Henrietta Brett

Death and Taxes

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DEATH AND TAXES

As Benjamin Franklin said in 1789 “Nothing is certain except death and taxes.” And that is as true today as it was then.

Death

It is a very modern taboo but we are all going to die so why is it that so few of us have a Will.

If you die without leaving a Will you are said to have died Intestate, and your Estate (that is your property, money and possessions) will be distributed in accordance with the Intestacy Rules. The Intestacy Rules are a set of strict legal rules which dictate who will benefit from your Estate, how much they receive and who can administer your Estate.

If you make a valid Will however you can choose who will benefit from you Estate. The English law of succession is based on the principle of “testamentary freedom”. Put simply, this means that you can choose to leave your Estate to anyone you like.

However, there are exceptions. The Inheritance Act (Provision for Family and Dependents) 1975 allows certain people to make a claim against an estate if they have not been adequately provided for.  The most common example is that of a dependent child.  Where a child has been cut out of their parent’s Will, the child (or someone acting on their behalf) can raise a claim asking for the court to make an award for “reasonable financial provision” from the Estate.  Although adult children financially independent from their parents can also make a claim in the recent case of Ilott -v- Blue Cross and others the Supreme Court confirmed that we are in general free to choose who will inherit our property when we die and that your wishes matter and that if you record those wishes in a will, they will be listened to. If this is a matter of concern to you then you should take legal advice.

… And Taxes

Inheritance Tax (IHT) is a tax which is paid out of your estate on your death. The standard IHT rate is 40% and it’s only charged on the part of your Estate that’s above the £325,000 threshold (the nil-rate band).

There’s normally no Inheritance Tax to pay if either the value of your Estate is below the £325,000 threshold or you leave everything to your spouse or civil partner, a charity or a community amateur sports club.

From April this year if your Estate includes a main residence and your Estate is above the nil-rate band it will be possible to claim an additional nil-rate band as long as your main residence is passed on death to a direct descendant. This will be:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.

Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.

IHT is a complex area and you may wish to take legal advice.

Funds from your Estate are used to pay IHT to HM Revenue and Customs (HMRC). This is done by the person dealing with your Estate, the “executor” if you left a Will or the “administrator” in the case of an intestacy.

The executor and administrator may also need to apply for a Grant of Probate or Letters of Administration if your Estate includes a house or flat although you don’t normally need a Grant if the Estate either passes automatically to the surviving spouse or civil partner because it was held as joint tenants or if the Estate consist only of a small amount of money. If a Grant is needed then a probate fee must be paid at the same time as sending your application form to the Probate Registry. Current probate fees are £215, or £155 for those applying through a solicitor. But the Government is increasing the fees from May as follows:

 

Value of Estate – £ Probate Fee – £
Less than £50,000 Nil
50,001 – 300,000 300
300,001 – 500.000 1,000
500,001 – 1,000,000 4,000
1,000,001 – 1,600,000 8,000
1,600,001 – 2,000,000 12,000
Over 2,000,000 20,000

 

Because both IHT and Probate Fees are payable before funds in the Estate are available you may wish to consider insurance policies or other financial arrangements to ensure the money can be accessed when it is needed.

If you would like advice on any of the issues raised in this article please contact Henrietta Brett at Fairhurst Menuhin & Co Solicitors on 01440 761200 or henrietta.brett@fmc-solicitors.com

The importance of an LPA

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Recently a young couple in their 30’s came in to see me to make Lasting Powers of Attorney. They explained that it was something they knew they probably should do  but it had never seemed very urgent until one their fathers was  knocked down by a bus while celebrating his  70th birthday in Paris. He was in a coma for many weeks  which was hard enough for the family but the situation was made much more difficult because they could not arrange payment for medical expenses (he only had the basic EHIC card). Once back in the UK his recovery was  slow and while they did everything they could to help they would have liked to take over the burden of his financial affairs until he felt up to it but, again they were limited in what they could do.

Mental and physical incapacity can hit at any time which is why we should all plan ahead to ease the potential burden on our relatives.

A Lasting Power of Attorney (“LPA”) gives another individual the legal authority to look after your financial affairs or health and welfare should you lose the capacity, either temporarily or permanently, to do so. LPAs are recognised by care homes as well as banks and building societies and the tax, benefits and pension authorities.

If you do not have an LPA in place and become incapacitated, your relatives may face long delays and expense in applying to the Court of Protection to get access to your finances.

LPAs are legal documents and you should consider having one alongside your Will. AGE UK advise that while you don’t need to use a solicitor “it’s important to remember that an LPA is a serious, powerful document

How to Be More Organised Than Your Pet

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Buttons, my Labrador retriever, did very little retrieving over his lifetime. Mainly he buried his treasured possessions in the garden and then forgot about them.

I am afraid Buttons’s approach to storage solutions is not unique to canines. I have seen people with a variety of creative filing systems come to Fairhurst Menuhin & Co for legal advice. Clients have put important family documents such as Wills under beds, in cupboards, and even one inside a Victorian crockery set, and then promptly forgotten about them.

Unfortunately, imaginative hiding places create complications with serious legal and emotional consequences. Too often legal documents are found after disagreements have already broken out over money, property and family heirlooms. Sometimes express wishes to be buried are only discovered after a deceased family member has been cremated. All the above situations are avoidable.

So where should you store your Will?

Taking the time to responsibly look after your family and estate by drafting a Will is something we all need to do.

In all fairness, however, it is not obvious what to do with a Will once it has been created. Some solicitors firms charge you for storing your Will at their offices, and some solicitors have filing systems only slightly more sophisticated than man’s best friend. If you are an organised individual, you can hold on to your Will at home, but it is still at risk of flood or fire damage or not making its way to a lawyer at the crucial time.

At Fairhurst Menuhin & Co, we can store your Will for free. We keep our documents in fire-proof storage units. And we stay in contact with our clients over the years in case any changes, however small, need to be made. Even if you have not drafted your Will with us, we are still happy to store it for free. Or we can review it for you.

And if we are storing your Will and you want to take a look at it, unlike Buttons, we are perfectly capable of retrieving it for you.

Contact Aaron Menuhin at aaron.menuhin@fmc-solicitors.com or call our offices on 01440 761 200.

The cost of care

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The erosion of assets as a result of long-term care costs is becoming a concern for many. We are living longer and consequently professional care may become a necessity for many of us.

Care Legislation

The NHS and Community Care Act 1990 obliges Local Authorities to carry out an assessment of anyone who appears to have a care need and to ensure the individual has access to suitable care.

Once an individual’s care needs have been established, the Local Authority will carry out a Means Test to determine the reasonable cost of care required and assess the individual’s ability to pay for or contribute towards the cost, taking into account both income and assets.

Those with assets over £23,250 are unlikely to receive any funding for care, but may be entitled to other benefits to help contribute towards the costs such as Attendance Allowance.

The Government is looking at state protection for people concerned by asset erosion with the proposed introduction of a cap on the amount individuals will be expected to pay for care during their lives. The level of the cap is expected to be in the region of £70,000, which remains a significant sum in relation to the value of many people’s estates.

In situations where the person requiring care is leaving a vacant property, the value of the house will be included in their financial assessment but the individual or their attorneys will be free to decide how to raise the necessary funds to pay for the care. The Local Authority will not simply ‘take the house’ and it may be worth exploring other options which provide the required money whilst preserving the capital asset.

While a dependent relative is living in the house, the value of the house will be disregarded by the Local Authority when carrying out a Means Test.

Deprivation of assets

Making a gift of a home to children or making lump-sum payments in order to qualify for state support is known as a deprivation of assets.  If it is apparent that someone has deliberately deprived themselves of a property or assets in order to qualify for state support, and there is no other compelling reason for the gift, the local authority will carry out the assessment as though the assets still belonged to the individual. There are no time limits on how far back the Local Authority will look.

A properly drafted Will

That said, peace of mind can still come from having a professionally drafted Will. If, for example, joint owners of a property pass their respective shares to their children, subject to the survivor’s  right to occupy, only the survivor’s half of the property will be included in any future means test.

 

Simon Saunders is a member of our Wills and Probate Department at FM&C Solicitors and may be contacted on or + 44 (0)1799 526 849.

Email: simon.saunders@fmc-solicitors.com

 

What to do when someone dies

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 When someone dies there are many things to sort out. When we are grieving for the loss of someone we loved, this can seem overwhelming.

 The first thing to do

If a person dies at home you should call their GP who will give you a medical certificate showing the cause of death and informing you how to register the death. If a person dies in hospital the medical certificate will be issued by the hospital. If the death was unexpected or a GP has not seen the person within the 14 days before their death, then the death has to be reported to the coroner who may order a post-mortem or an inquest, in which case the funeral may have to be delayed.

Register the death

You must register the death with the Registrar of Births, Marriages and Deaths for the district in which the death took place.

The Registrar will need:

The medical certificate, full name of the deceased, the date and place of death, the address of the deceased, the date and place of deceased’s birth, the deceased’s last occupation, the name, date of birth and occupation of the deceased’s spouse or civil partner.

The Registrar will give you:

A certificate for burial or cremation, a certificate of registration of death which you should complete and return to the deceased’s local social security office and a Death Certificate. It is worth getting more than one copy as they are needed for the probate application and for any pension providers, life insurance companies, banks and building societies.

Arranging the Funeral

It is worth checking the deceased’s Will to see if it includes any instructions about their funeral.

The person who arranges the funeral will be responsible for ensuring that it is paid for. You should check to see if the deceased had a funeral plan, if not it may be possible for funds in a current account to be released. This may not be possible until probate is granted, in which case you may have to pay the costs yourself and wait to be reimbursed.

Informing the authorities about the death

You should tell HM Revenue and Customs, the deceased’s bank and building society, insurance company, utility providers, dentist and optician. Their driving licence should be returned to the DVLA and their passport to the Passport Office.

Dealing with the estate of the deceased

If there is a Will this will name executors who will be responsible for dealing with the deceased’s estate. If there is no Will then the Intestacy Rules set out who will be responsible for dealing with the estate. These rules are complex and you may need legal advice. It isn’t always necessary to apply for a Grant of Probate if the estate is very small.

Inheritance Tax

Before Probate is granted any Inheritance Tax must be paid. At present Inheritance Tax is payable at 40% on an estate worth more than £325,000, unless the estate passes to the deceased’s estate or to charity. Any Inheritance Tax payable is due within 6 months of the date of death. The rules relating to Inheritance Tax are complex and you may want to get legal advice.

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Henrietta Brett looks after the Wills & Probate team at FM&C Solicitors. She may be contacted on +44 (0)7453 624 619 or +44 (0)1799 526 849.

Email: henrietta.brett@fmc-solicitors.com

 

 

Where there is a Will…

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Contested Wills

Dealing with disputes over family finances or inheritance can be stressful and emotional. No one wants to be in a position of having to fight family members or friends after the death of a loved one. However, there can be genuine reasons for a dispute and Wills can be contested for any number of reasons:

  • If a Will has been improperly completed or executed
  • The testator lacked mental capacity to make a Will
  • Undue influence was brought to bear on the Testator to organise a Will or organise their affairs in a particular manner
  • There is possible evidence of forgery
  • A promise has been made by the Testator prior to their death which has not been reflected in their Will
  • Disputes arising over the interpretation of a poorly drafted Will

If you believe that you have a dispute over a Will the key is to act fast, preferably before the Grant of Probate is obtained which enables the Executor to distribute the Estate.

If you are disputing a Will, you can lodge a caveat which will temporarily prevent any grant of probate issuing, to afford time to investigate and pursue any remedy.

Excluded from a will?

If you believe you have been unreasonably excluded from a Will, and satisfy a prescribed category of persons entitled to claim, you may be able to apply for reasonable provision from the deceased estate. These applications do however need to be made within six months of the first Grant of Probate.

What are your courses of action?

Sometimes litigation may be the only course of action, but it can slow down receipt of Inheritance and can be costly. Before embarking on litigation, we would always recommend exploring other options for resolving any dispute.

Quite often the disagreements which arise are less about money and more about wounded feelings and deep seated animosity between fractured family members. Mediated dispute resolution can often offer a solution.

Whatever the cause, disagreements with family members at what is already a stressful time usually requires sensitivity aimed at preserving relationships, whilst acting in your best interests.

 

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Kerry Wigg is a partner and disputes specialist at FM&C Solicitors. She may be contacted on +44 (0)7454 866 133 or +44(0)1799 526 849.

Email: kerry.wigg@fmc-solicitors.com

Hope for the best, but plan for the worst

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Who will manage my money if I can’t?

Most people know that if they care about what happens to their money, property or belongings when they die then they need to make a Will. But what about what happens when you are still alive but can’t manage those things yourself?

Delays and Frustration

The answer is that the Court of Protection will appoint a Deputy to take over. However, this may be a total stranger who doesn’t know you or your circumstances.

If you have friends or family who want to help they can apply to be appointed as your Deputy. This is a long-winded business and they will have to provide a number of supporting documents as the Court of Protection needs to be satisfied that the Deputy is a suitable person to take on such a sensitive role.

The time this takes can be very frustrating but, worse, it may mean necessary adaptations to your property cannot be made or a place for you in a care home cannot be secured because your money is, in effect, blocked.

This can even happen if you have a joint account but do not have the necessary capacity to deal with your own financial affairs.

Choose someone you trust

So is there anything you can do now to avoid problems that may arise in the future? Happily, the answer is “yes”. A Lasting Power of Attorney allows you to choose who will take over your property and manage your financial affairs should this be necessary.

As well as the peace of mind that comes from choosing someone you trust, if the Lasting Power of Attorney has been registered at the Court of Protection there will be none of the damaging delays involved with applications to the Court of Protection.

The Lasting Power of Attorney document also gives you the opportunity to set out guidance for the person you have chosen and can specify when it is to be used.

You should consider taking professional advice on completing the Lasting Power of Attorney document as if it is not done correctly the Court of Protection will not register it, rendering it useless.

Making a Lasting Power of Attorney has a number of advantages. You choose a person you know and trust to handle your money, you specify the circumstances in which they should use the authority you’ve given them, and you set out in writing guidance as to how they should use that authority. Last but not least, you save the people who care for you the frustrations and anxiety involved in arranging your affairs if you don’t have a Lasting Power of Attorney.

None of us knows what is round the corner so it isn’t better to “hope for the best but plan for the worst”?

Henrietta1

Henrietta Brett looks after the Wills & Probate team at FM&C Solicitors. She may be contacted on +44 (0)7453 624 619 or +44 (0)1799 526 849.

Email: henrietta.brett@fmc-solicitors.com

 

 

Is your Will worth the paper it’s written on?

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The government is considering proposals to regulate the practice of Will writing, following a request from the Legal Services Board. Due to a lack of regulation Will Writers with no technical qualifications, negligence insurance or continuity arrangements continue to practice Will writing.

The Legal Services Board has encouraged regulation to reduce what the Board says are “significant risks that consumers currently face” when using unregulated Will Writers. The request by the Board is intended to bring regulation of will writers in line with that of Solicitors.

When people make Wills their aim is to reduce risk. A Will helps ensure that someone’s estate will pass as they would wish after their death; providing support to families, friends and charities.

Anyone can set him or herself up as a Will Writer. The lack of restrictions on the business of Will Writing means that Will Writers have a lack of technical qualifications.

A properly drafted Will ensures property and assets are inherited by those you wish, allowing you to make provisions for children and express your funeral wishes. The consequences of a poorly drafted Will are significant and far-reaching.

These Will Writers provide Wills at competitive prices, charging from £85 for single Will. The widespread use of hidden fees by Will Writers, such as review charges and storage fees, escalate this cost. Will Writers often quote around £20 per annum for storage of a Will at the National Wills Safe, while a local Solicitor will often store a Will free of charge.

It is during the process of estate administration that fraud and theft from estates can occur. The Law Society has warned that “consumers risk losing everything if they allow unregulated and unqualified will writers to have full control of their estate’s assets”.

Will Writing companies lack sufficient arrangements in place should the company cease trading, which may mean that your file is lost.

For true peace of mind please ensure that whoever writes your will is regulated by the professional governing body the Solicitors Regulation Authority (SRA). Solicitors are tightly regulated by the SRA, ensuring that wills are produced to the highest professional standards and worth the paper they are written on.

While Will Writing Companies are often members of the Institute of Professional Will Writers, this is not a regulatory body and cannot offer the same level of consumer protection as that provided by the SRA. This could leave you with nowhere to turn should things go wrong.

The unregulated service offered by Will Writers leaves the public unprotected from abuse in this vital area.

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Julie Indaco-Plumb is a member of our Wills and Probate Department at FM&C Solicitors and may be contacted on +44 (0)7462 441184 or + 44 (0)1440 761 200.

Email: julie.indaco-plumb@fmc-solicitors.com