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1. Only naming a single beneficiary.

A key element of a discretionary trust is that there must be multiple potential beneficiaries who can benefit from it. The trustees’ discretion is over not just how to manage the capital and income of the trust fund, and when to make distributions, but who those distributions should be made to.
If there is a single beneficiary and no potential for new beneficiaries to be added to the trust then what you have is not truly a discretionary trust at all. For tax purposes it would be treated as either a bare trust or an interest in possession, depending on the default clause.

2. Having a very limited pool of beneficiaries
Only naming a couple of individuals can work fine initially. The trust could then be faced with the same issues as described in point 1.

3. Misunderstanding the point of a default clause

A discretionary trust can last for up to 125 years. This is the maximum perpetuity period allowed by law according to the Perpetuities and Accumulations Act 2009. The reason English trusts have a maximum perpetuity period at all is because there is a general legal principal that a person cannot tie up their assets in trust indefinitely. At some point the assets have to actually vest in someone. This is known as the ‘rule against perpetuities’, and sometimes ‘the rule against remoteness of vesting’.
What this means for discretionary trusts is that there needs to be a default beneficiary, and this needs to be a person who can take any assets in the trust fund at the point the trust ends. The circumstances in which a discretionary trust will end with assets still in it would be:
a) All of the potential beneficiaries have died.
b) The trust has reached the end of its 125-year perpetuity period.
Without a valid default clause any remaining funds result back to the testator’s estate, so in a worst scenario where the discretionary trust was a trust of residue the resulting fund would pass on intestacy.

IF YOU WOULD LIKE MY TEAM OF EXPERTS TO CHECK YOUR TRUSTS FOR FREE THEN CALL 01909 281277

What about my grandchildren?

Order of entitlement Intestacy – Should you die without a Will

Leaves a spouse and no children then the surviving spouse takes the whole of the estate (NET estate)

Leaves a spouse and issue (child) spouse entitled to all personal chattels (tangible, movable property) there will be a statutory legacy of £250,000.00 plus ½ of the residuary estate and then any issue takes equally the other half of the residuary estate.

Parents (no surviving spouse or issue) then parents will receive equal shares in the estate.

Brothers and sisters of the whole blood (share both parents) shared equally between them

Stepbrothers and stepsisters (who share 1 parent)

Grandparents

Uncles and aunts of whole blood (mothers or fathers’ real brother or sister)

Step uncle and aunts

Finally, The Crown or Dutchee of Lancaster of Cornwall

Funeral Plans

To say talking about funerals can feel a bit awkward is something of an understatement. But when you stop and think about it, it’s really just as easy to discuss as life cover or your inheritance planning.

We will all need a funeral one day. So a funeral plan is more than “just in case” product. It’s one that provides benefits of real value – peace of mind for now and help for your loved ones in the future.

By planning ahead now, you can make your wishes known, which can make things so much easier for those you love, at a difficult time. Plus, you can avoid the worry of setting funds aside later on, or leaving the financial burden of the funeral costs to your loved ones. That’s why now a good time to start the conversation.

Deeds Of Variation

A Deed Of Variation can be used to change a will up to two years after the date of death where all those affected by the alteration agree to the change. Typically it is used to redirect the stated benefit in a will form, say a child to, say, a grandchild to keep down the inheritance tax potential on the child’s estate; specialist advice should be obtained from a solicitor on this potentially useful tool. The effect of the Deed Of Variation is to rewrite the will as if the deceased person had made the new and altered instructions in their will.

-Extract from The Good Retirement Guide 2019 by Kogan Page, edited by Alan Esler Smith.

It is sensible for you to consider what will happen if at any time of your life, you are unable to manage your own affairs, whether temporarily or permanently. Loss of mental capacity can occur at any age as result of accident or illness. It is usually better if you have chosen and authorised other trusted person(s) to act on your behalf. This can be done by creating and registering the Lasting Power of Attorney.

What is a Lasting Power of Attorney?

The Lasting Power of Attorney (LPA) is a legal document which lets you appoint another trusted person(s) to act on your behalf. Under an LPA, a donor is able to confer on the attorney(s) authority to make a decision about the donor’s personal welfare and/or the donor’s property and financial affairs.

Anyone over the age of 18 can have an LPA. However, it is actually a good idea to set up an LPA as soon as possible especially if you have a condition which is likely to cause a loss of mental capacity later on, such as dementia.

What are the types of LPA?

There are two types of LPA:

  • Property and Financial Affairs: This LPA gives someone the authority to manage your property and money. This could include bank or building society accounts, bills, collecting a pension o benefits and even selling your home.
  • Health and Welfare: This LPA covers areas surrounding your health and well being, including decisions around your daily care (washing, dressing, eating etc), medical care and treatment or whether it is time to move into care home.

Who can be an Attorney?

The attorneys need to be over 18 and not subject to a debt relief order or declared bankrupt. However, it is advisable to select person or persons who know you well, is organised and interested in ensuring your well being and most importantly who can be trusted with such important decisions of your life. You can also select legal professionals for being your attorney.

A person(s) selected to act as an Attorney can refuse to act and so it is advisable to consult with them before signing and registering the LPA. Once it is registered, if the attorney refuses to act an Attorney, it is known as “revoking” an attorneyship. If the LPA is registered and attorneys must act jointly (ie all together for all decisions), revoking the attorneyship will invalidate the LPA and a new LPA will have to be made, unless there are replacement attorneys ready to step up. If the attorneys act jointly and severally, then the remaining attorneys can continue to act even if one of them revokes their attorneyship.

New attorneys cannot be added to a registered LPA. In such a case, a new LPA would have to be made and registered with the Office of Public Guardian.

Why is a Certificate of Capacity required?

A Certificate of Capacity is required to establish that the donor, at the time of making an LPA:

  • Understands the purpose of the LPA and the scope of the authority conferred under it;
  • No fraud or undue pressure is being used to induce the donor to create the LPA; and
  • There is nothing else which would prevent an LPA from being created.

What is the price for an LPA?

The price varies depending on whether you are setting up an LPA in England and Wales, Scotland or Northern Ireland. In England and Wales, it costs £82; in Scotland it costs £73 and in Northern Ireland it costs £115. These fees refer to each type of LPA, so if you are setting up two types (ie Financial and Property & Health and Welfare), you will have to pay the fees twice. However, if your income is less than £12,000 per annum you can be eligible for certain financial exemption or remission depending upon valid financial evidence for the same.

How much time is required for registering an LPA?

The LPA cannot be used until it is registered with the Office of Public Guardian. Registering an LPA usually takes around 8 to 10 weeks and sometimes even longer. This allows for the time needed to allow for the notification of those in the “People to be notified” section. Once registered, the LPA is valid and may be used by the attorney(s), subject to any express restrictions mentioned in the LPA.

What would happen if I do not make an LPA?

If you do not make an LPA and become unable to make decisions for yourself, it can result in serious financial, legal and emotional problems for your family. Your finances could be frozen until the Court of Protection appoints a deputy. You would have no control over who is appointed and family and friends do not automatically have the right to take over your affairs.

You can choose to make an LPA either with or without any legal professional. Many people however choose a legal professional to make sure that everything is filled out correctly and does not cause hassles in setting it up.

As a deputy you’re responsible for making decisions on behalf of someone who may not have the capacity to do so. Depending on whether you’re a lay, professional or public authority deputy, when you first receive your court order, you might know the person very well, or you might not know them at all. This will affect the way you make decisions for them.

We always say the first thing you should do when you receive a court order is to get to know the person, if you don’t already. This is so that when you do need to make a decision, you’ll know if you can help them make it themselves. If they can’t make the decision it will help you choose the right thing, that in their nest interests.

Even when you know the person well, you should always be guided by the Mental Capacity Act 2005 (MCA). Section 1 of the Mental Capacity Act sets out five basic and fundamental principles which all those working with people over the age of 16 should adhere to.

  1. A person must be assumed to have capacity unless it is established that he lacks capacity. (subsection 2)
  2. A person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success. (subsection 3)
  3. A person is not to be treated as unable to make a decision merely because he makes an unwise decision. (subsection 4)
  4. An act done, or a decision made, under the MCA for or on behalf of a person who lacks capacity must be done, or made in his best interests. (subsection 5)
  5. Before the act is done, or the decision is made, regard must be had to whether the purpose for which it is needed can be as effectively achieved in a way that is less restrictive of the person’s rights and freedom of action. (subsection 6)

– OPG In Touch Spring 2018

It is never a nice thing to think about what might happen upon your death, but we all have a choice over where our wealth and belongings go. But only if we make a Will.

The dangers of dying without a Will – a situation known as intestacy – are great as you lose control of where your estate ends up. If you have a spouse and direct decedents (children, grandchildren) it flows through them, if not it goes via your parents, or if they are deceased via siblings if you have them. The rules differ slightly between England, Wales, Scotland and Northern Ireland.

The risk is especially acute for people in relationships who aren’t married or in a civil partnership. They will inherit nothing without a Will in place leaving them assets, potentially jeopardising the roof over their heads. Not having a will could also mean an elderly surviving parent gets all the assets – even if you are estranged from them – rather than a sibling which may in term mean more of the parents estate will become subject to inheritance tax. Even if you are married and your assets go to your partner without a Will their financial future could be at risk if the assets are not ring fenced for them. For example, your former partner might re marry and later get divorced with their ex-partner receiving assets that could’ve benefitted the children.

So why are so many people leaving it to chance? The main reason for this lack of preparation appears to be apathy. The most common response (38%) when asked why people to not have a will  was that they simply “hadn’t got round to it yet”  this was even higher for those 45 and above, where 50% of respondents admitted they “hadn’t got round to it” Other reasons cited include not having enough assets to write one (32%) and feeling too young to worry about one (24%) although this response was, as would be expected, the highest amongst those aged 18-24 (71%).

Amongst those who do have a Will, about one in four (23%) admit it never reviewing it. Changes in circumstances such as relationships and family births and deaths, as well as legal tax changes mean that Wills should be reviewed periodically.

  • The Legacy Year Book 2019

Sometimes, a gift is given by a person who contemplates that they may die soon. This is known as a “gift in contemplation of death” but is commonly referred to by its Latin translation of “donatia mortis causa.”

A gift of this type is ordinarily made by people who are very ill or due to undergo serious surgery and make a gift during their lifetime which will take effect on their death.

As no legal documentation (or any documentation for that matter) is required to make a donatia mortis causa, there are few rules which apply. In addition, there is no need for probate or execution unlike a Will.

What are the Conditions for these Type of Gifts?

To qualify as a donatio mortis causa:

  • The gift must be made by the donor in contemplation of the donor’s impending death.
  • The gift must be contingent on the donor dying.
  • The donor must part with the gift or deliver it in some way to the donee.
  • The subject-matter of the gift must be capable of being given away in this manner.

 If there was a gap of several months after the gift had been made and at the time of the gift being made, the donor was not seriously ill/contemplating death from a known cause, the gift will simply not stand.

Who has Ownership of the Gift when it is Made?

Once the gift is made, the donor would give up control of the gift as soon as it made to the donee.

However, the donee would not absolutely own the gift until the donor has deceased. The reason for this is because if they survived the illness or operation (as per the examples used above), the gift would simply be void and the donee would no longer have any ownership right to it. The donor can revoke the gift at any time before their death which is why the donee would only own the gift on the death of the donor,

Are Deathbed Gifts Valid?

Deathbed gifts are perfectly valid providing the above conditions are met.

However, as these gifts are made when the person is on their deathbed and extremely vulnerable, issues can arise with regards to the donor’s capacity and whether they understood the effect of making the gift – especially gifts of high value. As with ensuring the donor had capacity at the time of making the gift, it would be important to somehow ascertain that they were not placed under any undue influence either.

What if I Already have a Will?

Ordinarily, a Will would govern what happens to assets on a death. Donatio mortis causa is an exception to that rule, which states that providing the gift was made in contemplation of imminent death, it will override anything in the Will or under intestacy. This is likely to cause conflicts between potential beneficiaries who are likely to contest the validity of the deathbed gift.

Challenging a Deathbed Gift

Courts will assess in detail how the deathbed gift was made and in what circumstances. It will be upheld only where there is clear evidence that the conditions for a valid gift are met. However, each case will be considered on its own facts.

Whilst deathbed gifts are perfectly valid if made correctly, it is of course better to dispose of your assets properly by way of a Will which will enable you to include trusts, set out funeral wishes and name guardians for minor children for example.

It is important to ensure you review your will regularly to prevent death bed gifts being made and then potentially challenged by disgruntled family members or those who were due to benefit under the Will. We recommend a Will is reviewed every 3-5 years or when there is a change of circumstance such as marriage or children.

To put a Will in place for you or your loved ones, please contact one of our members today.

 

A report commissioned by Age UK highlights the different approaches to long-term care across a group of countries in the developed world, and how they compare to the system in England.

The findings suggest that creating a sustainable social care system fit for a rapidly ageing population is a challenge in every one of these countries, which none has completely overcome. However most the countries reported have grasped the nettle and implemented significant reforms during the last 25 years. For example Germany began to modify the system in 1995 and Japan in 2000. Over the same period, despite two Government consultations, two official commissions, five Green and White Papers and one Act of Parliament, England’s system of means tested care funding is broadly unchanged.

It is notable that England has a stricter means test than the other countries examined in the report. England has a fixed means test limit for all long term care services, meaning anyone with savings or assets above £23,250 has to pay all the costs of their long term care (with tapered means tested support available to those with savings and assets between £23,250 and £14,250). Even those with savings and assets below £14,250 threshold will still be expected to pay a contribution towards the costs of their care through a deduction from their state pension. Other countries have more progressive systems, either providing a non means tested basic level of support (Germany), capping the level of co-payment for all (at 10% in Japan), or using a more generous and gradual means test (France).

  • The Legacy Yearbook 2019, correct as 21/11/2019

Here to serve the community

We have had a very enjoyable morning chatting over scrabble and dominoes whilst informing the public of what the benefits are regards planning for the future.

 

Why a Lasting Power of Attorney?

There are a number of reasons why you might need someone to make decisions for you or act on your behalf:

  • This could just be a temporary situation: for example, if you’re in hospital and need help with everyday tasks such as paying bills.
  • You may need to make longer-term plans if, for example, you have been diagnosed with dementia and you may lose the mental capacity to make your own decisions in the future.

 

FREE 90 minute home visit within the community please call 01909 281 277