Category: Personal

Why You Should Take Legal Advice When Making Your Will and LPA

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Why You Should Seek Professional Legal Advice for Your Will

Your will is one of the most significant documents you will ever create. It sets out your wishes for your estate after you are gone. To ensure it is properly written and legally valid, it is crucial to use a professional solicitor. DIY wills are more prone to errors, which can render them invalid, potentially causing significant complications. A solicitor will ensure that your will is executed correctly, giving you peace of mind.
Professional assistance is essential in drafting your will no matter your circumstances but particularly if you own property in the U.K. or abroad, own a business, have dependents outside your immediate family or you’re aiming to reduce your inheritance tax bill or have complex wishes.

Who Should Make a Will?

Everyone over the age of 18 should make a will, particularly if you have a partner, children, property, shared financial assets, or any other significant assets. Making a will gives you control over your legacy. You can choose an executor you trust to carry out your wishes.
Without a will, your assets will be distributed according to the Rules of Intestacy. This means you cannot choose your executor; one will be appointed for you, who may not act in your best interests.

Keeping Your Will Up to Date

It is important to regularly review your will with a solicitor to ensure it reflects your current circumstances. Significant life events, such as marriage, remarriage, having children, a family member’s death, or changes in inheritance tax laws, necessitate updating your will. This ensures it remains effective and honours your intentions.

Understanding Inheritance Tax

Inheritance Tax (IHT) is payable on estates exceeding the Nil Rate Band allowance—the amount you can leave tax-free. While everyone is subject to the Nil Rate Band, in 2017, the Government introduced an additional Nil Rate Band, subject to conditions:

1. You must have a property to leave to your descendants (children or grandchildren).
2. Your estate must be valued at under £2 million.

By consulting with a solicitor, you can ensure that your will is valid, up-to-date, and optimised to manage inheritance tax effectively.

Find out more about why you need a professionally drafted Will, with Dawn Pearce

 

Why You Need to Create a Lasting Power of Attorney with a Legal Professional

Creating a Lasting Power of Attorney with a solicitor ensures that the document is correctly drafted and legally sound. Solicitors provide professional advice tailored to your specific situation, helping you understand the implications of your choices. They also ensure that the document meets all legal requirements, reducing the risk of errors that could render it invalid.

Additionally, a solicitor can help you navigate the complexities of LPAs, including advice on selecting appropriate attorneys and understanding their responsibilities. By creating an LPA with a solicitor, you can have peace of mind that your affairs will be managed according to your wishes, without unnecessary delays or complications.

What is an LPA?

A Lasting Power of Attorney (LPA) is a legally binding document that enables you to appoint someone to act on your behalf when you are no longer able to do so yourself.

There are various reasons you might need someone to act on your behalf. In the short term, this could be due to a hospital stay where you need someone to manage your bills. Over a longer period, it might be necessary if you are diagnosed with a condition like dementia and need someone to take over your property and financial affairs.

Types of Lasting Power of Attorney

There are two types of LPAs:

  1. Property and Financial Affairs: This allows you to appoint someone to manage your finances, property, claim, receive or use your benefits, and handle your bank accounts.
  2. Health and Welfare: This allows you to appoint someone to make decisions on your behalf regarding where you live and your medical care when you can no longer make these decisions yourself.

If you have an Enduring Power of Attorney (EPA) document, you will need to create an LPA to ensure your wishes are upheld. EPAs stopped being issued in 2007 and were replaced by LPAs.

If you lose capacity and only have an EPA, the document must be sent off for registration with the Office of the Public Guardian, which can result in a lengthy delay before any action can be taken, during which your assets are frozen. With an LPA, registration occurs at the time of creation, ensuring it is ready for use whenever needed.

 

Get In Touch With Our Team Today

Ensuring that your Lasting Power of Attorney and Will are properly drafted and legally sound is crucial for safeguarding your future and the future of your loved ones.

Our experienced solicitors are here to provide expert guidance and support, ensuring your legal documents are tailored to your unique needs.

Don’t leave such important matters to chance. Contact the Wellers Law Group team today to discuss how we can assist you in creating a Lasting Power of Attorney and drafting your Will.

 

Find out more about LPAs with Dawn Pearce

Navigating Inheritance Tax Implications for Cohabitating Couples

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In a rapidly evolving social landscape, cohabitation has become a prevalent lifestyle choice for many couples. However, when it comes to inheritance tax, cohabitating couples often find themselves in a challenging situation when it comes to writing their wills and making them tax efficient.

Inheritance tax laws are typically structured to provide certain benefits and exemptions for legally married or civilly partnered couples. Unfortunately, cohabitating couples may not automatically enjoy the same rights and protections. As a result, the passing of assets from one partner to another in the event of death can trigger tax liabilities that may not be evident in traditional marital arrangements.

In many jurisdictions, married couples benefit from generous estate tax exemptions and the ability to transfer assets to a surviving spouse without incurring inheritance tax. Cohabitating couples, however, may face a different reality. Upon the death of one partner, the surviving partner could be subject to inheritance tax on assets that exceed the prevailing tax-free threshold (currently £325,000)

While cohabitating couples may face additional challenges, they are not without recourse. Strategic estate planning can play a pivotal role in mitigating tax liability and ensuring that a partner’s legacy is preserved. Utilising tools such as wills which include trusts can help cohabitants structure their assets in a tax-efficient manner.

Crafting a comprehensive and legally sound will is of paramount importance for cohabitating couples. A well-drafted will can outline the distribution of assets and provide clarity on the intentions of the deceased partner. Additionally, cohabitants should explore the inclusion of specific provisions to minimize tax exposure and enable the surviving partner to inherit without undue financial burden.

Cohabitating couples may consider strategic lifetime gifting as a means of transferring assets while minimising tax implications. By gifting assets during their lifetime, partners can potentially reduce the taxable value of their estate, thereby decreasing the inheritance tax liability for the surviving partner.

Understanding the nuances of inheritance tax is crucial for preserving financial legacies and safeguarding the interests of both partners. Cohabitating couples can take proactive steps, such as strategic estate planning, crafting comprehensive wills, and seeking professional advice in relation to cohabitation agreements, to navigate the challenges posed by inheritance tax. By doing so, they can ensure that their intentions are realised, their financial well-being is protected, and their loved ones inherit their assets as they intended in most tax-efficient way possible.

 

For enquiries relation to Tax Planning, please contact Naomi Augustine-Walker

By email: Naomi.Augustine-Walker@wellerslawgroup.com

By Telephone: 020 3831 2669

Gifts to Pets in Your Will

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In the realm of estate planning, one aspect that is often overlooked or not well-understood is the inclusion of provisions for pets in your will. Whilst pets are considered cherished members of many families, the law typically views them as property. As such, they require special consideration in your estate planning to ensure their continued care and well-being after your passing.

The first step in bequeathing a gift to your pet in your will is to clearly identify the pet or pets you wish to provide for. Include their names, species, and any distinguishing characteristics to avoid any ambiguity. This will help ensure that there is no confusion regarding your intent.

Selecting a trustworthy individual to care for your pet is crucial. This person will be responsible for your pet’s daily needs and ensure they receive the love and attention they deserve. Make sure to discuss your intentions with this person beforehand and gain their consent.

To support your pet’s care, you can set aside funds in your will. It’s advisable to specify a reasonable amount to cover food, veterinary care, grooming, and any other needs your pet might have. You can either leave a lump sum or establish a pet trust to manage these funds.

A pet trust is a legally binding document that outlines how the allocated funds should be managed for your pet’s benefit. This ensures that the funds are used exclusively for your pet’s welfare. Specify the trustee’s role, the duration of the trust, and how any remaining funds should be distributed after your pet’s passing.

Life circumstances can change, and it’s essential to revisit your will periodically to ensure that your pet’s needs are adequately addressed. If your designated “pet guardian” becomes unable or unwilling to care for your pet, it may be necessary to appoint a new caretaker.

Consulting with an experienced estate planning professional is advisable when including provisions for your pets in your will.

This article was prepared by Naomi Augustine-Walker, a private client solicitor in our London office. You can contact Naomi by email: Naomi.Augustine-Walker@wellerslawgroup.com or by telephone: 020 3831 2669 For our Bromley office please call 020 8464 4242 and for Surrey please call 01372 750100.

Capital Gains Tax – Changes to the Annual Exemption

Posted on by Aarti Gangaramani

What is Capital Gains Tax?

Capital Gains Tax (CGT) is payable on the disposal or sale of certain assets, this includes second homes, investment properties, art, antiques or shareholdings (held outside of an ISA or PEP).

In summary, CGT is calculated on the difference between the acquisition value of an asset and its sale or disposal value. This can also include gifted assets. The rates of Capital Gains Tax are either 18% or 28% on disposals of residential property and 10% or 20% on the disposal of other assets. Principal Private Residence Relief is available on the disposal of your main residence, making these disposals exempt from CGT. Entrepreneurs Relief is also potentially available on gains made on the sale of businesses charged to CGT.

Allowable expenses can also be deducted when calculating the tax due. One such allowance is the Annual Exemption Allowance (AEA). In April 2023 the AEA was reduced from £12,300 to £6,000 for individuals and personal representatives. The next tax year (2024/2025) will see a further reduction of the AEA from £6,000 to £3,000.

 

The Government had estimated that in this tax year (2023/2024) with the first reduction, circa 500,000 individuals and trusts could be affected by these changes to the AEA. By the 2024/25 tax year, the Government estimates that an additional 260,000 individuals and Trusts may be liable for CGT.

These changes have already had a significant impact on the administration of estates. The sale of houses, investments, shareholdings and other assets have all been affected. With further changes coming into place in the next tax year, estates where assets are sold at a higher value than the ‘date of death’ value and therefore subject to a CGT charge will be affected to an even greater extent.

Where CGT is not payable, where there is a gain of at least £50,000 there is still a requirement to report this to HMRC.

The reduction in the AEA together with the Government’s plan to halve the dividend allowance is expected to raise over £1.2 billion a year from April 2025. With the limit for Entrepreneurs Relief being reduced from £10 million to £1 million in 2022, CGT is set to be a big earner for the Government, widening the net of individuals, trustees, personal representatives and business owners who will need to consider its implications. Those who will now be subject to CGT need to be aware of how it may affect them and take appropriate advice.

 

For enquiries relating to Capital Gains Tax Changes, please contact Aarti Gangaramani.

By email: aarti.gangaramani@wellerslawgroup.com

By phone: +44 (0) 20 7481 6386

Misconceptions about Lasting Powers of Attorney

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A recent survey carried out by Which? has revealed that, although most of the public understand what a Lasting Power of Attorney is, there is some confusion as to how the documents operate.

A Lasting Power of Attorney (LPA) is a document that allows a person, called the Donor, to appoint a person or persons (Attorneys) to stand in their shoes when making decisions relating to their finances and health.  I have seen for myself there is a common misconception that if a person has a Will, there is no reason to worry about a Power of Attorney; this is not the case.  A Will only takes effect on one’s death, whereas an LPA will provide support for a person who is still alive but has become physically or mentally incapable.

The powers under an LPA can only be granted by a person who has the mental capacity to make their own decisions, and as such, the Donor may have to consider preparing an LPA before it is needed, as it could be too late to do so afterwards.  If a person has already lost the capacity to make their own decisions, the only option will be to make an application to the Court of Protection to be a Deputy; this process is considerably lengthier and more expensive than the process for preparing an LPA.

An LPA must be registered before it can used.  16% of those surveyed by Which? believed that once this registration has taken place, the Donor will lose access to their assets, but this is also not the case.  Registration of an LPA does not raise any presumption that the Donor has lost capacity, and in fact, as the registration process can take several months, it is usually wise to register the LPA early to ensure that it is available should it need to be used. There are two types of LPA.  The first is for Property and Financial Affairs, and deals with all financial matters such as accessing bank accounts and settling invoices.   When completing a Property and Financial Affairs LPA the Donor has the option to decide when their attorneys can step into their shoes or choose to wait until they have lost capacity. The latter option requires evidence from a professional that capacity has been lost and therefore can involve additional expense and take longer to organise which is an important issue if the Donor has bills to pay such as care home fees.

The second is for Health and Welfare, and deals with matters such as where a person lives, medical decisions and life sustaining treatment.  The welfare LPA can only used if the Donor has become mentally incapable.

There are several options as to how Attorneys can be appointed, and a Donor must give this careful consideration.  For example, primary Attorneys can be appointed, with replacements to act if those named first are unable or unwilling to fulfil their duties.  And where multiple Attorneys are appointed, they may act jointly, so they must make every decision together, jointly and severally so that they can act independently of one another or jointly in some respects and jointly in severally in others.

An LPA is a powerful instrument, and it is important that the public are aware of the options available to them should they be concerned about the management of their affairs; particularly that the document must be prepared before it is needed!

Please call us on 020 8464 4242 if you would like advice on preparing a Lasting Power of Attorney.

 

Buying property together and the importance of clearly identifying beneficial ownership

Posted on by Wellers

Whether you are partners buying your first home together or investing with family and friends in the purchase of a property, it is incredibly important that you identify how you intend to own the property from the outset. Normally, you will be asked to complete a form known as ‘TR1’. This is the transfer deed and within it, is contained a declaration of trust which identifies how the purchasers intend to own the property. Purchasers can elect to own the property jointly or as tenants in common in equal or unequal shares.

Caught up in the excitement of the transaction, purchasers can simply tick a box without understanding or giving due consideration to what they are actually ticking and agreeing.

The transfer deed will be the starting point for identifying the purchasers’ intended beneficial ownership. If either party seeks to argue otherwise, he or she will have to produce strong evidence to convince the court that what they had stated in that deed was not their true intention.

In the recent Court of Appeal case of ‘Ralph v Ralph’, Mr David Ralph (father) failed to obtain an order for rectification of a transfer deed based on common mistake.

The facts

In October 2000, David was unable to get a mortgage to buy a property and he asked his son, Dean Ralph, to assist him. Dean obtained a mortgage against the property and David paid the balance of the purchase price. The property was transferred into their joint names and box 11 of the TR1 form which deals with declarations of trust, had been ticked to indicate that the purchasers intended to own the property as tenants in common in equal shares. The TR1 form was only signed by the transferors.

The Court of Appeal considered the findings of the lower courts and found that they had been incorrect to allow the TR1 to be rectified but they accepted that the trial judge had found on the facts that there had not been a continuing common interest as to the split in the beneficial ownership of the property.

The Court of Appeal acknowledged that, since the parties had not discussed their intentions at all,  rectification was not possible. For rectification to be available, the parties’ needed to have discussed their intentions at the very least.  In the absence of any discussion as to intention, the Court could not order rectification for common mistake.

Points to note

A party seeking rectification of a document based on common mistake needs to prove that a common intention existed between the parties for a mistake to have occurred. If the party is unable to demonstrate common intention, then the court cannot rectify the document.

This case illustrates why joint purchasers need to discuss and identify how they intend to share their beneficial interest in the property before completing the TR1 form. It is also good practice for conveyancing solicitors to check that the purchasers have understood the significance of the TR1 form and have signed it.

Upon the death or insolvency of a joint owner or following the breakdown in a relationship, many clients find themselves in protracted litigation seeking to prove their beneficial interest in a property. The solicitor instructed to advise on the purported claim to beneficial ownership, will always consider the prospects of any claim by referring back to the conveyancing file and the declaration of trust specified in the TR1. What they find will often mean the difference between a strong or weak claim.

If you need assistance

Whether or not you intend to sell your property soon or in the future, it is worth checking how and if your interests in a property have been recorded. It is better to fix any problems now by having a new declaration of trust drawn up rather than wait for a dispute to arise. If you find yourself in dispute about your interests in a property  and  you require legal advice or guidance in either bringing or defending a claim, please contact Patricia Wollington in our London litigation team on 020 7481 2422 or email patricia.wollington@wellerslawgroup.com or call 020 8464 4242 for our Bromley team.

Your Will at separation or divorce

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A divorce or separation is a very time consuming and emotionally taxing circumstance. The last thing you would want to do in this situation is worry about whether your Will is up to date.  However, not considering your Will could end up being rather costly to you and your intended beneficiaries.

It is common for spouses to be an executor and main beneficiary of each other’s Wills. So when you decide that the relationship is no longer working, it is likely that you will no longer want your spouse to benefit from your assets in the event of your death or be in charge of them. Accordingly, your Will would need to be reviewed as soon as you have made the difficult decision to part ways.

A divorce is not considered as valid until a decree absolute is granted. Should anything happen to you during the interim, your old Will remains valid and your estate would be administered accordingly. This means that your ex-spouse can still inherit from your estate.

A separation has no legal status without a court order. It also doesn’t invalidate your Will. A divorce also does not invalidate an existing will.  If the previous Will remains unchanged following a divorce, any gifts to your ex-spouse will fail but this does not necessarily mean that all unwanted consequences are avoided. The assets in your Will intended to originally pass to your ex-spouse may be governed by intestacy rules which may conflict with how you would have wished these assets to be distributed. Furthermore, if your ex-spouse was the named executor of your estate or one of them, this may mean that you are left without an executor and left to the law to decide who will be responsible for your assets. .

We would therefore strongly recommend that you put a review of your Will at the top of your to do list if you do find yourself amidst a martial dispute.