In almost all cases it makes sense to have a will. If you die without a will (known as dying intestate) your assets will be distributed according to the intestacy rules.

Intestacy rules

Where a person dies intestate, their estate will be divided depending on the circumstances. For example, if you are married, your spouse will get £250,000 and an absolute interest in 50% of the rest of the estate with the other half going to your surviving children.

Making a will

If you prefer to dictate exactly who gets what, making a will is the only way to ensure that this happens after your death. It will also allow you to dictate who sorts out your affairs on your death by naming your executor.

Will legalities

For your will to be legally valid, you must:

  • be 18 or over
  • make it voluntarily
  • be of sound mind
  • make it in writing
  • sign it in the presence of 2 witnesses who are both over 18
  • have it signed by your 2 witnesses, in your presence

If you make any changes to your will you must follow the same signing and witnessing process.

NB Witnesses are barred from receiving anything in your will so make sure they are not named beneficiaries!

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Will Trust

What is a will trust?

Will trusts allow you to pass on your property within a trust structure – which can have a significant impact on your estate.

A will trust – also known as a testamentary trust – is created within your will to allow you to protect property you hope to pass on to your family.

Unlike a lifetime trust, a will trust will only take effect once you pass away.

Leaving property in a will trust

Will trusts are mainly used by married couples and civil partners and are set up in conjunction with splitting ownership of the family home, to ‘tenants in common’, so each partner has 50%. Rather than leaving this to each other, they leave it to a trust, which comes into being on the death of the first partner.

Until recently, nil-rate band will trusts were a common way of saving inheritance tax (IHT). A couple potentially liable could split their estate into halves, both below the nil-rate band.

However, since 2007 the ability to transfer unused IHT allowance ended the need to make this type of will trust for most couples, although they still ring fence assets against potential fees should you or your partner go into long-term care.

Will trusts and long-term care

If you use a will trust and your partner dies, you as the surviving spouse retain a right to live in the house. If you need to pay for care, only your share is assessed by the local authority.

The part owned by the trust is not counted. In this way it’s protected from care home costs. Government rules (Charging for Residential Accommodation Guide) suggest that this arrangement will not be contested as ‘deliberate deprivation’, meaning that you have deliberately split your assets to avoid paying high care-home fees.

Will trusts and inheritance

Another reason for setting up a will trust is to avoid ‘sideways disinheritance’. This occurs when the first partner dies, leaving children from the marriage who might reasonably expect to inherit some of the family estate in due course.

If the surviving partner remarries and fails to make provision for their children in a new will, there’s a risk that everything will go to their new spouse instead.

A will trust uses up some or all of the first partner’s IHT nil-rate band in a way that leaving everything to your partner doesn’t. It could also create a capital gains tax (CGT) liability for trustees.

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Lasting Power of Attorney

Who do you want to be in charge if you lose the ability to make decisions for yourself? How do you want decisions to be made for you?

It makes good sense to prepare for for this by making a Lasting Power of Attorney.

Lasting Powers of Attorney will help to provide some reassurance for the future

The future of each of us is unknown and sadly, some people in their older years will lose mental capacity. Whilst we all hope this does not happen to our loved ones, if the loss of mental capacity arises, then a Lasting Power of Attorney (“LPA”) provides the opportunity for those who may be concerned about losing their mental capacity to make decisions in the future, to have some say in their future care, such as the type of medical treatment they would want or not want, as well as appointing someone to look after their property and finances. Most LPAs will only become enforceable once a Donor is medically diagnosed as having lost mental capacity.

In the absence of an LPA, a person who loses their mental capacity will have their finances managed by the Court of Protection as opposed to by a loved one.

Managing your affairs during your lifetime can become more difficult and it is wise to nominate someone whom you trust to look after your affairs, should you become mentally or physically unable to manage your affairs yourself.

What is a Lasting Power of Attorney?

A Lasting Power of Attorney (LPA) (which replaces the Enduring Power of Attorney) enables you to choose who you would like to manage your property, financial and general affairs should you become unable to manage them yourself. Your choice of Attorney will come into play either when you choose or when your mental health declines (subject to certain safeguards imposed by the Court of Protection).

You can also extend the powers under a LPA to those relating to your personal welfare, if you so wish. You will also be able to place restrictions on what exactly your Attorney can deal with, such as property or restricting medical decisions.

Your Attorneys will have the power to decide on issues such as where you will live, your care and medical treatment. They may also give or refuse consent to the carrying out or continuation of medical treatment, according to your wishes, although they cannot act if you are still capable of making those decisions for yourself.

Enduring Powers of Attorney (EPA)

What is an Enduring Power of Attorney?

New EPAs can no longer be created, however if you have an EPA made before October 2007, either registered or unregistered, it can still continue to be used. LPAs have now replaced EPAs, which only allowed people to appoint Attorneys to make decisions about property and financial matters on their behalf. The new LPAs give more protection and extra options.

If you have already made an EPA and you are still have full mental capacity, you can either replace it with a new Property and Affairs LPA or can keep the existing EPA. You can also make an additional LPA for personal welfare decisions.

Find out more about making and registering a power of attorney

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Severance of Tenancy

Severing a joint tenancy is the process by which a joint tenancy is converted into a tenancy in common. Most house ‘co-owners’ own their home as ‘joint tenants’. This means that if one joint owner dies, the survivor would own the total value outright, irrespective of what might be written in a will. Furthermore, the whole value would be means-tested where care costs are assessed.

There is an alternative method of ownership, known as ‘tenancy in common’. This means that each of the ‘co-owners’ owns a share of the property and can deal with it as they wish. To make this change from a joint tenancy, there must be a Severance of Tenancy agreement between the owners that is recorded at the Land Registry. To effect this change, all owners sign a Notice of Severance of Joint Tenancy, which is then stored with the deeds relating to the property.

Benefits of a Severance of Tenancy

A Severance of Tenancy allows a co-owner of a property to dispose of their share in the property as they see fit through a will. A Severance of Tenancy agreement may also be used as part of an inheritance tax avoidance strategy. In addition, it assists with reducing exposure to “the cost of care”.

Features of a Severance of Tenancy

Property may be owned by more than one person, either as joint owners or as owners in common. Upon the death of one joint owner, their share passes, by survivorship, to the surviving owner regardless of their wishes as expressed in their will. Upon the death of an owner in common, however, their share is passed on in accordance with their wishes as expressed in their will.

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I needed someone to help us complete a Lasting Power of Attorney for my father. Rupert from FoxKnox visited him at home, went through all the paperwork and the whole thing was sorted really quick. The service was wonderful and at a great price.

Tom A, Whitechapel

We have been using FoxKnox for a number of years and found their service to be excellent. Every member of staff we have dealt with has been friendly and professional. We have recommended them to our friends and family.

Elizabeth C, Surrey

Foxknox have done my wife and I’s wills, LPAs and trusts and we have found them to be professional, straight forward and transparent with their fees. I highly recommend them.

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Executor personally on the hook for 340k

Make sure you’re up to date on the responsibilities that come with being an executor before you agree to take on the role.

At some point in our lives many of us will be asked to be an executor for a friend or relative’s estate. This can seem like an honour, but before you say yes, make sure you understand exactly what you are agreeing to.

When that person dies, you, as executor, will be expected to deal with their estate, making sure that their will – if they had one – is respected. As part of this role, it is your responsibility to make sure the deceased’s estate is correctly valued for inheritance-tax (IHT) purposes, and that any tax bill is paid. While that may not come as a huge surprise, many people don’t realise that the executor can be personally liable for the IHT bill, even if they aren’t a beneficiary of the estate (it is possible to be both an executor and a beneficiary).

The Daily Telegraph’s Adam Williams gives the example of Glyne Harris, who in 2013 was made the executor of a £1.2m estate. Harris filed an IHT return with HM Revenue & Customs (HMRC), and paid the initial taxes due. However, as the estate included land, the remaining balance owed to the taxman did not need to be paid up front, says Williams. So Harris arranged for the estate to be handed on to the beneficiaries. He said he handed over the bulk of the estate to one beneficiary, on the understanding that they would settle the remaining IHT bill.

Unfortunately for Harris, that beneficiary promptly disappeared to Barbados and didn’t pay the bill. This left the executor liable to pay the remainder of the £340,000 bill. As he no longer had the estate’s fund, he appealed, saying he should not be liable for it. However, a judge has ruled that Harris is in fact personally liable for the outstanding amount. HMRC could potentially go after Harris’s own assets, including his house, Rachel Griffin of wealth manager Old Mutual Wealth told The Daily Telegraph. While this is an extreme example of what can go wrong, it shows just what a responsibility being the executor of an estate can be.

A big tax headache

A more common concern facing those dealing with an estate is the question of how to pay an IHT bill when assets need to be sold to fund it. The problem here is that HMRC expects IHT bills to be settled within six months of the person’s death, after which it will start charging interest on unpaid tax. However, an executor cannot sell assets until probate has been granted, which can create a stressful situation. The good news is there are options open that don’t involve you having to dip into your own pocket.

Firstly, if the deceased has enough cash or investments to pay the bill, then you can approach their bank or investment manager and ask them to release the money. Many will do this to settle an IHT bill. Secondly, if the estate contains certain assets that need to be sold in order to pay the bill, then HMRC will allow you to pay in instalments. This includes property and shares that gave the deceased more than 50% control of a company. The first instalment is due six months after the death date and the rest is paid in annual instalments until the asset is sold.

In the case of property, you can pay the IHT bill in annual instalments of 10% of the bill, plus interest, if a beneficiary chooses to live in the property, meaning it won’t be sold. Be aware though that interest will be charged at 3% if you pay via instalments. Finally, a third option is to take out an executor’s loan to cover the IHT bill until probate is granted. You can then raise the funds to cover the loan repayment by selling the deceased’s assets.

If all this sounds like too much responsibility, remember you can simply say “no”. Whether you are appointed under a will as an executor or you become an administrator of the estate by way of intestacy (this occurs where the deceased did not leave a will), you can officially “renounce” the nomination.

Son whose late mother told him her £725,000 fortune was ‘all yours’ is now locked in a bitter court battle with her ex-boyfriend after he launched a claim for more than half of the inheritance

An only son who was told by his late mother ‘it’s all yours’ is locked in a court fight over his £725,000 inheritance after her last boyfriend launched a claim for a share.

James Campbell, 35, says his late mother Sarah – with whom he had an ‘extremely close and loving relationship’ – promised he would have everything when she died.

He also claims her will, drawn up 14 years before her death in 2015, handed most of her estate – including the keys to his childhood home – to the son she ‘adored’.

Mr Banfield says he and Mrs Campbell lived as ‘husband and wife’ for more than 20 years before her death and he needs a payout from her estate to buy his own home.

However, Mr Campbell says Mr Banfield has plenty of money of his own and denies the relationship between his mother and the pensioner was as close as he says.

Although they had been an item in earlier days, he claims his mum was unhappy at Mr Banfield’s ‘sedentary’ lifestyle and he was more like a ‘lodger’ to her.

He lived entirely in the front room of their home in Thames Ditton, Surrey, sleeping in a chair, while his mother spent most of her time ‘in the kitchen’, said Mr Campbell.

He told the court: ‘She told me on several occasions that all she wanted me to do was to find a lovely woman, buy a house, settle down and have a family.

‘It’s what my mother wanted. It was my father’s house and then my mum’s house and my mother left it to me.’

The court heard that all agree that Mr Banfield’s relationship with Mrs Campbell began in the early 1990s after the death of Mr Campbell’s father.

Dog-lover Mr Banfield claims to have moved into her Thames Ditton home in 1993 and that they became engaged in 1999.

From then until her death, they lived as a couple, with her partially maintaining him in her home.

But Mr Campbell denies there was ever an engagement and says Mr Banfield did not move in until 2002.

The relationship, although at first romantic, was more akin to lodger and landlady as the years went on, he claims.

They slept separately, with ‘sedentary and obese’ Mr Banfield in the living room on a chair, he said.

‘My mother was the life and soul of every party and had a very active social life, which disappeared around when Andy moved in,’ said the son.

But, accused of being ‘reclusive’ and expecting to be ‘waited on hand and foot’, Mr Banfield said the claims were ‘ridiculous’.

‘They’re making all this up,’ said the pensioner.

For Mr Campbell, barrister Elaine Palser said his mother made it clear she wanted her money and her house to go to her only child.

‘He and Mrs Campbell had an extremely close and loving relationship, it was her long-term desire that he inherit the property,’ she told Judge Paul Teverson.

‘This was his childhood home and he lived there – apart from a short stint away – until he moved into rented accommodation with his girlfriend in 2015, just before his mother’s unexpected death.’

She continued: ‘Mrs Campbell wrote to her son before making the will saying how much she adored him and that her estate “is all yours”. She told her friends the property was James’.’

Ms Palser argued that Mr Banfield is not entitled to anything from the estate, beyond a £5,000 gift which Mrs Campbell left him in her will.

And he does not need it anyway, as he has money and an income of his own with which to buy or rent a property, she claimed.

‘He is far better off than James, with substantial capital and a very healthy annual income surplus,’ she told the judge.

‘James and his fiancee Octavia Gray would love to buy a property large enough to start a family.’

Representing Mr Banfield, barrister Rory Brown said he deserved to be awarded ‘reasonable provision’ from his former partner’s estate.

He suggested that Mr Campbell simply ‘didn’t like to think’ of his mother sharing a bed with Mr Banfield.She may have protected him from the fact of their relationship by not talking about it.

‘The truth is your mother knew the new relationship was difficult for you and she naturally spoke to her friends about the realities and sheltered you from them, didn’t she?’ the barrister put to Mr Campbell.

Mr Campbell replied: ‘That’s not the case.’

Mr Brown also disputed the claim that Mr Banfield paid nothing towards the household while living with Mrs Campbell.

He had paid council tax, electricity bills, the TV licence and for their annual Canary Island holidays, he said.

Mr Banfield’s sedentary lifestyle was because he has mobility problems, said the barrister, and it did not have any impact on Mrs Campbell’s health.

‘The reality is she had her own health problems that contributed to her untimely and premature death,’ he said.

‘She preferred to have that lifestyle. She preferred to live with Mr Banfield.’

The court heard Mr Banfield claims he needs at least £420,000 to buy a suitable property in the village. The hearing continues.

Read more: http://www.dailymail.co.uk/news/article-5762021/Son-locked-bitter-court-battle-mothers-ex-boyfriend-fortune.html#ixzz5GRgPw1q1
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Calls for complete overhaul of ‘unfit’ inheritance tax system

Inheritance tax should be scrapped, and replaced with a fairer system that would be harder to dodge, thinktank the Resolution Foundation has said.

In its latest report into how to tackle unfairness between the generations, the thinktank, chaired by former Conservative minister David Willetts, says inheritance tax is by far the most unpopular tax.

Despite being levied only on the largest 4% of estates, and raising just 77p of every £100 of taxation, it is widely regarded by the public as unfair.

Adam Corlett, senior economic analyst at the Resolution Foundation and the report’s author, said: “Inheritances are already worth over £100bn a year, and their doubling over the next 20 years means they are going to play an even larger role in shaping British society.

“But the current system of inheritance tax is not fit to deal with this societal shift. It currently manages the uniquely bad twin feat of being both wildly unpopular and raising very little revenue.”

Instead, Resolution proposes a “lifetime receipts tax”, that could allow beneficiaries to inherit a lump sum before they paid any tax on it – and potentially raise extra revenue for the Treasury.

Its analysis suggests by setting such a lifetime limit at £125,000, and then levying inheritance tax at a lower rate of 20% up to £500,000 and 30% after that, the government could still raise an extra £5bn by 2020-21.

Taxing individual recipients of bequests rather than the estate as a whole, could also give parents an incentive to spread their largesse more widely.

The thinktank warns that inheritance tax is too easy to avoid, in part because of reliefs, including those for capital held in agricultural land and shares on the hi-tech AIM market.

These exemptions, which cost the Treasury £1bn a year, were intended to protect farmers from having to break up their estates and encourage entrepreneurial investment. But Resolution claims they are widely abused as a way of avoiding inheritance tax.

Read the story here: https://www.theguardian.com/money/2018/may/02/calls-for-complete-overhaul-of-unfit-inheritance-tax-system