Frequently Asked Questions

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Frequently Asked Questions
Wills & Probate Property Inheritance Tax Executors & Trustees Guardians Gifts & Legacies Lasting Power of Attorney (LPA) Asset Protection & Family Trust

Wills & Probate

Can the lengthy and costly process of probate be avoided?

It is certainly possible to mitigate this process and even eliminate it altogether, by the use of Asset Protection Trust / Family Trust, because generally assets held in these structures do not require probate because ownership of the assets themselves are retained within the trust itself.

What happens if I don’t have a Will?

If you don’t have a valid will when you die, your possessions money, property, land etc.. will be shared according to the law instead of your personal wishes. This ultimately means that your assets can pass to someone you hadn’t intended – or more importantly someone you want to pass things to receives nothing.

Common rules if you don’t make a will…

If you’re not married and not in a civil partnership, your partner is not legally entitled to anything when you die.

If you’re married, your husband or wife might inherit most or all of your estate and your children might not get anything (except in Scotland). This is true even if you are separated but not if you’re divorced.

If you have children or grandchildren, how much they are legally entitled to will depend on where you live in the UK – but if you make a will you can decide this yourself.

Any Inheritance Tax that your estate has to pay might be higher than it would be if you had made a will.

If you die with no living close relatives, your whole estate will belong to the Crown or to the government. This law is called bona vacantia (latin for ownerless property)

NB: any assets that you own jointly with someone will not pass under the intestacy rules but will pass by survivorship to the surviving joint owner. But be careful, you need to own the asset as “joint tenants” and not as “tenants in common” for survivorship to apply.

Contact us for more information and we can point you in the right direction

Property

What is the best way to own property… Joint Tenancy or Tenants in Common?

Joint tenancy: As joint tenants, each person owns the whole of the property - or put another way, each person has a 100% stake in the property's value. In the eyes of the law, you must act as a single owner. That means you'll need to get one joint mortgage to cover the value of the whole property. 

If one of you dies, your part of the property automatically passes to the other owners. You can't leave part of the property to someone else in a will. You must all agree if you want to sell the property. Married couples that own property together would typically be joint tenants.

Tenants in common

As tenants in common, you can all own a separate share of the property, and these shares don’t have to be equally sized - so for example, you may own 50% of a property, while each of your two children owns 25%. Each owner can also leave their share of the property to whoever they choose in a will when they die.

In theory, each owner can mortgage their part of the property separately. But in reality, few - if any - mortgage lender would be willing to agree to this. So you will still normally need to take out a joint mortgage. As with joint tenancy, you must all agree if you want to sell the property. This type of joint ownership is typically used by friends or relatives who are buying together.

How you own your property will dictate what happens when you die and how it is passed to your family and valued from a probate and tax perspective by HMRC. It is therefore important to be clear whilst you are alive the type of ownership you share with your partner or spouse, as this effects how this will be passed to your family within your Will and whether it is held in the correct way for you to be able to pass this on in the way you wish.

What  happens to our assets if one or both of us requires care ?

Local authorities assess the assets owned by you at the time you are taken into care.  Your assets will include property land shares and savings.  Should the total value of these assets be more than £23,250, then it is likely you will be required to pay the full amount of care home fees.  Below £14,250, then you would not be required to pay towards your care home fees. 

Local authorities are very strict on what constitutes and should be taken into account by way of valuing your assets and if necessary they will treat the assets that you may have given or passed to family ahead of requiring care, as still being owned by you, if they feel the reason for gifting assets was to avoid paying for care. Protecting your assets can be achieved, so long as at the time of planning, you were fit and healthy and there was no indication that care would be required, or that you could not have foreseen care would be required.

Unlike Inheritance Tax (IHT) and HMRC, where gifts and assets after 7 years of being gifted are either exempt from tax or charged at a much reduced rate, local authorities are able to go back as many years as they deem appropriate and assess the ownership of assets for the purposes of assessing the viability of care home fee liability.

Should they deem at any time that assets have been disposed of to mitigate the exposure to care home fee liability, then these assets can be reclaimed by the local authority and fees be made due payable.

Contact us for more information and we can point you in the right direction… 

Inheritance Tax

What are the Inheritance Tax (IHT) Thresholds?

Nil Rate Bands, or Allowances before Tax…

Individual Allowance = £325,000
Married Couples & Civil partners = £650,000
Tax for lifetime transfers = 20%
Tax for transfers on or within 7 years of death = 40%

Are there Inheritance Tax (IHT) Exemptions?

-Gifts of up to but not exceeding £250 annually to any number of person(s) is permissible

-Transfers between husband and wife are generally exempt

-Gifts that are made out of income or earnings that form part of normal expenditure and do not affect standard of living

-Lifetime transfers of £3000 in each tax year (both husband and wife have their own exemption)

-Gifts by way of a marriage to either bride or groom… Up to £5000 by a parent £2500 by a grandparent and £1000 by any other party

NB: This is not an exhaustive list and is subject to change, so advice at the time it is required is recommended to ensure you maximum benefits are gained

 

Contact us for more information and we can point you in the right direction… 

Executors & Trustees

Am I able to choose more than one Executor ?

It is up to you how many Executors you appoint, although by law no more than 4 can act at the same time

Do I need a Solicitor or other professional to be a Trustee?

The simple answer is no.  It is your choice who you appoint, although it is important you appoint people you absolutely trust, who are also given the power to employ other professionals should it be necessary.  Authority can be given to Trustees in your Will.

During probate, you will of course require some form of legal assistance to conclude matters of wrapping up the estate and we at ANJ Consultants can assist you in this regard.


Do I need a Solicitor or other professional to be a Trustee?

The simple answer is no.  It is your choice who you appoint, although it is important where and to whom you wish your belongings to go to, it is only necessary to list those items that you specifically wish to go to a family member, friend or charity etc…, all other items not itemised will be treated and distributed as Residue

Is there a difference between an Executor and Trustee?

In most cases, the Executors are also appointed as Trustees.  The simple difference is that the Trustee is responsible for making the decisions and maintaining to the best of their abilities the estate during the time it is held in trust before the estate is passed to the beneficiaries and the Executor is responsible for carrying out the wishes or executing the Will and wishes of the Trustees.

Can a Beneficiary be an Executor?

Yes if you deem this to be appropriate.  It is often seen today that those who will benefit from the estate proceeds will also have a role to play in the administration of the estate prior to its distribution.

What is the role of the Executor?

Whilst we could provide an extensive list of the roles and responsibilities of the Executor, which can be very onerous, their main role is to administer the estate and carry out the wishes of the person to whom has appointed them in their Will to the letter.

 

For more information as to the extent of the role, please contact us and we can point you in the right direction…

Guardians

Can anyone automatically become Guardian?

Generally only a parent of the child, or children who has parental responsibility. The mother of a child or children automatically has parental responsibility, a father doesn’t!

Is it a requirement for my Guardians to be Executors?

It is not unusual to see guardians also Executors to the Estate.  It makes sense that if you would want someone you trust to take care of your children you would also want them to have a form of access to your assets of your estate to provide for your children.

Alternative Executors can be used in the event the Guardian is a divorced parent and access should not be given to your assets directly.

If a Will is made you can state Parental Responsibility or Guardianship naming the birth father.

 

Contact us for more information and we can point you in the right direction… 

Gifts & Legacies

Can I leave gifts to charities?

Yes, but it is necessary to know the full name and address and registered number of the charity being gifted to.  All gifts to charities are completely tax free, so essentially they can be used to reduce the Inheritance Tax (IHT) liability of the estate.

Is it possible to set age limits when gifts can be received?

It is indeed possible to do this… This is what a Trustees role is – To ensure the gifts you have specified are preserved as best as possible until the time or age you have  specified the gifts to be given are made.

Is there a maximum value for gifts and legacies?

No, a gift can be any value you have chosen, whether it be £500 or your entire property, the choice is completely yours

Contact us for more information and we can point you in the right direction… 

Lasting Power of Attorney (LPA)

What is a Lasting Power of Attorney?

A Lasting Power of Attorney or LPA is a legal document that provides authority by you (Donor) to a chosen person (Attorney) to carry out your personal affairs at a given time in the future, should you become incapacitated mentally or physically and unable to deal with them.

Is it possible to have more than one Attorney?

It is completely your choice and you can appoint as many Attorneys as you desire, although it is important that you consider how you are appointing them.
It will be necessary to decide whether you wish to appoint your Attorneys to act jointly together which essentially means that all your Attorneys have to sign relevant documents together. This serves to act as a safeguard so all of your Attorneys must be in agreement. A disadvantage of this is that if one of the Attorneys is unable to act or refuses to make a decision, then the power fails.

It is also possible to appoint your Attorneys to act jointly and separately. This means that they can act on their own, or together. This is more flexible as it allows your Attorneys to act on their own should the other Attorneys become unavailable or are unwilling to act in the future.

Is there more than one type of LPA?

There are two different types:

Health and Welfare: This allows your Attorney to make decisions on your behalf about your personal welfare, including whether to give or refuse consent to medical treatment on your behalf and deciding where you live.

Property and Affairs: This allows your Attorney to make decisions on your behalf about your property and affairs including paying your bills, collecting your income and benefits or selling your home subject to any restrictions or conditions.

NB: if you own or manage a business, you may wish to make a separate Property and affairs Business Lasting Power of Attorney.

How much power does my Attorney have?

It is up to you how much power you give to your Attorneys in relation to your personal and business affairs. You can give your Attorneys general authority to manage all your property and affairs or make all decisions regarding your personal welfare. For a Property and Affairs LPA, this means that they could sign cheques, pay bills, open and close accounts, make gifts and/or even sell your home. If you do not wish your Attorneys to have such wide powers, then you can place restrictions/conditions on them. For example; you can include a condition that your Attorneys must act in a certain way or cannot act until you have become mentally incapable.

Does my LPA have to be registered and when?

An LPA can be registered after you have made it and cannot be used until it has been registered. The LPA is made when it has been completed and signed by all of those required to sign the forms.

Are there costs involved in producing an LPA?

Yes, at the time that you register your LPA you will have to pay a registration fee to the office of the Public Guardian. A separate registration fee is payable for a Property and Affairs LPA and a Personal Welfare LPA when each application for registration is made.

Does my LPA have to be registered and when?

Yes, if you have the capacity to make a decision, your Attorney can act for you in your best interests and on your instruction. If you disagree with your Attorneys actions and still have the capacity to do so, you can revoke the LPA by notifying the Office of the Public Guardian.

Contact us for more information and we can point you in the right direction… 

Asset Protection & Family Trust

Why should I create a family Trust?

A Trust is a relationship which is recognised by the Courts, and the details of the Trust are contained in a formal Trust Deed which acts rather like your family legacy rule book. Creating the Trust has the advantages of being able to satisfy most of the reasons why you might wish to dispose of your property, namely:

Formally recognising financial contributions of other family members that they may have made directly or indirectly to the property.

Once in the Family Trust, the property can be sold quicker following your death. (No Grant of Probate is typically required for assets held in a family trust)

Bloodline planning in the event of early death or divorce of a beneficiary avoiding estate dilution.

By creating the Trust you can rest assured that you can remain in the property as long as you wish.

Who can I choose as my Trustees?

You will need to give careful thought to your choice of Trustees. A minimum of two and maximum of four people should be chosen, especially if you wish to place property or land into your trust. Whilst the Trustees must act in accordance with the Trust Deed, they also have certain discretions.

What are the specific responsibilities of my Trustees?

The Trustees themselves do not retain any power beyond the terms of the Trust Deed. However, most things which you would want to do with your own money, assets and property can be done by your appointed Trustees provided it is in the best interests of the beneficiaries.

At all times it is essential your Trustees:

Disclose areas that may have a conflict of interest with one or more of the beneficiaries. For instance, if a beneficiary owes the Trustee money, then this should immediately be disclosed.

Take reasonable care in exercising their powers. It is worthwhile noting that Professional Trustees have a higher standard of care to meet than individual Trustees.

Make sure beneficiaries of the Trust are kept fully informed and up to date with any changes. This minimises the need for dispute resolution later on.

Must never create a conflict of interest with any of the beneficiaries or profit from their role as a Trustee.

Never exceed the terms of the Trust or their powers granted in the Trust Deed.

Maintain good Trust records and accounts are kept and account to HMRC for any tax due.

Take independent financial advice at appropriate times and ensure that the advice taken is in accordance with the Trustee Act 2000.

Act honourably and fairly between all the beneficiaries.

Know exactly what the terms and conditions of the Trust are, and that the terms of the Trust are fulfilled to their fullest extent.

Never to charge fees. It is only Professional Trustees that are able to claim the payment of fees for acting on behalf of the Trust. Trustees are only able claim out of pocket expenses.

Are there any disadvantages of a Family Trust?

When a Trust is put in place, the main asset (property) has to be transferred into the names of the Trustees. You still have rights under the Trust that allow you to remain in the property and are protected, but essentially you will have no legal ownership of the property.

There are certain discretionary powers that fall to the Trustees under these circumstances which they can exercise in respect of the property. If you should you need to use raise capital against the property to support a loan such as an equity release, the number of potential lenders that will deal with a trust will be restricted once the property is in Trust.

Are there Capital Gains Tax considerations?

Just as if you owned the property outright the principle private residence exemption to capital gains tax applies when you transfer the property into the Trust, therefore  no capital gains tax charges apply. However, if you cease to live in the property for a length of time and then it is sold, there may be a capital gains tax charge.  Other assets also held in the Trust (other than cash) however, will and the current capital gains tax rate will apply to gains made on those assets. It is possible however, your own capitals gains tax annual exemption can be used to offset any Trust gain.

Contact us for more information and we can point you in the right direction…