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Dementia And The Benefits Of A Lasting Power of Attorney

BY: Paul / 0 COMMENTS / CATEGORIES: News


What is an Lasting Power of Attorney (LPA)?
An LPA covers decisions about your financial affairs, or your health and care. It comes in effect if you lose mental capacity, or if you no longer want to make decisions for yourself.
You would set up an LPA if you want to make sure you’re covered in the future.
There are two types of LPA:
LPA for financial decisions
LPA for health and care decisions.
An LPA for financial decisions can be used while you still have mental capacity or you can state that you only want it to come into force if you lose capacity.
An LPA for financial decisions can cover things such as:
Buying and selling property
Paying the mortgage
Investing money
Paying bills
Arranging repairs to a property
An LPA for health and care decisions and can only be used once you have lost mental capacity. An attorney can generally make decisions about things such as:
Where you should live
Your medical care
What you should eat
Who you should have contact with
What kind of social activities you should take part in
Unfortunately, many people diagnosed with dementia will eventually reach a point when they can no longer make decisions for themselves. When a person lacks ‘mental capacity’, it’s common for someone else, for instance a family member, to make decisions on their behalf.
Who can make an LPA?
Anyone who is over the age of 18 and has the mental capacity to do so can make an LPA. Once a person has lost mental capacity, they will not be able to appoint an LPA.
Why would someone need an LPA?
For a person with a diagnosis of dementia, there may come a time when they are unable to make decisions about their care and their finances. A lasting power of attorney is a legal document appointing one, or more, trusted people to be their attorney(s). An attorney is a person responsible for making decisions on the person’s behalf.

People in a civil partnership or marriage might assume their partner can deal with their finances and make decisions about their healthcare should they lose the ability to do so, but this is not necessarily the case. If someone has not drawn up an LPA when they are assessed to have lost capacity, and their partner or friend wants to make decisions on their behalf, they may have to apply to the Court of Protection to be appointed as the person’s Deputy. This can be a long, complex and expensive process.
Making the right choice
If you’re considering making a LPA, here are five reasons why it might be a good move for you and your family and friends.
Choice
You can choose people you trust to manage your affairs and to make decisions on your behalf, should you become unable to do so. You can choose who acts for you and how they make decisions.
Legality
A Lasting Power of Attorney is a legal document which authorises your specified people to make decisions on your behalf. If you provide your bank cards to trusted friends or relatives, any permission you have given to them will be automatically revoked if you lose capacity in which case, they are technically committing fraud.
Control
It is important to note that you do not lose any control by making an LPA. Indeed, a properly drafted LPA can contain details of your wishes and instructions for your Attorneys to follow, allowing you to retain control even after incapacity.
Reassurance
If you’re unable to make a decision for yourself in the future, the person you choose will be able to make decisions for you, rather than a stranger or someone you do not trust.
Plan Ahead
Making an LPA helps start conversations with your family about what you want to happen in the future.
Other ways an LPA is beneficial
An LPA isn’t just put in place due to mental illnesses, it’s also very important to have as a security for anything sudden that can happen. “It will never happen to me”, is what a lot of us think. But sadly, accidents do happen all of a sudden and out of the blue. And in a heartbeat, lives can be turned upside down.
In the UK, every 90 seconds someone is admitted into hospital with a brain injury, whether it be from an accident or contact sport being examples of what can go wrong.
If such a life situation was to happen and an LPA wasn’t a document you have, then family or friends wouldn’t be able to assist or take control of finances or welfare decisions. You would have to apply to the Court of Protection to grant you permission which is a costly and lengthy process.
To apply to become a deputy there’s a fee of £365 that you are required to send with your application. If the court decides that your case needs a hearing then there’s an additional charge of £485. These payments are only the start of charges that will be occurred should you need to apply to the Court of Protection.
Having an LPA not only eliminates occurring the charges and the stress, it also comes into place instantly. Once the LPA is submitted, it takes up to ten weeks to register. The power will be effective as soon as the LPA is registered, so the attorney will be able to start making decisions straight away, unless they specify otherwise on the application. When applying to the Court of Protection, the court aim to issue an order within 21 weeks of the application being stamped. It can take 5-6 weeks to get to this point, depending upon how long the initial steps take. Please note, an LPA must be put in place BEFORE the person loses their mental capacity.
Summary
You probably wouldn’t want to die without a will in place, especially if you own property, have substantial cash savings, or have a partner or dependants. But what if something happens to you that does not kill you, but leaves you incapable of communicating your wishes to those closest to you.
It’s an uncomfortable thought but it’s crucial to consider it in good health and make the sensible decision. An LPA is probably the single best way to make sure that your interests are protected from the moment you are incapacitated until your death, after which your will can distribute your estate in the usual way.

by Bhupinder Mann, Associate at Balfort LegalSep 23, 2019

 

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Why Establishing Testamentry Capacity is not a Tick Box Exercise

BY: Paul / 0 COMMENTS / CATEGORIES: Power of Attorney

Why Establishing Testamentary Capacity Is Not a Tick-Box Exercise

One of the many challenges for legal practitioners specialising in Will drafting is establishing the testamentary capacity of the Testator. While in some cases, the presence or absence of sufficient mental capacity may be clear, in others, there may be some uncertainty, necessitating a more comprehensive process to reach a consensus. In the case of James v James [2018] EWHC 43 (Ch); [2018] C.O.P.L.R. 147; [2018] 1 WLUK 252 (Ch D (Bristol)) the High Court was asked to make a ruling on a challenge to a Will based on lack of testamentary capacity, and also outline the factors law practitioners should consider when making a capacity assessment at the time of Will drafting.
James v James (2018)
James v James involved the Will of a man who died in August 2012 at the age of 81. The Testator had been a successful businessman with a farming and haulage operation in Dorset. He had been reluctant to make commitments to his family regarding his inheritance until later in his life after his cognitive wellbeing had been in decline for some time.
The Claimant, S, was one of the Testators three children. In 2007, some of the plots of land owned by the Testator were transferred to one of his daughters, and after the family farming partnership was dissolved, the claimant received a farm, £200,000, the haulage business, vehicles, and a license to use one of the plots, ‘Pennymore’ from which to operate the haulage business. S, however, had been led to believe he would inherit ‘Pennymore’, leading him to challenge the Will on the grounds of his father’s lack of testamentary capacity.
It was stated that the Testator had not been “as formidable as he had once been” from approximately 2004 and had been diagnosed with “moderate dementia with frontal lobe impairment” in 2011. The Will had been signed in September 2010, hence close to the time at which the Claimant had been assessed as unable to make decisions “about his health care, where he lives or his finances”. The High Court held that the common law test for assessing retrospective capacity should be the one set out in Banks v Goodfellow (1870) (Banks), rather than the statutory test set out in the Mental Capacity Act 2005. Applying Banks, the Testator, should have understood:
the nature of entering into the will and its effect;
the extent of the property of which he was disposing; and
claims to which he ought to give effect
In addition, Banks requires the Testator have “no disorder of the mind that perverts his sense of right or prevents the exercise of his natural faculties in disposing of his property by Will”.
The Court held the Testator did have the capacity to enter into the Will.
This case is significant as it underpins the continued importance of Banks as the sole test for judging Will-making capacity in retrospect, and despite being a case from 1870, has not been superseded by the more recent Mental Capacity Act 2005, which contains a new legal provision for the assessment of mental capacity.
Assessing testamentary capacity at the time of Will writing
The importance of verifying the mental capacity of a Testator should never be underestimated. Ultimately, by undertaking this process in a clear and concise manner, contentious probate can be avoided, saving cost, time, and familial discord on behalf of clients and their beneficiaries in the future.
As we established above, the Banks test requires the Testator to understand the Will itself, the extent of their assets and the claims upon them. In addition, a law practitioner can further assess testamentary capacity in several ways:
If the Testator is elderly or infirm at the time of Will writing, the following steps should be considered:
Obtain contemporaneous medical opinion confirming testamentary capacity
Asking a medical practitioner to witness the Will
In the absence of medical opinion, explain to the Testator that this may heighten the possibility of their Will being challenged successfully on the grounds of lack of testamentary capacity. Ensure they confirm they wish to proceed and make clear notes of the guidance provided and the decisions made by the Testator and attach these records to the file.
If a medical opinion is needed, it is important to request the assistance of a health practitioner with the skills to assess capacity, to avoid the risk of their competence to make this assessment being questioned in a later claim. The client’s GP may therefore not be the best person to make the assessment. It is also essential that the time between the medical opinion being received and the Will being signed be minimised, to avoid any suggestion that mental capacity declined in the intervening period. When instructing the medical expert, subject to your client’s consent, it is also recommended to provide a summary of their proposed testamentary wishes.
If there is uncertainty regarding the mental capacity of your client (i.e. you have doubts but cannot be sure), it may not be in the best interests of the client to draft the Will. Should your client still wish to proceed in light of the risks that the Will may be later deemed invalid, you should record all of the grounds for doubting capacity, that this has been explained to your client, and the reasons they still wish to proceed.
In summary
Given the rise in Will disputes, it is even more essential that law practitioners specialising in Will drafting make no assumptions regarding the cognitive capacity of clients. Proving testamentary capacity is more than a tick-box exercise; rather it is one that requires that Solicitors and Will writers take the time to get to know their clients and to notice the subtle signs that their capacity may be diminished. By being open and transparent about the importance of this aspect of ensuring Will validity, you can ask questions and seek further information to help you make a determination. And don’t assume only those in their later years may lack testamentary capacity. A client who has suffered a head injury, perhaps as a result of a road traffic accident, or fall, may appear young, physically well, and alert, but maybe suffering impaired cognition (e.g. memory or logical reasoning). By broadening our view of what impaired mental capacity looks like, we can ensure the validity of the Wills we draft is not questioned at a later date.

by TWP Main AdminSep 12, 2019

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Influence

BY: Paul / 0 COMMENTS / CATEGORIES: Will Writing

 

A recent ruling by the High Court determined that a claim brought by 3 sons for a share of their mother’s £1 million family home was unsuccessful.

Mrs Rea died in July 2016 at the age of 86 and in her final Will which she made in 2015, she left her South London home, which was her main asset and worth roughly £1 million, to her daughter Rita. It was found she had left a note with her Will which stated

‘My sons do not help with my care and there have been numerous calls for help from me but they are not engaging with any help or assistance. ‘My sons have not taken care of me and my daughter Rita has been my sole carer for many years. ‘Hence should any of my sons challenge my estate I wish my executors to defend any such claim, as they are not dependent on me and I do not wish for them to share in my estate save what I have stated in this will.’

It was found that her 2015 Will replaced an earlier Will in 1986 which had left her entire estate to be shared equally between her 4 children.

The sons who were written out of the mother’s Will, brought a claim on the basis that their sister had “poisoned” their mums mind by claiming the sons had abandoned their mother so that she would solely inherit the family home.

It was relevant that the 3 sons had only been left a very small legacy, which, after funeral expenses would leave them with nothing. On that basis, they had made an application to strike out the 2015 Will and reinstate the earlier Will made by their mother in 1986.

The Court held that there needed to be evidence to show that Rita had “poisoned her mother’s mind by casting a dishonest aspersion on their characters.” On hearing and considering the evidence before them, the Court found there was no evidence to show that Rita had “poisoned her mother’s mind,” rather the sons relied on inference and therefore their claim was unsuccessful. It was noted that Rita had provided extensive daily care to her mother whilst the contribution from her sons was very little. In September 2015 Nino and David (Mrs Rea’s sons) had set up a rota to help with their mother’s care but within a few weeks, it had collapsed.

It was found that Mrs Rea had always had a close relationship with her daughter and a “soft spot” for her. It was her daughter who had moved into the family home to solely care for her during the final years of her life after Mrs Rea had suffered a heart attack in 2009.

On hearing the evidence from Rita, it was found the brothers each had a key to the family home and were welcome to visit as and when they wished to. It was only until late 2015 or 2016 when her relationship with her brothers became strained that the locks were changed.

With regards to the brothers contesting the Will on the grounds of undue influences, it was held Mrs Rea was very strong minded and at the time she made her revised Will, it was clear she knew what she was doing. Whilst English was not her first language, she understood enough to know the implications the change in her Will would have. Therefore, her mind had not been influenced and she made the decision to write her sons out of her Will on her own accord.

This case highlights just how important it is as professional will writers to exercise caution where cases are likely to be contentious and ensuring that detailed attendance notes are kept with your file.

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2000 Homes Per Month Sold To Fund Social Care

BY: Paul / 0 COMMENTS / CATEGORIES: News, Trusts

Almost 2,000 Homes Per Month Sold To Fund Social Care

On average, 1,760 older homeowners per month or 406 older homeowners every week are being forced to sell their homes to fund their social care costs.

According to new research by Independent Age, 21,120 homes were sold in 2018 with the funds being used to pay for the vital care all people should be entitled to as we age.

In comparison, only 11,800 homes were sold to fund similar care in 2000. This represents a 77% increase in family homes being sold to fund the social care crisis in the past 19 years.

In 1999, the Royal Commission made recommendations and suggestions to make care free at the point of use. However, subsequent Labour and Conservative Government’s have failed to solve the problem with recent issues widening as the number of elderly, in need of social care, increased whilst services and funding was cut in real terms.

Since 1999, Independent Age estimated that over 330,000 elderly people have sold their homes, forcing them to move into unfamiliar surroundings before they die, to help fund their care.

Independent Age has also questioned the success of the Government’s Deferred Payment Agreements (DPA) which enabled social care users to defer payments until after they died.

Whilst DPAs were designed to enable more social care users to remain in their homes, the roll out of this scheme has been sporadic and inconsistent.

According to a freedom of information request made by the organisation in July, of the 93 local authorities who responded, less than a third (29)  had accepted all DPA applications.

Worryingly, 7 local authorities had failed to set up a DPA process for the elderly constituents to use whilst 3 local authorities had rejected all DPA applications it had received.

As the social care sector awaits a definitive solution to help alleviate a crisis on the verge of imploding, it is imperative that all social care users are offered the same treatment and the same opportunity to remain in their homes for as long as possible.

Morgan Vine, Campaigns Manager at Independent Age, said: “Our findings show exactly why free personal care is so badly needed.

“Even arranging DPAs – a safety net to prevent people having to sell their homes within their lifetime – is proving to be a postcode lottery and doesn’t address the unacceptable situation where people are still required to spend a catastrophic amount on their care.

“Our Prime Minister has announced his intention to fix the social care system, and it’s crucial that free personal care is part of that solution. Free personal care is an affordable option for the country and is popular with people of all generations.”

  • by Martin Parrin
  • Sep 25, 2019

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The Practicalities of Paying Inheritance Tax

BY: Paul / 0 COMMENTS / CATEGORIES: Inheritance Tax

The Practicalities of Paying Inheritance Tax

The payment of Inheritance Tax on estates would appear to be a growing problem for Personal Representatives. In 2009/10, just 2.7% of estates were subject to Inheritance Tax, whereas in 2015/16, this had risen to 4.2% of estates.

(Source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/730125/Table_12_3.pdf)

Any impact that the introduction of the Residence Nil Rate Band has had on the percentage of estates subject to Inheritance Tax remains to be seen. I look forward to seeing updated statistics from HMRC to assess the same.

With the above in mind, now is a good opportunity to offer a refresher on the practicalities of payment of Inheritance Tax and to explore the options available in different circumstances.

For some Personal Representatives, the payment of Inheritance Tax can be relatively straightforward. If the estate has sufficient cash in it, the Executors can generally arrange payment through the Direct Payment Scheme and by completing form IHT423. There are some financial institutions that do not participate in the Direct Payment Scheme, though most will offer an alternative way of arranging payment out of the accounts held with them in order to facilitate the payment of the tax due. If the estate does not have sufficient cash but the Personal Representatives do, they can also personally arrange payment of the tax due and later seek to recover this from the estate. This is not a luxury afforded to many Personal Representatives however and there is often no guarantee of when they may expect to recover their personal monies. This can be due either to the current Probate Registry delays, or the nature of the estate assets may mean that it takes some time for the assets to be sold.

I find that for the majority of Personal Representatives, the above is not an option and they find themselves in a situation whereby the estate assets require a Grant of Representation in order to sell the same, but the Personal Representatives are required to first pay the Inheritance Tax due in order to obtain the Grant of Representation. They are therefore left with a number of options and I intend to explore the more common options below.

The first point of consideration is whether the estate can pay the Inheritance Tax due in instalments. The tax payable on the value of land, businesses, shares/securities which gave the Deceased control of a company and on certain unquoted shareholdings can be paid in ten annual instalments. This can mean that only a portion of the total tax due is payable prior to obtaining a Grant of Representation. The instalment option ends upon the sale of the asset(s) for which it was utilised, but of course the sale of the asset ought to give the Personal Representatives sufficient funds to pay the remaining tax due in any event. One often overlooked point with regard to the instalment option is that if the Inheritance Tax Account and supporting calculation is submitted more than one month prior to the due date for payment of Inheritance Tax (being the end of the sixth month following the death), then no instalments technically fall due and a Grant of Representation can be obtained simply by paying the tax due on the assets that do not qualify for the instalment option.

In my experience, most of the value in a typical estate is in assets that qualify for the instalment option and the tax payable on the assets that do not qualify forms only a small portion of the total tax bill. With that said, it is not uncommon for Personal Representatives to require a significant amount of time to collate the necessary information required in order to prepare the Inheritance Tax Account. It is therefore not always possible to get an account submitted more than a month prior to the due date.

It should be noted that outstanding tax payable after the due date accrues interest at a rate of 2.5% above the Bank of England Base Rate. It is therefore not a perfect solution, but one that is often unavoidable.

If the Personal Representatives do not have the means to pay the tax payable prior to the issue of a Grant of Representation even with the instalment option factored in, they are left with two main options (there are more complex payment options available in certain circumstances such as the transfer of land or chattels, but I propose only to address the most common examples).

The first option is to consider using some lending facility. Typically this is in the format of a bridging loan to cover the tax due with the estate assets used as security for the same. Once the estate assets are sold, the bridging loan can be repaid.

The second option is to consider applying to HMRC to release the IHT421 form (being the form required to obtain a Grant of Probate in cases where Inheritance Tax is payable) on a grant on credit basis, where they will generally request an undertaking from the Personal Representatives to pay the tax once they are in funds. This is considered by HMRC to be a last resort, where lending options have been exhausted. With that said, I have typically found HMRC to be fairly relaxed on this point and provided that an undertaking is provided by the Personal Representatives and they can clearly see that all cash assets have been used to make payments on account of the tax due, I have yet to see such an application be refused.

Ultimately, the Personal Representatives would have to weigh up the interest and any other monies payable on any lending arrangement against the interest and any other monies payable to HMRC for late payment of the tax due. Time will however also be a factor, in that I would typically find that most lending facilities can be arranged much quicker than it can take for HMRC to respond to a request for a grant on credit.

In summary, it is clear that payment of Inheritance Tax is a bigger headache for some Personal Representatives than it is for others. It is unfortunate that the current interest charging regime does not distinguish between cases where payment of interest is an unavoidable consequence of the nature of the estate’s assets and cases with apathetic Personal Representatives who have failed to arrange the payment of the Inheritance Tax due in a timely manner.

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Why Establishing Testamentary Capacity Is Not a Tick-Box Exercise

BY: Paul / 0 COMMENTS / CATEGORIES: News

One of the many challenges for legal practitioners specialising in Will drafting is establishing the testamentary capacity of the Testator.  While in some cases, the presence or absence of sufficient mental capacity may be clear, in others, there may be some uncertainty, necessitating a more comprehensive process to reach a consensus.  In the case of James v James [2018] EWHC 43 (Ch); [2018] C.O.P.L.R. 147; [2018] 1 WLUK 252 (Ch D (Bristol)) the High Court was asked to make a ruling on a challenge to a Will based on lack of testamentary capacity, and also outline the factors law practitioners should consider when making a capacity assessment at the time of Will drafting.

James v James (2018)

James v James involved the Will of a man who died in August 2012 at the age of 81.  The Testator had been a successful businessman with a farming and haulage operation in Dorset.  He had been reluctant to make commitments to his family regarding his inheritance until later in his life after his cognitive wellbeing had been in decline for some time.

The Claimant, S, was one of the Testators three children.  In 2007, some of the plots of land owned by the Testator were transferred to one of his daughters, and after the family farming partnership was dissolved, the claimant received a farm, £200,000, the haulage business, vehicles, and a license to use one of the plots, ‘Pennymore’ from which to operate the haulage business.  S, however, had been led to believe he would inherit ‘Pennymore’, leading him to challenge the Will on the grounds of his father’s lack of testamentary capacity.

It was stated that the Testator had not been “as formidable as he had once been” from approximately 2004 and had been diagnosed with “moderate dementia with frontal lobe impairment” in 2011.  The Will had been signed in September 2010, hence close to the time at which the Claimant had been assessed as unable to make decisions “about his health care, where he lives or his finances”.  The High Court held that the common law test for assessing retrospective capacity should be the one set out in Banks v Goodfellow (1870) (Banks), rather than the statutory test set out in the Mental Capacity Act 2005.  Applying Banks, the Testator, should have understood:

  • the nature of entering into the will and its effect;
  • the extent of the property of which he was disposing; and
  • claims to which he ought to give effect

In addition, Banks requires the Testator have “no disorder of the mind that perverts his sense of right or prevents the exercise of his natural faculties in disposing of his property by Will”.

The Court held the Testator did have the capacity to enter into the Will.

This case is significant as it underpins the continued importance of Banks as the sole test for judging Will-making capacity in retrospect, and despite being a case from 1870, has not been superseded by the more recent Mental Capacity Act 2005, which contains a new legal provision for the assessment of mental capacity.

Assessing testamentary capacity at the time of Will writing

The importance of verifying the mental capacity of a Testator should never be underestimated.  Ultimately, by undertaking this process in a clear and concise manner, contentious probate can be avoided, saving cost, time, and familial discord on behalf of clients and their beneficiaries in the future.

As we established above, the Banks test requires the Testator to understand the Will itself, the extent of their assets and the claims upon them.  In addition, a law practitioner can further assess testamentary capacity in several ways:

If the Testator is elderly or infirm at the time of Will writing, the following steps should be considered:

  • Obtain contemporaneous medical opinion confirming testamentary capacity
  • Asking a medical practitioner to witness the Will
  • In the absence of medical opinion, explain to the Testator that this may heighten the possibility of their Will being challenged successfully on the grounds of lack of testamentary capacity. Ensure they confirm they wish to proceed and make clear notes of the guidance provided and the decisions made by the Testator and attach these records to the file.

If a medical opinion is needed, it is important to request the assistance of a health practitioner with the skills to assess capacity, to avoid the risk of their competence to make this assessment being questioned in a later claim.  The client’s GP may therefore not be the best person to make the assessment.  It is also essential that the time between the medical opinion being received and the Will being signed be minimised, to avoid any suggestion that mental capacity declined in the intervening period.  When instructing the medical expert, subject to your client’s consent, it is also recommended to provide a summary of their proposed testamentary wishes.

If there is uncertainty regarding the mental capacity of your client (i.e. you have doubts but cannot be sure), it may not be in the best interests of the client to draft the Will.  Should your client still wish to proceed in light of the risks that the Will may be later deemed invalid, you should record all of the grounds for doubting capacity, that this has been explained to your client, and the reasons they still wish to proceed.

In summary

Given the rise in Will disputes, it is even more essential that law practitioners specialising in Will drafting make no assumptions regarding the cognitive capacity of clients.  Proving testamentary capacity is more than a tick-box exercise; rather it is one that requires that Solicitors and Will writers take the time to get to know their clients and to notice the subtle signs that their capacity may be diminished.  By being open and transparent about the importance of this aspect of ensuring Will validity, you can ask questions and seek further information to help you make a determination.  And don’t assume only those in their later years may lack testamentary capacity.  A client who has suffered a head injury, perhaps as a result of a road traffic accident, or fall, may appear young, physically well, and alert, but maybe suffering impaired cognition (e.g. memory or logical reasoning).  By broadening our view of what impaired mental capacity looks like, we can ensure the validity of the Wills we draft is not questioned at a later date.

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Funeral Plan – Its never to soon

BY: Paul / 0 COMMENTS / CATEGORIES: Funeral Plans

 

It’s never too soon to start saving for your retirement, they say. But is it ever too soon to start planning your funeral? If it is, the journalist Lauren Windle from the Sun newspaper hasn’t been put off. She only twenty-eight now, but she’s been planning her funeral since she was twelve.

Why did she start so young? She says it was her father. Whenever she had a minor complaint in childhood – like being stopped from eating sweets before a meal – her father would remind her of what lay ahead. There were two things she would be unable to avoid as a grown-up. First she would have to pay taxes; and then, sooner or later, she would die. I’m glad my father didn’t tell me the same. Those are serious thoughts for a child, but maybe they’re useful ones too.

Life can’t be fun for ever. And life can’t last for ever. That was a lesson that Laura absorbed early and that’s why she began thinking about what she wanted her funeral to be like. In short, she began a funeral plan. The first thing on her mind was the music. What song should be played to sum up her life and bring a tear or a smile to the mourners? At the age of twelve, she liked a ballad called “There You’ll Be” from the movie Pearl Harbor. It was full of emotion and power – a perfect way to say goodbye.

Or so she thought at the age of twelve. But our tastes change as we get older. Later she thought she might like Frank Sinatra’s “I Did It My Way” instead. It’s a very popular choice as a funeral song – many thousands of people have sent that defiant message to the world as they left it. But what about something quirky? Laura later decided on the Bee Gees’ “Stayin’ Alive” as a her funeral song. That would raise a smile, wouldn’t it?

Or maybe not. Her choice of song kept changing. At the moment it’s “See You Again” by Wiz Khlaifa, another emotion-filled song from a movie. It was played in Fast & Furious 7 to honour Paul Walker, the star of the franchise who had died in a car-crash in Los Angeles. But it’s more than likely than her choice of funeral song will change again. After all, she’s still only twenty-eight and she might live to be a hundred or more.

Or she might have an accident and pass away much sooner. Like most people, she has no idea when she’ll go and she wants to be prepared. Beside music, she’s also planning the food for her funeral. If her funeral plan as a whole was inspired by her father, her choice of food is influenced by her mother, who has an interesting story about her university days. She studied science and one day, working in the laboratory, she accidentally breathed in what she thought was a deadly gas.

“In an hour or two I’ll be dead!” she thought. But she wanted to have lunch first. With no future ahead of her, or so she thought, she chose an expensive prawn sandwich rather than the cheaper egg mayo she usually had. She didn’t die, of course: she married and had a daughter called Laura. And Laura, having heard her story about the poisonous gas and the prawn sandwich, decided that prawn sandwiches would be the perfect accompaniment to a real funeral.

For one thing, it’s a good family joke. And there’s nothing wrong with that. A funeral plan can have humour in it, if that’s what you want. The choices are yours, because it’s your funeral. But it’s a good idea to discuss your ideas with your nearest and dearest, even if you want to keep a few surprises up your sleeve. Laura Windle may be doing that in another part of her funeral plan: the message she’s recorded to be played when the mourners are gathered in church.

She wants to tell them that she loves them and that they meant the world to her. But her funeral message, like her choice of song, may be updated again and again as she gets older. Life brings us new experiences and we change our minds. A funeral plan doesn’t have to be set in stone. It’s likely, though, that we will be more and more satisfied with it as we get pass our middle years and into old age. At the age of twenty-eight, Laura Windle is having fun her funeral plan. As she gets older, she will begin to gain comfort from it. The funeral plan will allow her to have some control over something that none of us can control: the fact of our mortality.

We can’t choose to live for ever and when we have a funeral plan we have faced the end of life and decided how we want to be remembered. With a funeral plan, we can save money, enjoy peace of mind, and lift an enormous burden from our loved ones. They won’t have to make decisions about our funeral because the decisions will already have been made.

PLEASE CONTACT E.M.P Solutions for information pack

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Advising Expats On The Importance Of Making A Will

BY: Paul / 0 COMMENTS / CATEGORIES: News, Will Writing

Advising Expats On The Importance Of Making A Will

To quote Scarlett O’Hara in Gone with the Wind – “death, taxes, and childbirth, there’s never a convenient time for any of them”.

When it comes to the Grim Reaper, if he comes for your client whilst they are living in a foreign country, he is not bothered about whether they have organised their affairs or not. And few situations are messier than dealing with the fall-out from someone who is domiciled abroad and dies intestate.

An estimated 5.5  million British people live overseas. According to the data, over 1.5 million reside down under (Australia and New Zealand), 761,000 in Spain, 1.2 million in North America, 240,000 living in Dubai, and 212,000 in South Africa.

For succession purposes, where a matter involves more than one legal system it is necessary to apply the conflict of laws (also referred to as private international law (PIL)) rules that determine which law of succession applies. Where the PIL rules of one jurisdiction conflict with the PIL rules of another jurisdiction, it is necessary to determine which jurisdiction can decide the matter.

Fortunately, since 17 August 2015, the rules surrounding dying intestate within the European Union have been simplified. If someone dies in an EU Member State without a Will, the rules of intestacy will be the rules of the country in which they were habitually resident as at the date of their death.

The concept of domicile

The country in which a person is domiciled refers to the nation with which they have the closest ties. A person’s domicile of origin is typically their father’s domicile as at their date of birth.   One can choose to be domiciled in a different country from that where they were born; however, a person can only be domiciled in one country at a time. To establish whether a person has changed their domicile, consideration must be given to whether they have left their domicile of origin and settled in their country of choice and whether that move is permanent.

Conceptually, this may not be difficult. But take the increasingly common case of a mixed-nationality couple, who, once their children have grown up, decide to divide their time between two jurisdictions, e.g. Australia and France; this may continue for many years until one dies without a Will. In such circumstances, establishing which domicile applies is far from straightforward .

The law of intestacy in different jurisdictions

Once domicile or habitual residence is established, the intestacy laws of that country will apply. What many British migrants fail to realise is that other countries’ laws often differ substantially from that of England and Wales.

Australia

Each state in Australia has its own intestacy laws. For example, if the deceased dies in Perth, Western Australia, allocation of the estate is governed by the Administration Act 1903 (WA). Division will depend on the value of the estate and the type and number of potential beneficiaries. Unlike English intestacy law, cohabitees do have inheritance rights under the Administration Act, if they can establish they have been in a de-facto relationship with the deceased for two years or more.

Generally, anyone over the age of 18 who is entitled to a share of the estate can apply for Letters of Administration to the Probate Office of the Supreme Court for the right to manage the estate.

United States of America

Like Australia, each State has its own laws of intestacy. However, the laws are fairly uniform for small estates. In most cases, if the estate is valued at less than $100,000, rather than file Court proceedings, family members can file a Declaration of Small Estate through a bank. In California, this can even be done through the Department of Motor Vehicles (DVA). The person filing the Declaration must swear an oath that no other person has any greater claim to the deceased’s property.

State law varies for estates over $100,000 and where there are spouses or partners, and/or children involved. For example, in New York State , in the case of an intestacy where there is a spouse but no children, the spouse receives the entire estate.  If there is a spouse and children,
the spouse inherits the first $50,000 plus half of the balance. The children* inherit everything else.

Unmarried partners have no right to inherit under New York intestacy law. This has led to a growth in ‘deathbed’ marriages. State law provides the right for family members to have such a marriage annulled if they can prove the nuptials were made specifically to achieve fraudulent financial gain.

Dubai

If an expat dies without a Will in Dubai, the default is that Sharia law will decide who inherits their estate. Sharia law is not codified, and there is no system of precedent in the UAE Courts.

Under Sharia law, if a husband dies intestate, the wife will qualify for only one-eighth of her deceased spouse’s estate. In addition, all assets (including bank accounts and shares) will be frozen until liabilities have been discharged.

Conclusion

For those advising clients who have property in the UK and are likely to acquire assets in the country they move to, it is imperative they are advised on the importance of having a valid Will in place, not only in the UK but in the jurisdiction they are moving to.

Dying intestate in the UK causes complications enough. For the survivors of expats who die without a Will, the resulting administrative and financial problems can be a nightmare – and one that is completely avoidable.

  • by TWP Main Admin
  • Aug 13, 2019

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Tax Efficient Will Planning

BY: Paul / 0 COMMENTS / CATEGORIES: Inheritance Tax

With the introduction of the Finance Act 2006 the possibility of using lifetime planning for saving inheritance tax was severely restricted using lifetime settlements. By contrast, the use of trusts in Wills still have many of the old tax saving options available to him or her, most of which continue to use settlements. The will draughtsman can make use of these settlements to minimise a family’s tax liability in several ways. Saving tax is normally a concern for families with children, the parents wishing to pass assets on to children or grandchildren as efficiently as possible.

Following the introduction of the residence nil rate band (RNRB) presented fresh problems as the use of many popular forms of settlement could lead to the loss of the RNRB If the will and advice given is not carefully considered.

The following suggestions assume that:

  1. the clients are married or in a civil partnership;
  2. that one or both has children;
  3. both clients have assets in excess of the nil rate band but are not unduly overburdened with wealth, and will have most of their joint assets tied up in the family home;
  4. both clients are concerned that the surviving spouse or civil partner should have enough to live on but are anxious to pass on as much as possible to the children.

Advisers should be cautious common particularly when dealing with the family home. It is important to warn the clients that the tax rules may change and the very few tax saving schemes can be guaranteed.

The use of insurance policies can be used to make funds available to children for paying inheritance tax or to give them a lump sum not liable to IHT. This can be achieved by means of a joint lives policy. The premiums paid will be exempt if the payments fall within the normal expenditure from income exemption s21 IHTA 1984. The policy will mature on the death of the last surviving spouse and provided the benefit of the policy has been assigned to the children, the proceeds will pass directly to them.

When dealing with elderly clients who are accompanied by adult children, it is important to establish what the clients (as opposed to their children) want, and is desirable, if possible to see the clients in the absence of those who may benefit from the settlement or Will. With more complex family arrangements, allegations of undue influence in relation to lifetime gifts are increasing, and solicitors and other professionals have been criticised in court for failure to give independent legal advice to clients in relation to the proposed gifts.

The simplest option is for the first spouse to die to leave everything to the survivor, relying on the survivor to leave the combined assets to the children. The whole of the first estate will be spouse exempt and the survivor’s estate will benefit from the transferable nil rate band.

The disadvantages of such an arrangement are that the survivor may remarry, spend or lose the combined assets or go into a nursing home leading to the loss of the estate in fees. More people than ever before are choosing, therefore, to make use of trusts for asset protection purposes (APT’s). The use of a flexible life interest trust for some or all the assets can be a particularly useful tool, but the clients need to consider carefully what they wish to do in the future.

It is particularly important to advise the clients that by using an APT during their lifetime, they are giving up ownership to the trustees (albeit they may be one trustee themselves) and will incur further costs should they wish to mortgage or seek to release funds through equity release schemes.

Although the use of nil rate band discretionary trusts became less popular with the introduction of the transferable nil rate band, There is still much to be said for leaving a nil rate band discretionary trust with spouse and issue as beneficiaries, and creating the residue on trust (FLIT) for the surviving spouse for life giving the trustees wide powers to appoint capital to the life tenant or to the issue.

Such an arrangement has the following advantages:

  1. the first spouse to die makes use of his or her nil rate band (this is useful both where future growth in the value of assets may outstrip the value of the NRB transferred to the survivor and where the survivors estate may exceed the taper threshold leading to a loss of the RNRB) ;
  2. the trustees can give the surviving spouse all the income of the estate if that is appropriate;
  3. the trustees can appoint all the capital to the estate of the surviving spouse, if appropriate;
  4. the trustees have the flexibility to appoint income and capital to other beneficiaries, if appropriate
  5. the trust capital can be preserved for the issue.

Leaving some or all the estate a surviving spouse or civil partner on a fixable life interest trust

an alternative to leaving property to a spouse or civil partner absolutely is that it can be left to the spouse or civil partner on a flexible life interest trust or flit. The will should give the trustees power to terminate all or part of the life interest.

The advantages of using a FLIT are that:

  1. the residue passes to the spouse or civil partner initially and, therefore, is exempt from IHT using the spouse exemption;
  2. the NRB of the first to die will be transferred to the survivor;
  3. the surviving spouse has the benefit of receiving all the income, but the capital is protected for the issue; and
  4. the trustees have the power to appoint capital to the spouse and/or issue, depending on the individual circumstances.

If the trustees use their powers to terminate all or part of the spouse’s interest in possession (IIP) life interest, to create a discretionary trust, the spouse is treated as making a gift for the purposes of the reservation of benefit rules IHTA 1984 s102ZA. The spouse should not, therefore be included in the class of beneficiaries.

Problems with using the residence nil rate band RNRB

it is not necessary to make a specific gift of a residence to lineal descendants to obtain the RNRB.

It can be left as part of the residue of the estate.

However, even the simplest gifs can cause problems. A straightforward substitutional gift to children of a predeceased child may lead to the loss of the RNRB if the substitutional gift is contained in a trust contingent on reaching a stated age.

The impact of the residence nil rate band (RNRB)

With the introduction of the finance (No 2) in 2015 it inserted several new sections into the IHTA 1984. The effect of the new legislation is to provide an additional nil rate band available for deaths on or after the 6th of April 2017 when a residence is inherited by a deceased’s children or remoter issue or spouses or civil partners of such children or issue. There is also downsizing legislation which was included in the Finance Act 2016 which has made further amendments. Where a person dies without using all or part of his RNRB because he or she died before its introduction the unused portion can be transferred to a surviving spouse or civil partner.

Property left to certain types of settlement are treated as ‘inherited’ under IHTA 1984 Section 8J(4). The settled property must be held in trusts creating one of the following:

  • an immediate post death interest (IPDI) under section 49a; or
  • A disabled person’s interest under section 89; or
  • a bereaved minors or bereaved young person trusts section 71A or 71D.

Very few settlements qualify. The discretionary settlement is not included even if all the beneficiaries are lineal descendants. A typical grandparents settlement,” to such of my grandchildren as reach 21” will not qualify because the trust created is a relevant property trust and so not one of the permitted trusts. However, an appointment from a discretionary trust or advancement of capital to a beneficiary with a contingent interest made within 2 years of death to the lineal descendants will be read back into the will under IHTA 1984 s144 and so trustees could retrospectively secure the RNRB be for the estate.

Testators wishing to leave residential property to adult children with a substitutional gift to children of a deceased child will, therefore, need to consider the form of the substitution gift carefully if they want to secure the RNRB in relation to that gift. The possible options are a bare trust where the grandchildren will become absolutely entitled at 18 or an immediate post death interest.

The latter may be attractive as the trustees can be given overriding powers to appoint capital as they see fit. It is necessary to vary the Trustee Act 1925, s31 to provide that any accumulated income e.g. where the residence has been sold after death and the proceeds invested is held on a bare trust for the beneficiary. If this is not done, section 31(2)ii provides that any accumulated income is held on accretion to capital where a minor beneficiary dies before reaching 18. This has a divesting effect and the settlement will not create an immediate post death interest.

S.W.W Director general

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How and why to support your favourite charities in your will and the tax benefits for you

BY: Paul / 0 COMMENTS / CATEGORIES: Inheritance Tax

Discover the vital importance of gifts in wills to charities, the types of gifts you can leave and the tax advantages of doing so.

This post explains why and how to leave money to charities in your will and how to get yours sorted with zero fuss, today.

 


Why give to charity in your will?

Every year, people in the UK leave £2.9 billion to charities in their wills. These gifts can make a lasting impression on your favourite charities, allowing them to continue to operate and improve their services. In the last 12 months Farewill has raised £40 million in legacy donations.

“It’s incredible how generous the British public are” says Dominique Abranson, Legacy and in Memory Manager for WaterAid, “gifts from wills are absolutely vital in helping us reach everyone everywhere with clean water, decent toilets and good hygiene and transforming lives of the communities we work with overseas”

The charity might be a cause you’ve supported all your life making periodic donations. You might have encountered your chosen charity during medical treatment or end-of-life care for a loved one. Or you may be looking to minimise the amount of tax you pay when you die.

What types of legacy gifts can you give to your chosen charity?

There are three types of charitable legacies that you can choose from.

Pecuniary

A pecuniary legacy gift is the simplest and most common way of leaving a gift to charity in your will. You simply state your intention to leave a specified sum to your chosen charity. The executor of your estate is then tasked with making sure this sum reaches your intended charity.

Specific

A specific legacy gift relates to a particular item that you wish to leave to a charity of your choice. It may be a property, a road vehicle that the charity could benefit from or even shares.

Residuary

A residuary legacy gift is when you leave the whole of your estate or a percentage of your estate, The percentage you choose remains the same regardless of the value of your estate when you die.

While a cash (pecuniary) gift is a simple way to leave a gift to your chosen charity, it’s worth noting that the sum you include in your will today may not have the intended impact when the time comes. £1,000 today is a considerable sum but, in 30 years, it may not stretch as far.

What are the tax advantages of leaving gifts to charity?

Leaving a gift to charity in your will can reduce the tax your loved ones pay on what you leave them.

Inheritance tax is charged at 40% and applies to the proportion of your estate valued above £325,000 (£650,000 for married couples).

You can reduce the inheritance tax rate on the remainder of your estate (above £325,000) from 40% to 36%, if you leave at least 10% of your ‘net estate’ to a charity.

Here’s a worked example, without a charitable gift:

  • Your net estate is worth £425,000
  • You leave everything to your partner (unmarried). £100,000 is liable for inheritance tax (£425,000 – £325,000 tax allowance)
  • £100,000 is charged inheritance tax at 40%, equalling £40,000 due in tax.
  • So, £60,000 is left after inheritance tax has been subtracted
  • Your partner gets £385,000 after tax (£325,000 + £60,000)

Here’s a worked example, with a 10% charitable gift:

  • Your net estate is worth £425,000
  • You leave 10% of your estate (tax free) to charity £42,500 (net estate is now worth £382,500)
  • You leave the remainder to your partner (unmarried), £57,500 is liable for inheritance tax (£382,500 – £325,000 tax allowance)
  • £57,500 is charged inheritance tax at 36% (lower charity rate), equalling £20,700 due in tax
  • So £36,800 is left after inheritance tax has been subtracted
  • Your partner gets £361,800 after tax (£325,000 + £36,800), and the charity gets £42,500.

In the above example your partner gets £23,200 less, but the charity has gained nearly double that – £42,500 for good causes.

How to find details of a charity you wish to support?

Wherever you are based in the UK, these online registers will help you find contact details of the charity you wish to support:

England and Wales

Charities Commission’s register of charities

Scotland

Scottish Charity Regulator’s charity register

Northern Ireland

The Charity Commission for Northern Ireland

Next steps to give to charity in your will

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