Wills & Estate Planning

Why should you make a Will?

Having a Will is the only way to ensure your wishes are carried out after your death. You may assume you know who will inherit your Estate if you die intestate (without a Will) but this may not be right and your spouse or civil partner may not receive as much as you would have intended them to and if you have no living relatives then the Crown could end up inheriting it.

If you have a partner but are not married, the intestacy laws dictate that you are treated as a single person and your surviving partner may get nothing.

If you have remarried, your Will can ensure provision is made for your children from any previous relationship.

If you have children, you need to think about who you would trust to take care of them in the event of your death and this can be done by appointing legal guardians in your Will. If you die without making such provision the Courts will appoint guardians and may choose people to care for your children who you would not have wanted.

In most cases, Probate would be required before assets can be distributed. This process can take a lot longer if you die without a Will.

A carefully planned Will can help reduce the amount of Inheritance Tax payable on your Estate.

Disputes over Wills can cause family disagreements which may require a Solicitor to resolve them. By making your Will you alleviate any doubt of what your wishes are.

A Trust is an arrangement whereby assets (the Trust Fund) are managed by Trustees on behalf of a third party or parties (beneficiaries). The person transferring the assets into the Trust is known as the Settlor or Transferor.

A Trust ensures the people you choose are the only ones who can benefit from the Trust Fund, and it essentially ring-fences assets which are often diluted because of possible future marriages; divorce; spendthrift dependents; beneficiaries with alcohol or substance abuse problems; and can be used to mitigate inheritance tax and reduce probate costs and times.

Various assets can be transferred into a Trust which can include property and land, cash, shares, bonds, valuable items (family heirlooms; expensive paintings; jewellery), business shares, etc. There are some assets which cannot be placed into a Trust, for example ISA investments.

Trusts can be created on your death by your Will, or you can transfer assets into Trust while you are living (Lifetime Trusts). Lifetime Trusts cannot be contested however they can be challenged if being used as a vehicle to deliberately deprive assets from: paying for your care; being held as part of a divorce settlement; creditors; being taken into account when filing for bankruptcy.

Generally, Trusts will either give someone an absolute right to income and capital of the assets within the Trust; give an individual an interest immediately on death (interest in possession) known as a life interest; or will be discretionary (distributed at the Trustees discretion) and some Trusts incorporate both latter elements.

A life interest Trust allows Trustees to hold assets for an individual (the life tenant) who is given a right to any income produced by those assets and allows the life tenant to occupy Trust property. You can choose the duration of the interest (for instance, for their lifetime or until they reach a certain age) and you are free to impose conditions (for example you can say the interest will end if the life tenant remarries).

A discretionary Trust can run for 125 years and allows you to choose multiple beneficiaries or classes of individuals (children; grandchildren; etc.). It allows the Trustees to use the Trust in a discretionary format and the income and capital can be appointed out as they see fit and taking into consideration a letter of wishes you leave detailing your intentions.

Everyone over 18 should have LPAs in place.

These are legal documents drawn up and registered with the Office of the Public Guardian to give another or others (attorneys) the power to deal with your affairs and make decisions for you if you are unable to do this for yourself because you lack the capacity.

There are two types of LPAs which can be set up. One covers your financial decisions which would enable your attorneys to run your bank accounts; make or sell investments; pay your bills; buy or sell property. The other covers your health decisions which can include the type of health care and medical treatments you receive including life-sustaining treatment; where you live; who visits you; and daily matters such as your diet and routine.

To complete and register LPAs, there are certain forms which must be completed. You need a certificate provider to certify you are of sound mind and this is included in our service. You also require a witness and we can act as your witness if we are meeting you in person.

Couples who are married or in a civil partnership do not have the power to make decisions for each other if one loses capacity. LPAs are the only way to ensure that the people you choose would have the legal authority to deal with your affairs.

If you lose capacity (even temporarily) and you have not completed LPAs, your assets will be frozen (this includes joint bank accounts) and your loved ones would need to apply to the Court of Protection for deputyship. Applying to the court is very costly and can take several months for a decision.

In a lot of cases the court declines the application and appoints professional attorneys (who charge for their services) to deal with your financial affairs and social services will make decisions regarding your health and welfare – not your partner or next of kin.

Business Lasting Power of Attorneys

Business LPAs allow business owners to protect their business. Without one, their business is at risk.

If you own a business and you lose capacity, without having already made a business LPA, the bank could freeze your bank accounts; contracts or services might go unfulfilled and; your business contacts may think twice about doing business with you. If you are a sole trader, it could put you out of business.

A business LPA is particularly important when there is more than one Director and when you employ staff and need to ensure they continue to get paid.

The Mental Health Discrimination Act 2013 states that a director or partner of a company who loses mental capacity cannot automatically be removed as a director. It depends on the clauses that are contained with the company articles of association. Provisions removing partners because they lack mental capacity may be in breach of anti-discrimination legislation – it is therefore far better to have appointed persons (attorneys) within a business LPA in the event that someone needs replacing urgently.

As above, if a company has multiple directors and one loses the capacity to make business decisions, the other directors or partners may not be able to remove them under the Metal Health Discrimination Act 2013.

In order to be able to implement the business LPA, the company articles and any partnership agreements must reflect this as an option. These may therefore need to be amended. Articles can be amended by special resolution under s21(1) of the Companies Act 2006.

If you own more than one business and would want different people to act for each company, then a separate LPA should be completed and registered for each.

Anyone you appoint must not only understand the everyday running of the business, but also its future plans. They must be kept up to date, so they fully understand the vision for the organisation. They should understand the company’s business plan; marketing strategies; and mission statement (as applicable).

Your attorney(s) must have the relevant knowledge to be able to carry out the duties required of them. You can appoint more than one person and you can stipulate what duties you are giving each person the authority to carry out in the event that you do not have the capacity to do this yourself.

Attorneys must be trustworthy, competent, reliable and have the skills and ability to carry out the necessary tasks.

General Power of Attorneys

These are legal documents drawn up by a person (known as the donor) wishing to appoint another or others (attorney or attorneys) to manage their property and financial affairs. They are only used while the donor has mental capacity and will expire if the donor loses mental capacity or on their death. There is no legal registration required so these documents can be used as soon as they are signed and witnessed.

Compare these to Lasing Power of Attorneys (LPAs) which must be registered with the Office of the Public Guardian before they can be used. General Power of Attorneys can be very useful when the donor does not have time to wait for the registration of the document and needs it to be used straight away.

These documents should only be used if there are matters that need to be dealt with that are time sensitive and we strongly recommend people set up their Lasting Power of Attorneys at the same time which can be used instead of the General Power of Attorney once registered.

General Power of Attorney are particularly useful if you are going to be away and unable to deal with collecting rents during that time, if there were business papers that needed attention while you were away or if you were selling your home and documents needed to be signed.

An Advance Decision gives a person the opportunity to make decisions now about specific treatments they may not want to receive in the future. This ensures that if somebody is unable to make their own decisions about treatment, that they are not forced to receive any treatment they do not want.

Treatments that can be refused include life-sustaining treatment. For example, some people may write an Advance Decision to refuse a blood transfusion for religious reasons.

The person making the Advance Decision must be over 18 and have mental capacity at the time they make it, otherwise it will not be valid.

Doctors and medical professionals will have to follow an Advance Decision provided it is valid and applicable.

For an Advance Decision to be applicable the wording has to be specific and relevant to the medical circumstances. If the wording is vague or there is concern that it does not refer to medical conditions or medical practices that the person is experiencing at that time, then the Advance Decision may not influence the doctors’ decisions.

The Advance Decision must be clear; must not be made under the influence of other people; and the person making it must be fully informed on the consequences of refusal of treatment, including that it may hasten death.

The Advance Decision must be written down and be signed by the person making it in front of a witness.

An Advance Decision cannot be used when a person has the capacity to give or refuse consent themselves and must not be used for anything that is against the law (for example, euthanasia or assisting a person to take their own life).

Copies of a signed Advance Decision should be given to the person’s GP to keep with their medical records; hospital or medical staff to keep with their case notes; close relatives and friends interested in their welfare; and any attorneys named in a Health and Welfare Lasting Power of Attorney (H&W LPA).

If a H&W LPA is created after an Advance Decision, and the Attorneys named in the LPA are given authority to give or refuse consent to life-sustaining treatment on behalf of the Donor, the Attorneys will be able to override what is written in the Advance Decision. If the Attorneys are not given the authority to make decisions relating to life-sustaining treatments, the Attorneys will not be able to consent to any treatment that the Donor has refused, and which is set out in the Advance Decision.

If the Advance Decision should be taken into account and used alongside the H&W LPA, there is specific wording that should be included in the LPA.

Business Trusts

Assets that qualify for full BPR can be passed on to any beneficiary free of any Inheritance Tax. As a person is automatically exempt from paying Inheritance Tax on any assets left to them by their spouse or civil partner (exempt beneficiaries), it can therefore be a waste to leave these assets to them and, depending on what happens with the assets, they may no longer qualify for BPR when the exempt beneficiary dies.

It would therefore be better to leave these assets to non-exempt beneficiaries (for example children or grandchildren). However, you may not want to leave the assets to non-exempt beneficiaries until your surviving spouse or civil partner has died.

A Business Trust is a good solution to this problem. It is a Discretionary Trust in nature, it preserves the BPR and allows both exempt and non-exempt beneficiaries to take the property as and when the trustees think fit as the assets held in the trust are held entirely by the Trustees who control which of the beneficiaries benefit, in what quantities and when.

These trusts will take in all the business interests you hold at the date of your death that qualify for full BPR. They can run for 125 years, and you should choose multiple beneficiaries or classes of individuals (spouse or civil partner; children; grandchildren; etc.). It allows the Trustees to use the Trust in a discretionary format and the income and capital can be appointed out as they see fit, taking into consideration a letter of wishes written by you which sets out your reasons for setting up the trust and how you would like them to hold the fund.

Discretionary Trusts are particularly good for people looking to generation skip (useful for mitigating Inheritance Tax); to control who receives money at the discretion of the Trustees; to look after minors; to manage assets for individuals who are unable to look after it themselves; to protect against those with alcohol or drug addiction problems; as a way of protecting a legacy; excluding people you do not wish to benefit.

Cross Option Agreements

This is an agreement entered into by all shareholders of a limited company where each shareholder gives the other shareholders options over their shares. The options are only exercisable on death. Each shareholder takes out life insurance policies which are written into trust for the other option holders.

When a shareholder of a company passes away, a cross option agreement gives the surviving shareholders of a limited company the right to buy the shares and gives the deceased’s personal representatives the right to force the survivors to buy those shares.

The agreement must be entered into by all the shareholders of the company. If one of the shareholders passes away, the remaining shareholders have the right to purchase the deceased’s shares and the funds to pay for them are funded by life assurance policies which are taken out on each of the shareholders’ lives.

Under the agreement, the heirs of the deceased shareholder are obliged to sell their shares if the surviving shareholder(s) exercise their option. Or the heirs can require the surviving shareholders to buy the shares they have inherited, albeit they do not themselves have an option over the shares.

Business Lasting Power of Attorneys

Business LPAs allow business owners to protect their business. Without one, their business is at risk.

If you own a business and you lose capacity, without having already made a business LPA, the bank could freeze your bank accounts; contracts or services might go unfulfilled and; your business contacts may think twice about doing business with you. If you are a sole trader, it could put you out of business.

A business LPA is particularly important when there is more than one Director and when you employ staff and need to ensure they continue to get paid.

The Mental Health Discrimination Act 2013 states that a director or partner of a company who loses mental capacity cannot automatically be removed as a director. It depends on the clauses that are contained with the company articles of association. Provisions removing partners because they lack mental capacity may be in breach of anti-discrimination legislation – it is therefore far better to have appointed persons (attorneys) within a business LPA in the event that someone needs replacing urgently.

As above, if a company has multiple directors and one loses the capacity to make business decisions, the other directors or partners may not be able to remove them under the Metal Health Discrimination Act 2013.

In order to be able to implement the business LPA, the company articles and any partnership agreements must reflect this as an option. These may therefore need to be amended. Articles can be amended by special resolution under s21(1) of the Companies Act 2006.

If you own more than one business and would want different people to act for each company, then a separate LPA should be completed and registered for each.

Anyone you appoint must not only understand the everyday running of the business, but also its future plans. They must be kept up to date, so they fully understand the vision for

the organisation. They should understand the company’s business plan; marketing strategies; and mission statement (as applicable).

Your attorney(s) must have the relevant knowledge to be able to carry out the duties required of them. You can appoint more than one person and you can stipulate what duties you are giving each person the authority to carry out in the event that you do not have the capacity to do this yourself.

Attorneys must be trustworthy, competent, reliable and have the skills and ability to carry out the necessary tasks.