 per person until 2021.
On the back of that promise, for deaths on or after 6 April 2017, the new, additional “Residence Nil Rate Band” (RNRB) will be available where the estate contains a family home (“a qualifying residence”) left to children or other “direct descendants” .
A maximum RNRB amount of £100,000 per person is available for deaths this year, increasing to £175,000 in 2020. If you double these figures for a married couple, the magic £1 million figure is reached by 2020.
A “qualifying residence” is any home that an individual lived in before they died (so buy-to-let properties, for example, are not included). If you own more than one residential property when you die, your personal representatives will need to nominate which property the relief should apply to.
At the end of the day, the property needs to end up in the hands of “direct descendants”. They are defined quite broadly in the legislation and include children (including adopted, foster and step-children), grandchildren, together with the spouses and civil partners of children and grandchildren. It does NOT include nieces and nephews, siblings or other relatives.
There are three main ways a property can be “inherited” by direct descendants. These are:
The main perceived difficulty arises when the property is left to a trust, for example a discretionary will trust. In these circumstances, the property will NOT be treated as having being inherited, even if the class of beneficiaries is made up entirely of direct descendants. It should however be possible to appoint the property out of the discretionary trust to direct descendants within two years of death, so that the RNRB can be captured. Where the direct descendant has an absolute entitlement to the property (for example, under a bare trust), the property will be treated as inherited.
For estates with a net value of £2m or more, the RNRB will taper away £1 for every £2 over £2m. Therefore currently, the RNRB will not be available for an individual estate over £2.2m. There may be cases where lifetime gifting is appropriate to ensure the estate is within the limits.
Where the family home has been sold (perhaps to move into a smaller, rented property or a retirement flat or nursing home) “downsizing relief” means that the RNRB can still be claimed. The calculations involved in downsizing relief are complicated, but the essence of the relief is that you can still clam the benefit of the RNRB where you disposed of a qualifying residence on or after 8 July 2015.
Where does this leave us now in terms of estate planning; should we all be changing our Wills to ensure that the RNRB is captured? The short answer is “no”. I have already mentioned that in the case of a discretionary trust, it should be possible to appoint the property out within two years to take advantage of the RNRB. A deed of variation within two years of death, if appropriate, will achieve the same result. In any event, if you have left the property under your Will to individuals who are NOT direct descendants, I doubt those wishes will have changed by reason of the introduction of the RNRB.
Specific provision can be made for the RNRB in the Will, if this gives the testator some peace of mind. One option would be to leave assets equivalent in value to the maximum available residence nil rate band on discretionary trusts, with an accompanying letter of wishes to trustees requesting that they exercise their powers to ensure that any qualifying residential interest is inherited by direct descendants to take advantage of the residence nil rate band.
While a change in inheritance tax reliefs might be a trigger to pull our Will out of the drawer, my guess is that most Wills should prove compliant with requirements for the relief unless, of course, there was never any intention of leaving the estate to children or other “direct descendants” anyway. Only, perhaps, where (rarely) the whole estate is left to a mixture of direct descendants and others, might some redrafting be necessary to ensure that the RNRB will apply to the qualifying part.
Please contact us for more information 01325324515Read More
In 1870, a three-part test for Testamentary Capacity was laid down in what is now referred to as
Banks v Goodfellow (1870).
It sets out that a Testator has capacity if:
Solicitors and Will writers therefore are duty-bound to ask certain pertinent questions of their clients when preparing Wills, so that they can satisfy themselves that the test has been met.
If in any way the test has not been met, then after the Testators death, the Will could easily be challenged under the claim that full Testamentary Capacity was not established.
In order to satisfy these conditions, our Advisor will need to establish the following:
Once Testamentary Capacity has been established, this may be clearly noted as such, at the very beginning of your Will.
Because we keep very accurate attendance notes and records of all of our conversations with you, we are 100% confident that once a Will produced by ourselves is signed and witnessed, it is from then on completely robust and steadfast against any potential claim of insufficient mental capacity, assuming all the information required to establish said capacity has been forthcoming.Read More
Often life throws up surprise’s and a family member may find themselves unable to manage their own financial affairs or make informed decisions about their personal welfare.
Illnesses such as Alzheimer’s, Parkinson’s and other forms of Dementia can often be the cause of someone losing the ability to make their own decisions. When this happens, it is called “loss of mental capacity”.
Should this happen to you or someone in your family and the correct paperwork i.e. (a Lasting Power of attorney for Property & Financial affairs or Health & Welfare) has not previously drafted and correctly registered with the Office of the Public Guardian (OPG), you need to apply to the court of protection to become a Deputy in order to take control of your loved one or family member’s affairs
Deputyship is usually given to a close family member or friend or to a professional and must be applied for through the Court of Protection.
The appointed Deputy is responsible for the vulnerable person’s decisions about issues like property and finance, and occasionally healthcare.
Court of Protection & Deputies Frequently Asked Questions
Who are the Court of Protection and what do they do?
The Court of Protection in English law is a superior court of record created under the Mental Capacity Act 2005. It has jurisdiction over the property, financial affairs and personal welfare of people who it claims lack mental capacity to make decisions for themselves The Court of Protection makes decisions on applications which involve people who lack mental capacity to make their own decisions.
Court of Protection Deputyship – Why do people need one
A Deputy and is given the authority to manage the day to day financial affairs of the person who has lost the mental capacity.
When a friend or loved one has lost their ability to manage their own financial affairs (often referred to as the loss of mental capacity), the Court of Protection appoints someone to do this on their behalf.
REMEMBER mental capacity is a complicated subject and it is important to remember that someone may be able to make decisions about everyday issues like what to eat or what to watch on television, but can lack the mental capacity to make decisions on more complex issues, like financial management.
Not always a Deputy – What is an Appointee?
Applying to become an Appointee means you are applying for the right to deal with the benefits of someone who can’t manage their own affairs because they are mentally incapable or severely disabled.
If the incapacitated person does not have savings or property in excess of £5,000 and their only income is pension or state benefits, then a Deputyship Order will not be proportionate to their needs.
So, in these circumstances it would be more appropriate to contact the Department for Work and Pensions (DWP) to become an appointee for the incapacitated person.
Apply to be a Deputy?
Anyone over the age of 18 can apply to act as a Deputy. Usually a friend or relative will be the most suitable person to apply, but it is the Court of Protection who has the final say in who can act.
In some cases, it may not be suitable for a friend or relative to act and the Court will appoint an approved Deputy (“a Panel Deputy”) to act.
You may choose to appoint a solicitor to step in as Deputy and act in their professional capacity. A Deputy is responsible for taking on the responsibilities of another person and it is important that a Deputy considers this carefully before making an application.
It is normally recommended that at least two persons should apply to become Deputy to help ease the burden of responsibility. A Deputy must comply with the Court Order and should always act in the best interests of the incapacitated person.
The Deputy is responsible for the finances and bills of the person they are acting for. The Deputy may have to submit an annual account to the Office of the Public Guardian.
Deputyship orders are made for Property and Health (like Lasting power of Attorney’s)
Property and Financial Affairs
(This is the most common of Deputyship Order and allows a Deputy to manage a person’s finances)
Health and Welfare
(The Court of Protection will only grant this Order in certain situations)
A Deputy may also apply to the Court of Protection to make a will on behalf of the incapacitated person. This is known as a Statutory Will.
Confused – Jargon buster
Court of Protection – The Court of Protection in English law is a superior court of record created under the Mental Capacity Act 2005. It has jurisdiction over the property, financial affairs and personal welfare of people who lack capacity
OPG – The OPG stands for the Office of the Public Guardian who are the supervising body for Court of Protection Appointed Deputies, providing support to Deputies and safeguarding vulnerable adults.
How much does it cost to apply to become a Deputy?
At this time, a Deputyship application starts from £950 + VAT in line with the Court of Protection solicitors’ fixed costs. There are some disbursements, primarily a £400 court fee, these should be clearly set out before the start of any application process. Other fee’s may apply like annual supervision fee’s depending on type of supervision the fee can be found at https://www.gov.uk/become-deputy/fees