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If you have children under the age of 18, you may want to consider appointing a guardian for them in your Will in case you die before they reach the age of 18. This allows you to choose someone you approve of to take care of your children, giving you peace of mind.

Guardians may only be appointed for children who are under 18, known as ‘minors’.

If you fail to appoint a guardian for your child and both you and the child’s other parent die, the Court will typically have to appoint a guardian and this may not have been the person you would have chosen yourself.

Who can appoint a guardian?

A person who has ‘parental responsibility’ for a child can appoint a guardian for the child in their Will.

‘Parental responsibility’ means all the rights and duties that you would expect a parent to have in relation to making decisions for a child. They might, for example, make decisions about the child’s education, medical treatment or where the child lives.

A child’s mother always has parental responsibility for her children.

If the parents of the child were married when the child was born, they will both automatically have parental responsibility.

If the parents were not married when the child is born, the mother automatically has parental responsibility but the father can acquire it in a number of circumstances – for example, if:

  • he marries the mother;
  • he is registered as the child’s father on a register of births in the UK (which requires the mother’s consent; this applies only if the child was born on or after 1 December 2003);
  • he enters into a Parental Responsibility Agreement with the mother which is then filed at the High Court;
  • he obtains a court order giving him parental responsibility;
  • he is named in a Child Arrangements Order as a person with whom the child is to spend time or otherwise have contact and the court decides that it would be appropriate to make a Parental Responsibility Order in his favour;
  • he becomes the child’s guardian; or
  • he adopts the child.

Provided that you have parental responsibility for the child, you can name a guardian for them in your Will (you can in fact appoint a guardian without using a Will, but most parents use their Will as they intend for the appointment to take place on their death).

When does the appointment take effect?

If you appoint a guardian for your child in your Will and you then die, the appointment will take effect only if, following your death, no other parent has parental responsibility for the child.  (It will not matter that a person other than a parent has acquired parental responsibility.)

If, following your death, the child has a surviving parent who has parental responsibility, the appointment of your chosen guardian will not take effect for as long as there is a surviving parent.

Example 1 : Married parents

Jane and Samuel were married. They had two children. Jane and Samuel divorce and the children live with Jane. Jane makes a Will appointing her sister Charlotte as guardian of the two children. Jane then dies. Because Jane and Samuel were married when the children were born, Samuel has parental responsibility for the children. The appointment of Charlotte as guardian for the two children will only take effect if Samuel dies before the children reach 18. 

Potential problems

A potential issue arises if the parents each choose different guardians. In the above example, Jane has appointed her sister Charlotte, but Charlotte will not be guardian unless the children’s father Samuel dies before the children reach 18. However, what if Samuel decided in his Will to appoint his brother Matthew as guardian, and then Samuel dies? On Samuel’s death, both Jane’s appointment of Charlotte and Samuel’s appointment of Matthew will come into effect. The two guardians must then agree on all matters relating to the children’s education and upbringing. Should they disagree, the matter will have to be referred to the Court.

To avoid difficulties it is highly advisable that parents discuss guardians with each other and try to coordinate who they appoint – even if they are no longer a couple.

Example 2: Unmarried parents

In this example, Janet and Chris are not married. They have a daughter, Melissa. Chris does not have parental responsibility for Melissa. Therefore, only Janet can appoint a guardian for Melissa. She makes a Will appointing her mother Lisa as guardian. If Janet dies while Melissa is under 18 and Chris has not acquired parental responsibility at that time, Lisa’s appointment will take effect immediately and only Lisa will be able to make decisions about Melissa – regardless of whether or not Melissa is living with her father Chris. Lisa will have no legal obligation to consult Chris when making decisions. However, if Chris has acquired parental responsibility at the time of Janet’s death, Lisa’s appointment will not take effect unless Chris dies or his parental responsibility is terminated (for example, by a Court Order) while Melissa is under 18.

It is clear that where parents with children are living together but are not married, the father needs to have parental responsibility to avoid potential issues.

How to appoint a guardian

The appointment of a guardian in your Will can be made using a fairly simple clause and a substitute guardian can also be named – for example:

If my husband dies before me, I appoint, as the guardian of any of my children who are under 18 at my death, Jane Smith of 123, The Street, Town, County NG1 234. If Jane Smith dies before me, or her appointment does not take effect for any other reason, then I appoint Lisa Jones of 456, The Street, Town, County, NG2 345 instead.

Appointments can be conditional – for example:

If my husband dies before me, I appoint, as the guardian of any of my children who are under 18 at my death, my mother Gloria Jones of 123, The Street, Town, County NG1 234 PROVIDED THAT she is under the age of 70. If my mother dies before me, or she is 70 or older, then I appoint Lisa Jones of 456, The Street, Town, County, NG2 345 instead.

Appointments can also be more complex. For example:

  • One guardian until they reach a certain age, then another should  take over.
  • A couple (e.g. your sister and her husband) provided that they are married, otherwise someone else.

Again, it is important for parents to consider these clauses together, even if they themselves are no longer a couple. Otherwise, each may appoint separate guardians who will then have to make decisions together, or go to Court. Children will already be dealing with grief, and any conflict between the two separately appointed guardians will only add to this.

Changing your mind

Having made a Will, you might later change your mind about your chosen guardian. In this case you can either:

  • Destroy the Will (and make a new one); or
  • Make a “codicil”.

A codicil is an addition to the Will that modifies or revokes (cancels) a part of it.

So the codicil might simply state that the appointment of a guardian no longer applies, or it may state that instead of appointing your sister Jane, you instead want to appoint your mother Sarah.

The effect of divorce

If, having appointed a guardian for your child in your Will, you get divorced, this will not automatically revoke (cancel) the Will (or indeed, the appointment of the guardian).

However, if you then marry again, the entire Will (including the appointment of the guardian) is automatically revoked.

Wills are always revoked on marriage unless they specifically state that they were made in ‘contemplation of marriage’ to a specific person.

Therefore, on remarriage, you should make a new Will and include the appointment of a guardian for your children of your first marriage. Once more, we would strongly recommend coordinating with your ex-spouse to avoid conflict in the future.

Financial provision

If you appoint guardians for your minor children, who will pay for their upkeep? Many parents deal with this issue by including a provision in their Will that their ‘residuary estate’ – that is, the amount of money left after all debts and expenses has been paid – should be held ‘on trust’ for the children. This means that the money is held safely for the children until they reach a certain specified age – usually 18, 21 or 25.

The trustees – those who look after the money for the minor children – usually have the power to make some of the money available for the children’s benefit before they are entitled to it. They could, for example, pay school fees for a child directly to the child’s school, or to the child’s guardian to use for the child’s benefit.

Some parents also choose to leave a gift to the guardian, provided that the guardian does actually take on the responsibility, as an expression of gratitude.

Others may allow the trustees to loan the guardian money from the trust fund, enabling them to perhaps purchase a larger house to accommodate the children whilst they are minors. The loan can be secured by a charge on the house, so the money will still be available for the children in the future.

Parents may decide to write a letter of wishes guiding the trustees on how they would like the money in the trust fund to be used (although this is not legally binding). A separate letter of wishes should be used if the parents would like to set out their views on how their child is to be raised or even their choices of substitute guardians, should the choices in their Will fail. However, again, such a letter of wishes will only be guidance and is not binding. If the letter is brought before a court, they may consider it, but they will always consider the welfare of the child or children first.

The above is a general outline of appointing a guardian in your Will and a brief overview of parental responsibility. Speak to April King’s lawyers today for advice on guardianship clauses and other aspects of your Will, specific to your circumstances. Call us on 08700 120 130 or email info@aprilking.co.uk for a free appointment. 

The post Do I need a guardianship clause in my Will? appeared first on April King.

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In the recent case of James v James the Court confirmed that, when deciding whether a person has the necessary mental capacity to make a Will, the criteria set out in the old case of Banks v Goodfellow (1870) must still be applied, despite the fact that newer legislation has come into force dealing with the question of capacity.

The test in Banks v Goodfellow requires that the person making the Will must:

  • understand the nature of the act [of making the Will] and its effects;
  • shall understand the extent of the property of which he is disposing;
  • shall be able to comprehend and appreciate the claims to which he ought to give effect; and,
  • no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties (per Cockburn CJ).

The level of understanding required varies according to how complex the Will is, the extent of the testator’s assets and the claims upon the testator.

More recently, the Mental Capacity Act 2005 has set out a new definition of mental capacity that applies in certain situations. In some textbooks and cases, it has been suggested that the definition in the Mental Capacity Act 2005 is simply a modern day restatement of Banks v Goodfellow and the Act could therefore be optionally applied – further, it has been suggested that ultimately, the provisions of the Act will replace the test in Banks.

However, the decision in James v James has confirmed that this approach is incorrect.

In James v James, the Court confirmed that the test in Banks v Goodfellow had not only survived the enactment of the Act, but that it is the sole test of capacity when judging whether someone had the capacity to make a Will. The Court reached the conclusion for the same reasons set out in the earlier 2014 case of Walker (Deceased).  Although there is clearly an overlap between the tests and applying either would often produce the same result, this would not always be the case. These include differences in the burden of proof, and the presumption of capacity under Section 1(2) of the Mental Capacity Act.

In Walker, the Court looked at the purpose of the Mental Capacity Act as set out in Sections 1(1) and 2(1), which was to define when a living person could make decisions for themselves and to state how decisions should be made if they were unable. This is an entirely different task to evaluating retrospectively whether a deceased person had mental capacity when they made their Will. Consequently such an evaluation does not fall within the scope of the Mental Capacity Act.

Further, test in Banks v Goodfellow was founded on principles that go back over almost three centuries. Accordingly, applying the principles of statutory interpretation, it is assume that Parliament did not intend to overrule the well-established rules of the common law when passing the Mental Capacity Act, in the absence of clear words or at least necessary implication.

In the James v James case, the Deceased satisfied the first two limbs of the Banks v Goodfellow rule – he appreciated he was making a will, and he was aware of the estate that he had to dispose of. Further, at the time of executing his will, the Deceased had capacity to appreciate the claims made by others on his estate, satisfying the third limb of the Banks test. He therefore had the necessary capacity to make the Will.

Cases referred to:

James v James and others [2018] EWHC 43 (Ch)

Banks v Goodfellow (1870) L.R. 5 Q.B. 549

Walker (Deceased), Re [2014] EWHC 71 (Ch), [2015] C.O.P.L.R. 348

The post Testamentary capacity: Banks v Goodfellow test still applies appeared first on April King.

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Those who registered a Lasting Power of Attorney (LPA) or an Enduring Power of Attorney (EPA) in England and Wales between April 2013 and March 2017 can claim a partial refund of up to £54 together with 0.5% interest.

How much could I get?

The amounts that can be claimed are as follows:

When you paid the fee Refund for each power of attorney
April to September 2013 £54
October 2013 to March 2014 £34
April 2014 to March 2015 £37
April 2015 to March 2016 £38
April 2016 to March 2017 £45

The 0.5% interest on offer is based on HM Revenue & Customs’ standard tax repayment rate.

There are two types of Lasting Power of Attorney: one for financial decisions and one for health and welfare. The refund is paid for each LPA registered, so some people will get £108 – twice the £54 on offer, plus interest.

If you paid a a reduced fee (a ‘remission’), you’ll be entitled to half the refund.

Why are the Government offering partial refunds?

The reason for the refund is that the Government has decided that you were charged more than was necessary. From 2013 to 2017, the operating costs of the Office of the Public Guardian, which deals with registration, were reduced – but the fees charged (£110 per LPA or EPA) stayed the same. The Government has therefore decided to repay some of the difference.

Who can claim the refund?

You can claim the refund if you are:

  • The ‘Donor’ – this is the person who has made the Lasting Power of Attorney or Enduring Power of Attorney; OR
  • The ‘Attorney’ – this is the person who was appointed by the donor.

However, the refund will always be paid to the Donor. If you were an Attorney for someone who has died, you can still claim the refund but you must make your claim over the phone.

How do I claim?

There are two ways that you can claim:

Check the opening hours at the bottom of this post.

You’ll only need to claim once, even if you made more than one type of Power of Attorney.

How will I be paid?

You’ll need a UK bank account to be paid the refund. If you don’t have one – or if you’re a Court of Protection Deputy – you’ll need to phone 0300 456 0300 to apply (select option six).

How long will it take?

It takes about 10 minutes to claim but you’ll have to wait up to 12 weeks for your claim to be processed and paid.

Should your claim be refused, you can appeal the decision by calling the refunds helpline (0300 456 0300 – option 6).

What if I registered my LPA/EPA after 31st March 2017?

The fees to register an LPA or EPA changed on 1st April 2017. Before that date, the fees were £110 per LPA/EPA. After that date, the fees reduced to £82.

If you paid the old fee of £110 to register an LPA or EPA after 1st April 2017, the difference will be refunded. This refund will be made to the individual who made the payment.

If you paid online before 1st April 2017 but the Office of the Public Guardian received your LPA on or after 1 April, you’ll still be entitled to a refund of the difference between £110 and £82.

More information

Here are the details of the refunds helpline together with their opening hours:

  • Telephone: 0300 456 0300 (choose option 6)
  • Textphone: 0115 934 2778

Opening hours:

  • Monday, Tuesday, Thursday and Friday : 9am to 5pm
  • Wednesday : 10am to 5pm

If you have any questions about the above, please do contact the Refunds helpline rather than April King. You can also email: poarefunds@justice.gsi.gov.uk

The post Lasting Powers of Attorney: Am I entitled to a refund? appeared first on April King.

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A recent case study in the Telegraph highlights once again the danger of making a Mirror Will.

A Mirror Will is a type of Will made by couples which, as the name suggests, contains identical terms. On the first death, they leave everything to surviving spouse if there is one, or to the children or other loved ones if there is not. Consequently, after the first death the surviving spouse inherits everything, with the idea that the children or other chosen family members get the estate on the second death.

What you may fail to realise is that if you make a Mirror Will, your spouse is free to change their Will as they please, even if you don’t. If you die first, there is no guarantee that your spouse will keep their Will in the same terms. Further, if they remarry, their Will is automatically revoked, making their new partner first in line to inherit. Even if they make a new Will, this could leave everything to their new spouse first, who then has every right to disinherit your children.

The Financial Times recently reported that there was a 36% surge in inheritance disputes brought to the High Court in 2016. However, given that most inheritance disputes are resolved out of court, these figures are likely to grossly under represent the scale of the problem. Despite the problems that Mirror Wills cause, they are still widely recommended by lawyers across the UK.

Stuart Herd’s case

The Telegraph reported on the case of Stuart Herd inherited nothing from his late father William’s estate as a result of a Mirror Will.

Stuart’s mother passed away and his father remarried in his late 60s.

His father then signed a Mirror Will together with his new wife Dorothy – Stuart’s stepmother. The Will provided for the surviving spouse first, and then the children that both William and Dorothy had from their past marriages.

The terms of the Will stated that on the first death, the estate was to go to the surviving partner. On the second death, the estate was to be shared equally between Stuart and Dorothy’s son.

Stuart’s father died and the estate passed to Dorothy – but it was not until more than 10 years later on Dorothy’s death that Stuart discovered she had changed her Will. Rather than splitting her estate equally between Stuart and her own son as Stuart’s father wanted, Dorothy had left everything to her son.

Stuart explained that the estate not only included his father’s money, but also his mother’s and grandparents’ funds as well. Stuart should have received £150,000 if his father’s wishes had been complied with but instead, the entire estate passed sideways out of the family as a result of a completely legal process.

Dorothy changed her Will four years before her death and also left a Letter of Wishes which explained that she had disinherited Stuart because he had not bothered contacting her for 10 years. Stuart says this is untrue and he has evidence they were in touch just a few days before Dorothy’s new Will was drawn up. However, this makes little difference since Dorothy is completely within her rights to disinherit Stuart, her husband’s son.

Stuart told the Telegraph:

“I feel the law hasn’t moved on – there is an increase in blended relationships. Relationships are far more complex these days. My father worked really hard to build that up and losing it feels like you’ve been mugged. To me he was very clear in what he wanted. There should be a requirement and an obligation to notify anyone being disinherited so they can challenge it then.”

The alternative to Mirror Wills

Using a Life Interest Trust, you can ensure your spouse is cared for after your death whilst protecting your share of the assets for your children/grandchildren.

Perhaps the saddest part of this case study is that the issue is very easily avoided with some simple estate planning. This involves the use of a life interest trust in your Will which not only protects your children’s and/or grandchildren’s inheritance but also protects your share of the family wealth from care fees.

With this type of arrangement, if you die first your spouse is given a life interest in your share of the family wealth. This means that they have use of your share but it is protected. On their death, your share then passes to who you choose.

There are a good number of benefits to using a Life Interest Trust. It gives you peace of mind that if you die first, your spouse will be cared for after your death, but they cannot do anything to disinherit your children or grandchildren, whether intentionally or inadvertently. They don’t actually own your share of the family estate as they only have a life interest, so they can’t spend it or include it in their Will. Further, if your spouse needs care after your death, your share of the assets cannot be used up on care fees as once again, they do not own your share.

Life Interest Trusts: How they work

If your spouse needs care after your death and like most people, they are not entitled to NHS Continuing Healthcare Funding, the Local Authority will perform a means test to see if they can afford to pay the care fees.

  • If they have assets over £23,250 (including the family home) they will have to pay for their care fees in full.
  • For those with assets between £14,250 and £23,250, the Local Authority will pay in part for the care costs.
  • When assets deplete to £14,250, the Local Authority pays in full (although in reality, most people will still be asked to make a contribution as they will often want to attend a different care home than the Local Authority budget will allow for).

In the UK you can expect to pay on average of around £31,200 a year in residential care costs, rising to over £43,700 a year if nursing care is necessary (Source: Laing & Buisson Care of Older People UK Market Report 2016/17 cited on Payingforcare.org). Consequently, after care fees are taken, there can be little or nothing left to leave to children or grandchildren.

Using a Life Interest Trust, you ensure that after your death, your spouse only has a life interest in your share of the estate. This means that they have full use of the share but they do not own it outright. Consequently the Local Authority cannot take it into account when performing a means test and even if your spouse’s share depletes, there is still 50% of the estate left to pass on to children/grandchildren. Further, your share cannot pass sideways out of the family as a result of your spouse changing their Will, remarrying or getting into financial debt.

Note that a Life Interest Trust is created in your Will. It is NOT the same or even similar to the worthless so-called ‘Asset Protection Trusts’ that are sold by unscrupulous companies and involve giving up ownership of your home. These are both dangerous and useless in effect – read our article ‘Asset Protection Trusts – why you should steer clear‘ for more info.

Once your spouse dies, your Will dictates what happens to your share. One option is for it to pass into a trust for your children or grandchildren which then provides further protection for them against predatory third parties (see for example our article ‘What happens to inheritance on divorce?‘).

For this type of Will to be effective, it is important that you own any properties as ‘Tenants in Common’ rather than ‘Joint Tenants’. Owning a property as ‘Tenants in Common’ means that each owner can dealt with their share as they choose. If you do not already own your family home or other properties this way, you can change your ownership to Tenants in Common by ‘severing the tenancy’ which involves the completion of a form (if the property is registered with the Land Registry) or a Notice (if the property is not registered).

To find out more, order our free information pack without obligation: click here.

The post “Dad could not have known I would be disinherited” appeared first on April King.

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Health minister Jackie Doyle-Price has confirmed that the promised £72,500 cap on social care costs is to be scrapped.

The proposed cap was due to be introduced in England after recommendations made by the Dilnot commission back in 2011.

But Jackie Doyle-Price told MPs on 7th December that the government would not be implementing the cap. She stated:

“To allow for a fuller engagement and development of the approach, with reforms to the ​care system and the way it is paid for considered in the round, we will not be taking forward the previous Government’s plans to implement a cap on care costs in 2020.”

The cap as recommended by the Dilnot commission was put into an Act of Parliament, but this section will not come into force.

Instead, there will be a Green Paper published by Summer 2018 on the future of social care with views collated from “a range of independent experts” “key stakeholders”, “people who use services and their carers”. Additionally Ms Doyle-Price stated that the Government would be hosting a number of round tables to hear a range of perspectives from those representing different constituencies, including carers, service recipients and providers, health services, financial services providers, local government and working age adults.

Once the Green Paper is published, it will be subject to a full public consultation.

Of the decision, Shadow Health Minister Barbara Keeley noted:

“The Minister has today finally confirmed what many of us on the Opposition Benches suspected: they will not be proceeding with their plans to cap care costs by 2020, as legislated for by the House … Meanwhile, very many people are still faced with the catastrophic costs of paying for their care.”

What you can do

If you own more than £23,250 of assets (including your home) you will have to pay for the full cost of your care. Those with assets between £14,250 and £23,250 must pay a contribution. In theory the Local Authority takes over paying the bill once your assets deplete to the £14,250 threshold – however, many people will be asked for a contribution, particularly if they want a particular care home.

Couples who take action now can protect their share of the family assets from care cost fees. This can be achieved through the use of a Care Fees Trust Will which leaves your spouse or civil partner use of your share of the family home for their lifetime. After their death, your share is inherited by your choice of beneficiaries such as children or grandchildren.

Under this arrangement, because your partner does not own your share of the family property, it cannot be taken into account when the Local Authority perform a means test to see if they should pay for their own care. However, it is important to this arrangement that you own your home as Tenants in Common rather than Joint Tenants.

We offer a free information pack with more details of Care Fee Trust Wills, together with an overview of our Bloodline Wills and Lasting Powers of Attorney. Click here for your pack.

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Around a third of adults in the UK have a Will – the remaining two thirds have left things to chance. Here’s what you need to know before writing a Will and why using a free or cheap Will writing service could cost your loved ones dearly.

1. DIY Wills spell disaster

DIY Wills – whether made using online software or offline ‘packs’ – frequently spell disaster.

Kits designed for writing a Will are available cheaply in many shops and at the Post Office. You can also find various DIY Will websites where you enter your details and get a downloadable, printable Will either for free or for a low fee. But DIY Wills – whether created online or offline – simply spell disaster. Common problems include:

  • The Will may not meet the requirements of the Wills Act and may therefore be invalid.
  • The language used may be ambiguous, causing confusion and upset for your loved ones (not to mention the potential of legal expenses) at an already difficult time.
  • Someone may contest the Will and argue it is not valid, for a number of potential reasons. This can cost your estate thousands in legal fees. If you use a professionally qualified Will writer to prepare your Will, they will prepare clear attendance notes and letters recording your wishes and instructions with you which can be produced in the event of a dispute.
  • The Will may not accurately give effect to your wishes, leaving loved ones without proper provision.

There are countless cases where DIY Wills have been found to be invalid or where their effect was not what the Testator (the name given to a person writing a Will) intended. Read our article ‘When DIY Wills go wrong‘ for just one example of how DIY Wills can result in years of misery for your loved ones.

2. Not all ‘Will Writers’ are qualified

Many Will writing services do not use appropriately qualified people to supervise the preparation of Wills.

Writing a Will is not a ‘reserved legal activity‘ under the Legal Services Act 2007. This means that anyone can prepare a Will for you. As a result you can get a Will written very cheaply, but those preparing the Will may have little or no legal knowledge or experience whatsoever.

ALL of the above issues that occur with DIY Wills also apply to Wills that are prepared by unqualified Will writers.

Some Will writing services profess that they are members of Will writing bodies and institutes but in some cases, a closer inspection reveals that the ‘body’ is just another website set up by the Will writing company.

Others say they use ‘qualified’ persons but this means very little without further clarification of what qualifications are held.

Using a firm or company that has qualified Will writers who supervise the preparation of all legal documents is essential. Examples of appropriately qualified people who can supervise the preparation of a Will include:

  • Full members of STEP (the Society of Trusts and Estates Practitioners)
  • Chartered Legal Executives with a current practising certificate
  • Solicitors with a current practising certificate

However, just because someone is appropriately qualified, does not mean that their service will protect your assets.

3. A basic or Mirror Will offers you very little protection

The basic Wills offered by many legitimate Will writers, while perfectly legal, do not protect your assets.

Many legitimate Will writing services, despite being supervised by a legally qualified person, offer a basic (and often, therefore, inadequate) Will writing service.

For couples, ‘Mirror Wills’ are often recommended – these allow you to leave everything to your partner and vice versa. However, this type of Will offers very little in the way of protection.

For example:

  • If your partner needs care after your death, most of the family wealth (including your share) will be used to pay care fees (down the £14,250 lower limit).
  • If your partner remarries after your death, their new spouse will be next inline to inherit the family wealth (including your share) rather than your children.
  • If your partner gets into financial difficulty after your death, creditors can take the family wealth (including your share), leaving nothing for the children.

Those who are single may be offered a basic Will allowing them to leave assets to their children, siblings, parents or whoever they choose. But again, these offer little protection against some very common problems – for example:

  • If your child/sibling/parent divorces after your death, the assets they inherited from you may form part of the divorce settlement.
  • If your child/sibling/parent runs into financial difficulty after your death, creditors may take the assets they inherited from you to pay debts.

All of the above scenarios could be avoided by using a Wills specialist such as April King Legal.

4. It is worth spending a few pounds more for a Wills specialist

Paul King TEP explains to a client how our specialist Wills offer a high level of protection for their assets.

April King Legal has over 25 years of experience providing first class legal advice in all areas of estate and family law, including matrimonial and property. We pride ourselves on our level and range of services, such as Care Fee Trust Wills and Bloodline Wills, which offer you and your family great peace of mind.

Our Wills can provide protection against all of the above events – for example:

  • If your partner needs care after your death, ensuring your share of the family wealth is not used to pay their care fees.
  • If your partner remarries after your death, ensuring your share of the family wealth does not pass outside of the family.
  • If your partner gets into financial difficulty after your death, ensuring your share of the family wealth is not taken by creditors.
  • Once both you and your partner have died, ensuring that your share of the family wealth is not taken by creditors or lost in a divorce settlement.

We understand that cost is a huge concern for those looking at writing a Will for the first time. Basic Wills packages can look very attractive on price, but remember that it is a false economy if the Will is not valid or provides little in the way of protection from common lifetime problems.

April King Legal charges £240 + VAT to make a specialist Will. We also offer a number of package deals that allow you to make both types of Lasting Power of Attorney at the same time for a very affordable fee.

To find out more about writing a Will with April King, order our free information pack below.

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The post Writing a Will – why a £19.99 Will could cost your loved ones dearly appeared first on April King.

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There is a legitimate alternative to the so-called ‘Asset Protection Trust’, but couples need to take action now.

Channel 4’s recent edition of Dispatches, promisingly entitled ‘How to Avoid the Dementia Tax’, lifted the lid on so-called ‘Asset Protection Trust‘ companies who claim to help couples avoid care fees, in exchange for thousands of pounds. Peddlers of these trusts use pushy sales techniques to persuade unsuspecting homeowners to transfer their homes to the trust. But unbeknown to their victims, such an act is regarded as ‘deprivation of assets‘ by Local Authorities and can have serious adverse consequences.

It is clear that Asset Protection Trusts are bad news and our team have been urging clients to avoid them for years. But is there a viable alternative?

A legitimate alternative to the ‘Asset Protection Trust’

The starting point here is that if your partner needs care after your death, it is grossly unfair that the care should be paid for from both their funds and yours. Why should you pay for care you haven’t had?

The problem is that many couples will make ‘Mirror Wills‘ which leave everything to the other, then to the children and/or grandchildren. On the first death, the surviving spouse inherits everything – and this pot is then available for the Local Authority to dip into, should the surviving spouse need care. In fact, the Local Authority can take everything down to the lower limit of £14,250 before they take over paying the fees and even then, those needing care are often asked to pay a contribution.

For those with a severe need, Continuing Healthcare Funding may be available – but funds are very limited and few meet the criteria.

The solution to this problem is for couples not to leave everything to each other in the first place. Instead, each spouse can give the other a life interest in the family home, with the remainder to the children/grandchildren.

This is only possible if the couple hold their property as ‘Tenants in Common’ rather than ‘Joint Tenants’.

Property ownership: Joint Tenants vs Tenants in Common

Under a ‘joint tenancy’ each owner has an indivisible share in the property and all of the owners are equally entitled to the whole property. On the death of one co-owner, that co-owner’s interest in the property will pass to the surviving co-owner by law. No action is required as the surviving co-owner is already entitled to the whole of the property.

If co-owners hold the property as ‘tenants in common’, they each have a distinct share in the property. Typically, a husband and wife might each own 50% of the property. When the first spouse dies, their share of the property passes in accordance with the terms of their Will (or if they have no Will, by the rules of intestacy).

If couples currently own their property as ‘Joint Tenants’, they can change their ownership to ‘Tenants in Common’ by ‘severing the tenancy’. This is usually done with a Notice of Severance, which April King’s team can arrange for you.

Protecting your share of the assets from care fees

Once the tenancy has been severed, rather than leaving your share of the family wealth to your partner, you can instead give them a life interest in the family home. This means after your death, your spouse will continue to own their 50% of the family home but they will not own your 50% share outright. Instead, they have a life interest in your share. With a life interest in your share:

  • They can stay in the family home for their lifetime
  • They can (with the permission of the ‘trustees’) sell the family home to buy an alternative property
  • If they need care, your share of the family home will not be taken into consideration when performing a means test
  • They can leave their share of the family home in their Will to whoever they like
  • On their death, your share of the family home will go to whoever you decide to leave it to in your Will (children, grandchildren or a trust, for example)
What is the difference between this solution and a so-called Asset Protection Trust?

With a so-called ‘Asset Protection Trust’, you transfer ownership of your home to a trust to avoid care fees. This means that you no longer own your home. One of the risks of this is that Local Authorities will class the transaction as ‘deprivation of assets’. This gives them very wide powers and lead to drastic consequences (look at our ‘Deprivation of Assets‘ guide to find out more). Councils are actively pursuing people for care fees who have used these type of trusts (see ‘Councils actively pursuing deprivation of assets cases‘).

With our solution, you do not give up ownership of your home and you have not deprived yourself of assets. You simply ensure that you own your home in such a way that you can leave your share to who you choose on your death. Then, rather than leaving your share of the home to your partner in your Will, you instead give them use of the family home.

Giving your partner a life interest in your share not only ensures that your share is not used up for your partner’s care fees (after all, as we said, why should you pay for care you never received?) but also protects it from third parties. For example, if your spouse remarries after your death, their new partner would be next in line to inherit the family wealth. With this solution, your share of the property is safe for your children/grandchildren as your spouse does not own it outright. Additionally should your spouse get into financial difficulty after your death, your share is safe from creditors.

You can go one step further and leave the residue to your children/grandchildren in a bloodline trust. This means that they have access to the money but it is safe from creditors and future divorce settlements.

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To find out more about what you can do as a couple to protect the family wealth from care fees, order our free information pack without obligation:

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The post The Dementia Tax: why couples aren’t doing enough appeared first on April King.

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Many people are still unaware that if they need care in later life, their assets will be means-tested by the local authority to help pay for these services. This goes back to the Community Care Act 1990, which came into force in 1993.

If someone requires social care in later life, the local authority will look to use the assets of a person until they get down to a lower limit of £14,250, when the local authority will take over the fees.

How to Avoid the Dementia Tax - YouTube

Paul King knows this all too well, after experiencing this personally.

“My grandmother sadly passed away at the age of 92. My grandfather had died many years earlier and left everything to her. When she needed care in the last six years of her life, because my grandfather had left everything to her, the house and all the estate were counted in the local authority’s means test. Just as she died, she had gone down to that lower limit of £14,250 – and that’s all that her children inherited.”

Our clients tell us, ‘We’ve worked hard all our lives, why should the local authority get it all?’

There are many myths about the steps people can take to protect their assets from being used like this. The main one is that a parent should simply sign their house over to the children now, so it won’t be taken into consideration for means testing. That’s just not true.

Local authorities will actually look to see if you’ve ‘deliberately deprived’ yourself of an asset by giving property away, going back over any period in time.

Sometimes people think if the gif is made seven years prior then the house is safe. This is not so as the seven-year rule only applies to Inheritance Tax and not local authority care. The solution is for couples to simply not leave everything to each other in the first place.

Paul continues to explain:

“What my grandfather could have done is leave his half of the house in trust to his children, stating that they couldn’t have it while his wife, my grandmother, was still alive. We call these Property Trust Wills.

If my grandfather had left his half of the house in trust to the children then when my grandmother subsequently received care in her later life she would have only been means tested on her own half of the house, but my grandfather’s half would have been safe.

Why should he have to contribute his half when he didn’t receive any care?

The important factor is that couples need to act in advance. Once one party dies or loses mental capacity, through a stroke for example, they are no longer in a position to do this legitimate and straightforward type of planning.

It is therefore important for couples to act now even if they may not foresee care fees being an issue.”

Paul goes on to explain a further important point. Most clients he sees are surprised to learn that remarriage usually cancels a will and makes the new spouse next in line to inherit, ahead of their own children!

Protecting your half of the house in this way, he suggests, ensures that your children ultimately inherit when the survivor dies.

“Had my grandmother remarried after the death of my grandfather the whole estate could have passed sideways out of the family,” says Paul.

It’s another important reason for home-owning couples to upgrade to a Property Trust Will.

April King Legal are your local estate law specialists and have prepared a jargon-free guide to protecting your hard earned assets. Call for your free copy today. Your details will remain confidential and never passed to any third party.

These invaluable information packs also include details of Lasting Power of Attorney and our special Bloodline Trust Wills, which help prevent your children and grandchildren from losing their inheritance due to a child’s divorce, remarriage or financial difficulties.

The post How to Avoid the Dementia Tax appeared first on April King.

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Anyone can lose the ability to make decisions for themselves at any age, due to an accident or illness. If you own a business, what would happen if you lost mental capacity?

Generally if you lose mental capacity and you haven’t made a Lasting Power of Attorney, someone would need to apply to the Court for a Deputyship Order to act on your behalf. This is expensive and the applicant may not be who you would have chosen. The process can also be lengthy – typically taking between 3 and 6 months to complete. In the meantime, nobody can make financial decisions on your behalf.

Even if your bank account is held jointly with your spouse, it can be frozen until a Deputyship Order is produced. Business accounts can also be frozen, even where these are held jointly held in the names of business partners or directors.  With no funds, businesses in these circumstances can fail.

Having a Business Lasting Power of Attorney in place allows someone that you trust – someone who understands your business – to take over the day-to-day affairs as soon as they are needed. Your attorney might be given the power to pay suppliers and staff, access and manage bank accounts, invest assets, handle tax matters and enter into contracts.  Of course, you can limit your attorney’s power, but you need to ensure that the company can continue to operate with any limits in place.

Types of business

There are different considerations for business LPAs, depending on what type of business you have.

Sole traders

Sole traders run their businesses as individuals – the business is not therefore legally separate from the business owner. A business LPA will often be advisible  for a sole trader – indeed, the lack of an LPA exposes your business to unnecessary risk.

Partners (general partnerships and limited partnerships)

Partnerships will be subject to any Partnership Agreement, together with the provisions of the Partnership Act 1890 or the Limited Partnerships Act 1907. Partners need to consult their partnership agreement as this may contain provisions relating to the incapacity of the partners. Of note however, provisions removing partners who lack mental capacity may be in breach of anti-discrimination legislation. In order to manage a potential situation with a partner who lacks mental capacity and to reduce the risk of discrimination claims, the partners should each consider putting in place a Business Lasting Power of Attorney.

Limited liability partnerships are subject to the Limited Liability Partnerships Act 2000 and subject to many of the provisions of the Companies Act 2006. They often adopt Model Articles of Association. Members of an LLP should review their articles and remove any potentially discriminatory clauses. They may then wish to each appoint an Attorney using a Business LPA.

Company directors

Many companies use the Companies (Model Articles) Regulations 2008 which used to contain provisions allowing the removal of directors who lacked mental capacity. However, these were amended in April 2013. From this date, various provisions were removed from Schedules 1, 2 and 3 of the Articles by the Mental Health (Discrimination) Act 2013, including Paragraph 18(e) of Schedule 1 which stated:

“[A person ceases to be a director as soon as] by reason of that person’s mental health, a court makes an order which wholly or partly prevents that person from personally exercising any powers or rights which that person would otherwise have.”

However, although not expressly revoked, it is possible that attempts to remove a director who lacked mental capacity under Paragraph 18(d) of the Model Articles (and similar provisions contained in Schedules 2 and 3) would also fail if the grounds for or process of removal were found to be discriminatory. Paragraph 18(d) states:

“[A person ceases to be a director as soon as] a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months.”

Directors need to check their articles of association for similar clauses. In order to protect the company’s interest and avoid possible claims of discrimination, it makes sense for all Directors to execute a business Lasting Power of Attorney.

Some have claimed that individual directors cannot delegate their authority or authorise a proxy and often you will hear the New South Wales case of Mancini v Mancini cited in which it is stated:

“The office of a director is not a property right capable of being exercised by an attorney or other substitute or delegate of the person holding the office.”

However it is important to appreciate that this case is not an accurate representation of English, Welsh or Scottish law (nor Australian for that matter). Directors may amend their articles of association to include delegation authority by an individual director, if the articles do not already permit it.

Unless the director is a sole director, he/she cannot appoint an individual to be a director in his/her place without the board of director’s approval. However, if the rules of agency are applied, a principal (donor) is able to appoint a proxy (attorney) to make decisions on their behalf. This is not the same as appointing someone to be a ‘full’ director. When an LPA is used in a business context, the underlying principle is that the nominated attorney remains the agent1.

Actions for directors:

  • Check to see if your articles of association include delegation authority by an individual director. If not, you may wish to amend the articles by special resolution.
  • Check to see if any provisions of your articles may be considered discriminatory under the Mental Health (Discrimination) Act 2013 and amend by special resolution as necessary.
  • Consider whether all Directors should make a business LPA to protect the company’s interests.
  • If you are in any doubt, contact Jonathan Maskew at April King who will put you in touch with one of our commercial lawyers.
How do I make a business LPA?

Business LPAs are made on form LP1F (the same form used to deal with personal property and financial matters). They are made in much the same way as a personal LPA and the same rules apply, governing for example who can act as an attorney, the certificate provider, and witnesses.

An important point to note is that if you decide to make both a business LPA and personal LPA, each needs to contain instructions in Section 7 of the form limiting their scope – i.e.

  • The personal LPA should specify that your attorneys have general authority to act in relation to all of your property and financial affairs except for the relevant business, in respect of which you have executed a separate lasting power of attorney.
  • The business LPA should specify that your attorney’s authority is limited to your business.
When does the attorney’s authority end for a business LPA?

To answer this question, refer to Section 4 of the Mental Capacity Act 2005 which states that attorneys must:

“…so far as reasonably practicable, permit and encourage the person to participate, or to improve his ability to participate, as fully as possible in any act done for him and any decision affecting him.”

Attorneys must also consider the Code of Practice for the Mental Capacity Act 2005, particularly Section 7.52.

Q: Can I use the same person as my attorney for my personal financial LPA and business LPA?

You can use the same person as your attorney for your personal financial LPA and business financial LPA if you want to. However, in many cases, it will be inappropriate to appoint the same person to manage both personal and business affairs on your behalf. Capability, conflicts of interest, requirements of regulatory bodies, insurance and the partnership agreement or articles of association are just some reasons why this may not be possible or, indeed, advisible.

If you do intend to use the same attorneys for both personal and business regardless, you can just create a single LPA on one LP1F form.

If you are using the same form to appoint the same attorneys for both your personal and business matters, it is advisable to set out clearly that the form is intended to cover both. The Code of Practice for the Mental Capacity Act 2005 contains a list of the types of decisions that a property and financial affairs attorney might make (subject to any express restrictions made on the LPA form). Although the list is not exhaustive, it is indicative – and notably, the emphasis is on decisions that relate to your personal property and personal financial affairs, such as paying the mortgage and household expenses. Setting out expressly that the LPA is intended to apply to your business avoids any doubt.

Q: Can I just make one LPA and appoint different attorneys for personal finances and business finances?

No. Attempts by donors to appoint, on a single LPA form, different attorneys to make decisions regarding their personal and business affairs have been rejected by the Office of the Public Guardian.

What now?

This article is intended to provide a general overview and is not a substitute for professional advice. Call us on 08700 120 130 or email info@aprilking.co.uk for an appointment.

References

1 Craig Ward, MSc Solicitor, Business and commercial LPAs

The post Do I need a business LPA (Lasting Power of Attorney)? appeared first on April King.

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Some people choose to make a Letter of Wishes (or Statement of Wishes) to accompany their Will. A Letter of Wishes can deal with matters such as:

  • Explaining why certain family members have not been included as beneficiaries in your Will.
  • Explaining why unexpected beneficiaries have been included in your Will.
  • Providing a particular beneficiary with instructions on what to do with an asset (although keep in mind that the letter is not binding – it may be better to leave the asset in trust if it is crucial that your instructions are followed).
  • Providing guidance on how any funds held in a discretionary trust are to be used.
  • Leaving instructions for the guardians of minor children as to their upbringing, such as religion, education and residence.
  • Providing instructions as to funeral arrangements – such as burial or cremation, types of ceremony, music to be played etc.
  • Dictating how particular small/low value personal possessions (chattels) are to be distributed.
  • Suggesting particular tax management strategies (for example, explain that the Will was structured a certain way to minimise tax liability rather than to restrict or disinherit members of your family).

There are some important points to note regarding letters of wishes, as follows:

  • A Letter of Wishes is a flexible document – because there are no legal formalities, it can be changed or replaced as your circumstances or those of your family change.
  • You can write more than one Letter of Wishes i.e. addressed to different individuals.
  • It is important that your letter can be found and it is commonplace to store such letters with the Will.
  • The Letter of Wishes is not binding and so if it is important that particular personal possessions go to a certain beneficiary (particularly more valuable ones), this is best dealt with in your Will.
  • It is not advisable to have the Letter of Wishes witnessed (even if it deals with gifts of your personal possessions) as a witnessed letter could be viewed as a Will and cause substantial problems as a result.
  • The letter does not have to be disclosed to the entire family – however, it may need to be disclosed if someone challenges the Will, claims against your estate, in the Family courts in relation to a divorce or in some other circumstances.
Q: If my Will is challenged, will my Letter of Wishes be relevant?

If you use a qualified, experienced professional to prepare your Will, it is far less likely that it will be challenged – but no Will is completely immune from the possibility of a challenge (see our article ‘Is My Will Final?‘ for more details). In such circumstances, will your Letter of Wishes be of any relevance?

To answer this question, we will look at a couple of recent cases. First, consider the very well publicised case of Ilott v The Blue Cross in which a mother disinherited her estranged daughter and left the bulk of her £486,000 estate to three charities. The mother left a very strongly worded Letter of Wishes accompanying her Will which explained her decision not to leave her daughter any money. The daughter claimed against the estate under the Inheritance (Provision for Family and Dependants) Act 1975 and after multiple hearings, was left with a meager £50,000.

A further case heard in July, Nahajec v Fowle, similarly involved an adult daughter of working age who had experienced a long estrangement from her parent. Like the Ilott case, the daughter was in difficult financial circumstances – and like the Ilott case, the deceased left a note forcefully explaining his clear wishes that the daughter should not receive any provision at all from the estate. As with the Ilott case, the claimant received an award – in this case over 11% of the estate.

Given that the deceased person expressed unequivocally why they had not left any money to their estranged child, how could the Court come to such decisions? Surely in this country we have the freedom of testamentary disposition – i.e. the right to leave our property to whomever we choose?

It would seem to depend on how such wishes are expressed and whether those views are accurate and rational. In both cases the written wishes were shown to include inaccuracies and exaggerations which undermined them in the courts’ eyes. For example, in Ilott, the mother’s Letter of Wishes implied that her attempts to reconnect with her daughter failed due to the fault of her daughter. The District judge instead held that both sides were responsible for the continuation of the estrangement, whilst attaching the greater responsibility to the deceased.

Consequently Lord Hughes’s opening statement in Ilott, which emphasised freedom of testamentary disposition, may be qualified by his later comments that:

“…the reasonableness of the deceased’s decisions are undoubtedly capable of being a factor for consideration within Section 3(1)(g) [of the Inheritance Act 1975]”.

Section 3(1)(g) states that the Court may look at ‘any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant’. when reaching its decision.

Similarly in Nahajec judgment it was observed that:

“the fact that a deceased explained his reasons for leaving his Estate as set out in his will does not mean that the resultant provisions in the will are necessarily reasonable”.

Judge Saffman states of the note:

“It is also right to note that the note itself raises certain issues which detract from its significance and the extent to which it can be relied upon to controvert the claimant’s evidence … First, and perhaps least importantly there seem to have been some confusion on the part of the deceased as to how long it was since he had heard from his children… Secondly, and perhaps more importantly the note appears to have been premised on the contention that the children are ‘sufficiently independent of means not to require any provision from me’. Since it seems incontrovertible that the claimant who was not leading an extravagant lifestyle was only making ends meet by taking out loans, some of which were payday loans on the basis that was all she could get, it is difficult to see how this description could sensibly be applied to her.”

The lesson we can take from this is that care needs to be taken in writing a Letter of Wishes. If your letter focuses on the positive reasons why you have met particular beneficiaries’ needs, this will be more logical and convincing than if you offer personal and bitter explanations of why certain potential beneficiaries have been excluded. Ultimately inaccuracies and irrationally expressed wishes will weigh against you.

Always use a qualified, experienced professional to prepare your Will and advise you – get in touch with our team for a free meeting at one of our 29 offices or at your home address, without obligation. Call us on 08700 120 130 or email info@aprilking.co.uk.

Cases referred to:

Ilott v The Blue Cross, the RSPB, and RSPCA [2017] UKSC 17

Nahajec v Fowle [2017] EW Misc 11(CC)(18 July 2017)

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