Be Proactive: Plan for the Future
Ben Tyer, a Partner specialising in Wills, Trusts and Estate Planning from GLP Solicitors advises clients across Cheshire and the UK, presents seminars, and has featured in the national press encouraging families to get their legal affairs in order.
Far too often clients or their loved ones see me after disaster has struck: a death, a divorce or illness and they are wanting to undo the repercussions. But more often than not it is impossible to do so and the consequences lead to emotional toil and unnecessary costs.
Being proactive and getting legal advice, however, could make this avoidable. To best illustrate this, I thought I would describe three real life cases (the names have been changed for privacy).
Plan for incapacity
Paulโs massive stroke was sudden; a shock to the family.
After running a successful business for over 20 years, he was now no longer capable of doing so needing 24-hour care. Accessing his bank accounts, paying his bills or dealing with his investment portfolio was an impossibility because his three adult children had no legal authority. The fact that they were his โnext of kinโ is irrelevant in the eyes of the law.
To be able to manage the finances, the children had to apply to the Court of Protection - a specialist Court that makes decisions about incapacitated and vulnerable individuals. It took almost 12 months and cost ยฃ2,000 in Court fees, legal costs and insurance costs before they were able to deal with his finances.
It was further complicated by the children not having a relationship and not being able to work together or decide who should be in charge. After a protracted dispute, in the end a Judge chose an independent solicitor based far away who charged for the work they did.
All the while, Paul was still in hospital. The Local Authority felt it would be best to discharge him to a care home whereas the family wanted their dad to come home.
However, as with the finances, the children did not have legal authority to make decisions about where Paul should live so although their views were considered, the doctor or social worker had the final say. They concluded moving home was not in his best interests which led to an impasse causing yet more stress for the family and led to Paul remaining in hospital for weeks longer.
Paul could have made a Lasting Power of Attorney (LPAs) for Property & Finance and Health & Welfare whilst he was fit and healthy. These are legal documents that allow a person to nominate one or more person they trust to access bank accounts, deal with investments and pensions, and decide where to live (amongst other things) respectively when they are unable to themselves.
Cheaper and quicker than the Court route, once registered the LPAs are ready to use immediately if necessary. Had Paul made LPAs his children could have dealt with his property and finances and would also have had the final say about his living and care arrangements.
Plan for changes in circumstances
Johnโs second wife, Julie, and his daughter from his first marriage, Helen, did not get on. Helen was fearful that Julie was after her fatherโs house and money. Julie was worried Helen would evict her from the home if John died.
Content that he had a Will in place and there would be an amicable agreement, John did nothing.
Unfortunately, John did not realise that a marriage cancels a previous Will. By marrying Julie in 2019, his existing Will made in 2017 became null and void. When John died at Christmas 2021, in the absence of a Will, Julie, as his spouse, inherited the majority of his estate including the 4-bedroom family home. Helen was left with a fraction of what she had been set to inherit in the previous Will.
From Helenโs point of view, arguing the Will is unfair is not a basis for any legal claim.
John should have made a new Will after marriage (or his previous Will ought to have included a clause anticipating marriage). And he could have protected both his new wife and his daughter by including a trust arrangement for the home whereby Julie would have been allowed to remain there for the rest of her life thereby securing her somewhere to live whilst simultaneously ring-fencing the property and his savings for his daughter once Julie had passed away.
Plan for death
At the time of making their wills Lorraine and Peter were in their 70s and had two children both of whom were in the process of divorcing. Afraid that the soon-to-be ex-spouses might be entitled to any inheritance, the couple went online and executed Wills with discretionary trusts so that on their deaths Trustees would manage the money rather than it going to their children outright.
Sadly, both died in relatively quick succession. Only when we were instructed to apply for the grant of probate and administer the estate did the family realise there was an inheritance tax liability. This was because the couple had combined assets of around ยฃ850,000 and the structure of their Wills โ namely the trust - meant the estate had to pay approximately ยฃ80,000 in tax.
Had Lorraine and Peter taken advice they would have been advised that a married couple potentially have a combined inheritance tax allowance of ยฃ1million before tax of 40% is charged on death. This includes a nil rate band of ยฃ325,000 each and the relatively recently introduced residence nil rate band of ยฃ175,000 each which, generally speaking, is only claimable if a property is bequeathed to children or grandchildren. Together (ยฃ325,000 + ยฃ175,000) equals ยฃ500,00 allowance for each person so ยฃ1 million combined.
By leaving their childrenโs inheritance into a discretionary trust they lost the ability to claim the residence nil rate band allowance. In other words, the structure of their Will meant their combined allowance was limited to ยฃ650,000 leaving ยฃ200,000 exposed to tax at 40%.
The couple were unaware that they ought to have included a different type of trust to be able to claim the full inheritance tax allowance, retain the assets in the trust and save ยฃ80,000 for the next generation.
The underlying theme is to take action now before it is too late. Do not hesitate to contact us for a no obligation initial discussion of your options.
GLP solicitors are a full service law firm also specialising in Conveyancing, Commercial, Personal Injury, and Landlord and Tenant Disputes
enquiries@glplaw.com
0800 138 6061
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