Wills

THE IMPORTANCE OF PLANNING FOR THE FUTURE

WILLS, LASTING POWERS OF ATTORNEY & ASSET PRESERVATION

Mark Lennon, Solicitor, Irwin Mitchell LLP

September 2014

Agenda

• About Irwin Mitchell

• Planning for the future

• What happens without a Will?

• Making a Will

• Lasting Powers of Attorney

• Asset Preservation

• Services for the Irish Community

• Q + A’s

About Irwin Mitchell

IM : Private Client Legal Services

• Largest private client team in the UK

• Recognised as a leading Will writing law firm

• Produced in excess of 300,000 Wills

• Dedicated Will disputes team

• Dedicated Court of Protection team

• National coverage through network of offices and a variety of delivery channels

IM : Work with the Irish Community in Britain

• Fortnightly legal advice clinics at Irish in Birmingham since October 2013

• Legal advice clinics with Leeds Irish Health & Homes since August 2014

• Sponsorship of Birmingham St Patrick’s Festival

• Support for Cuimhne Campaign

PLAN FOR THE FUTURE

• 3 out of 10 people die without a will

• 1 in 3 people with

children under 18 die

without a will

• Last year £53 million pounds

went to the Treasury through

intestacy

• 10% of people think a Will covers

them in the event of mental

incapacity

Will Writing

• We all have other priorities

• Thinking about your demise

• Making difficult decisions e.g Guardians, Trustees

• Confronting family issues and disputes

• Reluctance to access legal services

But if there’s no Will…..

• The law decides – not you!

• The rules of intestacy will apply; these are prescriptive and non-negotiable

• Some common misconceptions about dying without a Will:

- it all goes to my spouse, so I don’t have to bother – IT DOESN’T

The surviving spouse only gets £250k outright ( if there are children) or £450k outright (if no children)

- unmarried partners assume they have the same rights;

unmarried partners receive NOTHING from the estate of their partner

• Intestacy rules can be complex and you may not end up with what you want....

Reasons to make a Will

• Overrides the intestacy laws – you decide who gets what

• Peace of mind/certainty that your wishes are written down

• Prevents family disputes following death

• Speeds up the post death process

• Allows you to make specific gifts of e.g jewellery, charitable donations

• Allows you to protect children/grandchildren/other vulnerable beneficiaries

• Save tax, protect property for future generations

How Wills can protect your Estate and Beneficiaries

– Children/Grandchildren

– Vulnerable beneficiaries

– Tax Saving

– Division of assets following second marriage/relationships

– Mitigating Care Fees

Other Trusts

• Vulnerable beneficiaries – discretionary Trusts

• Inheritance tax planning – discretionary trusts

• Protective trusts – life interest or interest in possession trust

Disabled Discretionary Trusts

• Best way of protecting a vulnerable child or beneficiary

• Protects benefits and care entitlements and ‘status quo’

• Disabled trusts are given special tax treatment where certain conditions satisfied

– Effectively where no one else benefits while disabled person alive

– Disabled person must be incapable of dealing with own affairs

– In receipt of DLA or AA at middle/higher rates

• No 10 year charges or exit charges to Inheritance tax

Inheritance tax and Wills

• Nil Rate Band is £325,000, remainder taxed at 40%

• ‘Unused’ Nil Rate Band is transferable between spouses/civil partners (£650,000)

• Charitable gifts are free of Inheritance tax

• Certain assets qualify for Inheritance tax relief, farming interests, business interests

Leaving gifts to Charities

• Applies to deaths on 6 April 2012 onwards

• Where at least 10% of the taxable estate goes to charity the rate of tax payable on the rest of the estate reduces to 36% ( from 40%)

How do I make a Will?

• Quick, seamless process

• Online or postal service – www.irwinmitchell.com/wills

• Telephone Support

• Support with form completion through Irish legal clinics

• A Will in two weeks....or sooner if required

What’s a Lasting Power of Attorney?

• A legal document which appoints an individual ‘Attorney’ to act on your behalf in the event of onset of mental incapacity

• Two types:-

– Property & Finance

– Health & Welfare

• Replaced Enduring Power of Attorney from 2007

Why do I need one?

• Arguably more important than a Will

• Like a Will, taking action now means you have a choice over

– Who would deal with matters

– How they would deal with matters

What if I don’t have a LPA?

• Deputyship Application to Court of Protection

• Long process – 6-8 months, even if not disputed

• Assets are frozen

• Much more costly to obtain

Making a LPA

• Very procedural process

• Forms to complete which deal with

– Attorneys – ( joint or joint and several)

– Extent of their authority

– Certificate Provider

– Persons to be notified

– Strict order of signing

Registering a LPA

• In order to use a LPA it needs to be registered at the Office of the Public Guardian

• £110 registration fee

• Strict order of notification

• Circa 3 months to register so do it once you have prepared the LPA then it’s ready to use

Support in making a LPA

• Office of the Public Guardian website

– www.justice.gov.uk/opg

– guidance notes issued by the OPG are 153 pages long!

Using IM

- postal service similar to Will writing

– quick process – we liaise with all parties to arrange signature, notification and registration

– Do Wills & LPAs together

– Support with initial application completion through Irish legal clinics

Capacity is the key

Ordinary Power of Attorney

Court of Protection

Enduring Power of Attorney

Lasting Power of Attorney

Line of Capacity

Asset Preservation

• 2 million Britons will suffer from Alzheimer’s by 2050

• 1 in 5 people over 50 expect to be forced to sell their property if they need care

• 1 in 20 believe they will have to cover costs if their own parents need long-term care

• Care fees are a huge burden

Asset Preservation – Care Fees

• Who is liable to pay care home fees?

– Depends on circumstances of person going into care and nature of care required

– First step is care assessment

– Domiciliary or nursing care

– If care exclusively nursing care – NHS pays

– If domiciliary care, financial support means tested

– If element of nursing care – seek contribution from NHS

Asset Preservation – Care Fees

• Capital Limit for 2014/2015 - £23,250

• ‘Capital’ means all assets including bank accounts, ISA’s, national savings, shares and the family home

• Not all Capital taken into account eg. Home excluded if dependant over 60

• If Claimant has capital in excess of limit, must fund cost of care in full

• Minimum Capital Limit of £14,250

– If capital between £14,250-£23,250, LA makes contribution until capital reduced below £14,250, part funding according to sliding scale

Asset Preservation – Options if Capital Exceeds Limit

• 1. Do Nothing and hope you never need to go into care

• OR

• 2. Wait until care is required and simply pay the bills or an “Immediate Needs Annuity”

• Immediate Needs Annuities

– Offer security of money to cover all care costs for as long as needed

– Expensive – average cost approx £100,000

– Risk losing all money to insurer if stop needing care or die shortly after buying the annuity

Asset Preservation – Alternative Options – Giving Assets Away

• Risk losing right to live there if the recipient wants to sell the property, divorced or went bankrupt

• Tax implications – Capital Gains and inheritance Tax

• Risk of falling foul of ‘Deliberate Deprivation of assets’ rule at LA Financial Assessment

• Whether or not gift succeeds depends on a number of factors, including but not limited to:-

– Length of time between gift and financial assessment

– State of health at time of gift

– Whether or not any other reason for gift

– Extent of remaining assets in estate

Asset Preservation – Asset Protection Wills and Joint Ownership of Property

• Ensures at least 50% of the property is protected without any direct risk of application of deprivation of assets rules

• Hold Home in joint names as ‘tenants in common’ rather than ‘joint tenants’

– Each spouse/partner owns their own 50% share rather than jointly owning the whole

– Simple structure to set up with Land Registry

– Not effective if both people go into care

– Half house still exposed to financial assessment

Asset Preservation – Asset Protection Wills for Couples

• Carefully structured wills for couples in addition to holding property as tenants in common

• Instead of leaving estate to spouse, leave it in trust for their benefit during their lifetime and following their death to children and beneficiaries

• Assets held in trust not included in Financial Assessment for care fees

• Deprivation of Asset rules cannot apply as not made a ‘gift’

Asset Preservation - Lifetime Asset Protection Trust

• If single or a widow/widower, can’t hold property as tenants in common

• Options of paying for care, gifting assets or purchasing care annuity – not attractive

• Can transfer assets into a Trust

– Trust is a separate legal entity

– Trustees hold assets for benefit of beneficiaries

– Assets held in trust protected from personal liabilities of the Trust beneficiary

– Can preserve right to occupy property

– Could still be caught by deprivation of assets rules

Future Reforms – Care Act 2014

• To come into force April 2016

• Will include cap on total care costs of £72,000.00

• However, cap excludes “bed and board” fees which account for approx. 1/3 of the total bill

• Only covers the official cost of care in the LA area – usually much lower than private care home fees

Services for the Irish Community

• 10% discount for instructions referred via Irish charities. Fees, inclusive of VAT, as follows:-

• Single Will - £130.50• Mirror Wills - £207.00• Complex Wills incorporating trusts - £355.50• Single LPA - £432.00 + court fee of £110 (not discounted)• Mirror LPA’s - £540.00 + court fee of £220 (not discounted)• Advice on Asset Preservation

– Tailored Advice to suit particular circumstances– £360.00 inclusive of VAT** to be offset against any further

fees payable for implementation of preferred option

How we can help

• Tailored service

• Deal with several important tasks at once quickly and easily

• No visits needed, unless requested*

• *Most cost effective method- fixed fees with support via irish legal clinics

• We act for clients across the country

• Welcome suggestions about how best to deliver services to the Irish community

Wills

Q & A’S

Can we put something in a will to stop our property being sold to pay for our care?

• Asset Protection Wills for Couples

– Including severance of joint tenancy of the property to ‘tenants in common’

• Lifetime Asset Protection Trust (not a will)

Is there a time limit on how long your property should be transferred to avoid Financial Assessment?

• NO!

• But the longer the better. 

• Length of time 1 relevant factor

• Transfer shortly before care is imminent is likely to fall foul of deliberate deprivation rules

If the husband is in care and the wife dies at the home belonging to both, does the whole of the

property become the husband’s assets even if the wife had willed her half to her children?

• The property would have to be owned as ‘Tenants in Common’ for a provision such as this to be in the Will and for it to work. 

• If Tenants in Common, his 50% of the property form part of his assets

• If property held as ‘Joint Tenants’ then it would pass by survivorship and would end up in the husband’s sole name and therefore be liable for assessment.

Will you make sure I am buried in Ireland?

• A Will can specify funeral requests

• Good practice to notify closest relatives as often funeral arrangements made before the will is looked at

• If there are no close relatives then the Executors should have this responsibility. 

• Can easily be arranged provided there are funds to pay for this to happen

Position where there are Assets in Ireland

• When a will is prepared it is usually prepared to cover all worldwide assets. 

• However, best advice is that they have a will in that country to cover that asset specifically and then that country is excluded from the will that we prepare. 

• Cannot have two wills covering the same thing, or one could inadvertently revoke another.

• If assets in Northern Ireland, similar laws so a worldwide will can be done but for Southern Ireland, such assets should be excluded from any Will we prepare. 

• Complex area – as long as we are informed at initial instruction stage we will then advise on the best cause of action for the particular circumstances.