What gifts qualify for exemption or relief from inheritance tax? This article explains the rules on gifts and exemptions for inheritance tax. What are the current inheritance tax rates? Inheritance tax (IHT) is the tax that is paid on someone’s estate when they pass away. All money, property and personal possessions form part of a person’s estate. The value of the estate will determine whether any IHT is payable. The current rate of IHT is 40% and is only charged on the part of the estate that is above the threshold, also known as the nil-rate band . Everyone has a nil-rate band which is currently set at £325,000 until 5 April 2028. For example, if you left an estate worth £650,000, the first £325,000 would be tax free and the remaining £325,000 would be taxed at 40%. If you own a property on your death, your estate can also benefit from the residence nil-rate band if ultimately the property is being left to your direct descendants, such as children or grandchildren. The residence nil-rate band is currently £175,000 . This means, your own personal threshold could increase to £500,000. Using the above example again, if this was the case, the first £500,000 would be tax free and then only the remaining £150,000 would be taxed at 40%, limiting the IHT bill. There is a reduced rate of IHT at 36% instead of 40% if the deceased had left over 10% of the net-value of their estate to charity(s) in their will. How much can you give to a spouse or civil partner tax-free? If you are married or in a civil partnership, you can pass your entire estate to your surviving spouse or civil partner, tax free when you die. This means the surviving spouse can inherit your whole estate without having to pay any IHT. You can also pass any unused nil-rate band or residence nil-rate band to your surviving spouse or civil partner on death. If you did not use any of your nil-rate bands, your spouse or civil partners could essentially be topped up by 100%, leaving them with a nil-rate band of £1 million when they pass. There is no IHT payable on gifts to a spouse or civil partner during your lifetime, so long as they are living permanently in the UK. You can also make as many as you wish.  What gifts qualify for exemption or relief from inheritance tax? Annual exemption Everyone has an annual exemption of £3,000, meaning you can give away a total of £3,000 worth of gifts each year, whether to one person or split between multiple people, without them being added to the value of the estate. You can carry an unused annual exemption forward for one tax year only.  Gifts worth less than £250 You can give as many ‘small gifts’ up to £250 as you want each tax year, so long as you have not used another allowance on the same person. Weddings and civil partnerships Each year, you can give to someone who is getting married a tax-free gift, up to the value of: £5,000 to your child £2,500 to your grandchild £1,000 to anyone else This can also be combined with your annual exemption. For example, you could gift your child £8,000 for their wedding and it be tax-free, if you used your wedding gift allowance of £5,000 and your annual exemption of £3,000. Charities To encourage more people to leave donations to charity in their will, any gifts to a qualifying charitable body are exempt from IHT. This also applies if they are gifts made during your lifetime. As mentioned above, if you leave over 10% of your net-estate to charity, your IHT rate will also be reduced to 36% for the remainder of your taxable estate. Agricultural property You can pass on agricultural property, either during your lifetime or as part of your will, without having to pay IHT, but only if it meets certain conditions. Agricultural property that qualifies for exemption of IHT is ‘ land or pasture that is used to grow crops or to rear animals’ . However, farm assets are not free from tax, such as farm equipment and machinery, livestock, derelict buildings or harvested crops. In order to qualify, you must also have owned the land and occupied for agricultural purposes immediately before its transfer or, 2 years if occupied by the owner, a company controlled by them or their spouse or civil partner, or 7 years if occupied by someone else. Business relief Any ownership of a business or share in a business is included in your estate for IHT purposes. However, your executors can apply for business relief of either 50% or 100% on some of an estate’s assets which can be passed on, provided the deceased owned the business or asset for at least 2 years before they died. Pensions Pensions can be passed on to your beneficiaries without any IHT becoming due. If you pass away before the age of 75, your beneficiaries won’t have to pay any tax at all. If you pass away over 75, your beneficiaries at most will pay their own marginal rate of income tax. What is a potentially exempt transfer (PET)? A potentially exempt transfer (PET) allows an individual to make gifts of unlimited value which will become exempt from IHT if you survive for 7 years after making the gift. If you don’t survive the 7 years after making the gift, the gift will still form part of your taxable estate, but taper relief may be available depending on when the gift was given. Gifts could include money, property or land, stocks or shares, and personal possessions. Gifts given up to 3 years before your death are taxed at the normal 40%. Gifts given between 3-7 years before your death have the benefit of taper relief at the following rates: Period before death IHT rate 3-4 years 32% 4-5 years 24% 5-6 years 16% 6-7 years 8% 7+ years 0% If you gave away a gift, but still have an interest in it, for example you gave your property to your child but continued to live there rent free, the house would still be considered as part of your estate and chargeable to inheritance tax.

Debunking some of the most common myths surrounding IHT, including gifts, property and assets abroad. What are the current inheritance tax rates? Inheritance tax (IHT) is the tax that is paid on someone’s estate when they pass away. All money, property and personal possessions form part of a person’s estate. The value of the estate will determine whether any IHT is payable. The  current rate of IHT is 40%  and is only charged on the part of the estate that is above the threshold, also known as the  nil-rate band . Everyone has a  nil-rate band  which is currently set at  £325,000  until 5 April 2028. As everything above that threshold is taxed, larger estates can be subject to a substantial bill. Whilst there are planning strategies individuals can take to mitigate their tax liabilities, such as lifetime giving and post-death planning, the area of IHT is highly complex, with the rules governing it often causing confusion. Inheritance tax myths #1 “Only the very wealthy pay IHT” With current IHT thresholds, for a married couple with children who own a house worth £350,000, there is a combined IHT threshold of £1m.  There are tax mitigation strategies available, especially for individuals who own trading businesses and farmland. High net worth individuals can often set up their personal planning to utilise IHT reliefs, combined with an ongoing plan for gifting. However, for individuals owning over £500k, or couples owning over £1m in assets or property such as buy to let, then there is potential inheritance tax liability.  This is especially so where the major asset is the home or with assets that produce an income upon which the owner relies on to maintain their standard of living. In these situations, it can be quite difficult to gift assets as this can result in insufficient income or capital gains tax liabilities on gifting assets. Therefore, IHT liabilities often occur on the middle band of individuals whose estates exceed the IHT thresholds but without sufficient assets to justify the next level of IHT planning to mitigate their IHT liability. #2 “A property can be gifted, meaning no tax will be payable on it” A popular IHT planning strategy is to make gifts of assets. Where the asset is a property other than the main house, any gift will be a disposal for Capital Gains Tax (CGT) purposes, so a straight gift will often trigger a CGT liability. The interaction between IHT and CGT is key to IHT planning, as potential CGT liabilities are one of the most common issues preventing the gifting of property. In certain circumstances, the use of discretionary trusts which qualify for CGT holdover relief can help to postpone any immediate CGT liability, but that can tend to move the potential CGT liability further down the line rather than eliminate it altogether. It is also important to be aware of the reservation of benefit rules and the seven-year clock in relation to gifts. Generally, for a gift to be effective for IHT purposes, the person making the gift must survive by seven years. Also, they cannot continue to benefit from the property they have given away as, if they do, the asset will continue to be treated as part of their estate for IHT. For example, if a mother decides to give her house to her children and continued to live there, this would not be effective for IHT purposes. However, this could be overcome if the mother paid a full open market rent to her children. #3 “IHT only applies to property” IHT applies to all assets including someone’s: home cash savings investment portfolio property IHT reliefs are available against certain assets, such as an interest in a trading business or farmland, subject to certain criteria. The main asset which doesn’t attract IHT is someone’s pension fund. The recent pension changes announced in the last budget removed the lifetime allowance thresholds, providing an opportunity to add more assets to a pension fund. However, if someone draws on their pension fund, such as taking their 25% tax free lump sum, that can have the effect of bringing those assets back into their estate and potentially make them subject to a charge to IHT on their death. #4 “Assets abroad are not counted for UK IHT” UK IHT is payable by people domiciled in the UK (subject to some complicated tax rules on domicile) on their worldwide assets, not just UK assets. For example, foreign holiday homes are an asset subject to IHT on a UK domiciled individual. There may also be a tax liability in the country where the asset is located but there a number of Double Taxation Relief treaties with foreign countries to stop the same assets being taxed in both the UK and a foreign jurisdiction.

Following the launch of a government consultation , this article sets out some key considerations regarding the future of the storage and retention of original wills. What is the current legislation around the storage of wills by courts? Individuals and charities may wish to have access to a copy of an original will to find out whether they are a beneficiary or to challenge the validity of a will. Creditors may also wish to do so to protect their rights. Section 124 of the Senior Courts Act 1981 confirms that: ‘All original wills and other documents which are under the control of the High Court in the Principal Registry or in any district probate registry shall be deposited and preserved in such places as may be provided for in directions given in accordance with Part 1 of Schedule 2 to the Constitutional Reform Act 2005; and any wills or other documents so deposited shall, subject to the control of the High Court and to probate rules, be open to inspection.’ In practice, this means a will remains private and confidential until it has been ‘proved’ by applying for a grant of representation . Where a judge or probate registrar finds it ‘undesirable or inappropriate’, the request for a copy would not be granted. The legislation also states that copies of a will may be obtained from HM Courts and Tribunals Service (HMCTS) upon payment of the fee.  The current legislation, requiring original wills to be ‘open to inspection’, has resulted in HMCTS storing wills which date back to 1858, when the Principal Registry was established. The following issues are associated with the current system: high storage costs, which increase each year as more wills are added, estimated by the Ministry of Justice to be in the region of £4.5 million per annum practical considerations, such as finding a secure storage space to store the original documents storage services are outsourced, adding to costs What are the proposals for the future of will storage? In December 2023, a consultation was commenced by the Ministry of Justice in relation to the storage of wills, which is open until 23 February 2024. There is currently no time limit on how long original wills can be held by the courts. The consultation questions whether the current rules should be amended. The proposals for future will storage are to make the system ‘more economic and efficient’. The consultation is seeking views on whether original wills should be held for a fixed period and whether to move to digital storage. Considerations for storing wills for a fixed period of time: The length of the fixed period will need to be discussed as part of the consultation. The proposal is for original wills to be stored for a fixed period and electronic wills could be stored indefinitely. The government suggests 10 to 12 years. The length of time a will could be stored will be relevant for any challenges to a will. To provide an example of the current storage limits, probate application forms are retained for two years, however, divorce papers (Decree Nisi/Absolute) are retained for 100 years. Considerations for electronic storage: Wills can be stored permanently. This will allow wills to be open to inspection, in accordance with the Senior Courts Act 1981. Electronic storage would reduce storage costs. Making and retaining digital copies of wills has been done since 2021 (as well as retaining the original). It could modernise the system. It could make the system faster than physically searching storage for an original will. People may prefer keeping a physical original will. The government considers there is equivalence between paper wills and digital copies, however, the consultation will be seeking views on this. The consultation is open to suggestions on exceptions, where original wills could be stored indefinitely. An example could be the wills of historical and famous people, as they may be in the public interest. However, the consultation requests feedback on this.   The proposal is that these alterations could be enacted by amendment to the Electronic Communications Act 2000 to allow electronic copies of wills to be stored or by primary legislation. Primary legislation would take longer, however it would allow debate and scrutiny of the proposal. This is another question in the consultation.  The consultation queries whether the current legislation relating to the storage of wills is satisfactory or whether it should be reformed.

After the loss of a loved one, the responsibility of being appointed an executor can feel overwhelming. As a result, many may consider the convenience of pre-paid probate plans. However, they do come with significant risks. Article, looks at the risks of pre-paid probate plans. What is pre-paid probate? Some companies in the UK are offering their clients a service where they can pay a set amount which covers all the fees and work associated with carrying out the probate process after they have passed away. Fees are usually based on a percentage of the value of that individual’s estate at the time the plan is taken out. What are the biggest risks associated with pre-paid probate plans? At first glance, pre-paid probate plans may seem like a practical way to ease the future burden on loved ones. However, these plans often come with hidden dangers that could cause more harm than good. Firstly, there are no stringent qualifications required for selling pre-paid probate plans. Quite often, the plans are sold without delving deeply enough into the assets and estate of the individual taking out the plan. Estates can change significantly over time. What may start as a modest estate could grow or become complicated due to unforeseen circumstances. A company offering a fixed-fee probate service decades in advance may not be equipped to handle these changes, leading to potential shortfalls or delays. There is also a lack of transparency of how the funds paid up front are going to be held. Some firms are guaranteeing that funds will be ringfenced or held in a client specific account or trust until they are needed, but there is very little proof of this. The collapse of Safe Hands, a company that sold pre-paid funeral plans, serves as a cautionary tale. Many customers lost their money without receiving refunds when the company went into administration. This highlights the potential vulnerability of funds invested in pre-paid probate plans. All of the above is made more worrying by the fact that the target for a lot of these plans are vulnerable and elderly people. Marketed in the right way, pre-paid probate can seem like the perfect solution for somebody wanting to ease the burden on their family after they pass away, with the risks downplayed or not disclosed at all. What has been the response from industry professionals and organisations regarding pre-paid probate plans? Many industry professionals are arguing for regulations to be put in place for the selling of pre-paid probate. Big names in the industry such as STEP and The Legal Services Board have all shared their thoughts condemning pre-paid probate. Most recently, in June 2023, the Competitions & Marketing Authority (CMA) launched an investigation into will writing and other legal services. During that investigation, they have highlighted pre-paid probate as an area of concern. Has there been any regulation introduced for similar services? The Financial Conduct Authority (FCA) now regulates pre-paid funeral plans in order to increase standards and increase consumer protection. As of July 2022, the FCA authorises reliable companies in the selling of this service, meaning that any companies who do not comply with their regulations are not authorised to sell them. Some of the regulations introduced include looking after client’s money, bans on cold calling and introduction of a register of approved firms. Many of the reasons for this being input ring-true with the risks posed by taking out a pre-paid probate plan. Customers of failed pre-paid funeral plans now have a safety-net, but that luxury is not yet being afforded to pre-paid probate customers. However, at WWW, we are committed to representing reliable and qualified professionals who are covered by the Best Foundation Client Guarantee and to giving consumers a space to find them and chose an estate planning professional who is right for them.

A recent survey by the charity will-writing scheme, Will Aid, identified that more than half of UK adults have yet to make a will. Article explains how those who die without a valid will may end up leaving their loved ones with little control over their assets, and potentially open to costly legal challenges and delays in sorting out the estate An executor is the person (or people) you nominate in your will to manage your estate after your death. Therefore, it follows that if you do not have a will, you are unable to choose who is going to administer your estate. In that event, without a will, your estate will pass in accordance with the laws of intestacy, and who is able to administer your estate is also governed by the intestacy rules.  Nonetheless, there remains a strict order of who benefits from the estate depending on family circumstances, and the right to manage the estate falls in accordance with this. What issues can arise from dying intestate? The person who is legally first entitled to act as administrator may not be willing or able to do so, due to age or ill health, such as an elderly spouse or parent. In this case, steps will need to be taken to pass on the right to manage the estate. You have to be 18 years or older to act as an administrator (the person who administers an estate without a will). In the event of minor children, who, but for their age, would be entitled to act, then the person with parental responsibility for the minor(s) would be entitled to take out the grant on their behalf.  If you have a partner but are not married, or are in a civil partnership, your partner has no right to manage the estate and no entitlement under the laws of intestacy, even though they may be exactly the person you feel would be best placed to know your wishes. If there is no close family it may be difficult to trace the person entitled to act, let alone gaining their agreement to take action, causing delays. If there is more than one person at the same level of entitlement to manage the estate, they may disagree over who should act if they do not wish to act together, causing disputes. There can be delays in making funeral arrangements, securing your property and other assets, and settling debts, if it is not clear who should be dealing with such matters.  Other inheritance issues to consider: If you have no family who can inherit under the rules, the estate passes ‘bona vacantia’ to the Crown, and the Treasury Solicitor will have control of the management of your estate. Friends, unmarried partners, or partners not in a civil partnership, carers, relatives by marriage and charities whom you may wish to benefit from your estate will not. Family members who you may not have wanted to have control of, or to benefit from, your estate may end up doing so. Partners or dependants may need to submit a claim for reasonable financial provision from your estate pursuant to the Inheritance (Provision for Family and Dependents) Act 1975. Reasons for having a will: You can choose who manages your estate: Making a will allows you to choose who manages your estate and, if they agree to act, you can speak to them in advance about any priorities or concerns, thus ensuring that your estate is managed in the way you would want. You can opt for a legal professional to act as an executor if you prefer: Making a will means you can appoint a legal professional to act as your executor if you feel an independent professional would be more appropriate for your particular circumstances. Changes to the laws of intestacy: The intestacy rules governing who benefits from the deceased’s estate changed in 2014. These changes were intended to make the distribution of assets more transparent and more in line with the public expectation of how an estate should be divided. As one might expect, spouses, civil partners and children are all first in line to inherit (there is a prescriptive approach to who gets what), followed by other close relatives in descending order of blood relationship. Overall, the only reason why someone would actively choose not to make a will is if they genuinely had no interest at all in who inherits their estate. In practice, very few people actually fall into this category, but there still exist too many myths (and a degree of superstition) around making a will. We all need to stop and think – who do I want to inherit my assets when I die? Once the question has been answered, the solution is very straightforward.

When someone dies, their executors or administrators (collectively, personal representatives) are required to ingather assets, settle debts and inheritance tax if applicable, and distribute the net assets to the estate beneficiaries. Confirmation in Scotland, or  probate in England and Wales, is the process by which the validity of the deceased's will (if one exists) is proved and the executors' legal authority to uplift and distribute the deceased's assets is confirmed by the courts. While there are similarities between the processes north and south of the border (including the current inheritance tax regime), there are many procedural differences. Here, we look at some of the main differences between the two jurisdictions. The courts Probate is an order of the high court. Since 1971, the family division of the high court has exercised jurisdiction to make grants, though the chancery division and the county courts have certain powers. In Scotland, confirmation is granted by the commissary department of the local sheriff court, or by the Edinburgh sheriff court. Testate or intestate If someone dies leaving a valid will, they are said to be testate. If they do not, they are intestate. In Scotland, confirmation is granted, if a grant is required at all, regardless of whether the deceased died testate or intestate (though an executor must be appointed through the courts first for intestacy). In contrast, there are three types of grant in England and Wales, depending on the validity of the testamentary writings left by the deceased: probate letters of administration with will annexed simple administrationrests, and those of your business, you should consider making a business LPA.  Intestacy It should also be noted that the rules governing the distribution of an intestate estate (which would follow the grant of confirmation/administration) differ significantly between the two jurisdictions. Executors/administrators In Scotland, those responsible for administering the estate are usually just referred to as executors (but technically, they are either executors-nominate if appointed by will, or executors-dative, if appointed by the courts). In England and Wales, those responsible can be executors or administrators, depending on which type of grant is obtained. Age of executors/administrators In Scotland, executors must be age 16 or older to act as an executor. In England and Wales, the age at which a person can obtain a grant is 18. Number of executors/administrators In Scotland, there is no minimum or maximum number of executors who can obtain confirmation. In contrast, a maximum of four people can take a grant in respect of the same asset in England and Wales, and a minimum number of administrators may be required in certain situations. Power reserved/double probate Powers may be reserved when a grant is made in England and Wales. For example, if an executor does not wish to take the grant, but they do not wish to renounce office, or if an executor is under 18 at the time of the grant, the grant will be made to the other representatives, with power reserved to that individual who may take a grant later. If a grant is subsequently taken, this is known as double probate . There is no such concept in Scotland. If an executor does not wish to be part of the grant of confirmation, they must decline to act or renounce office beforehand. Limited grants In England and Wales, grants may be general, or they may be limited in time, to part of the estate or for a specific purpose. This is not the practice in Scotland. Forms In Scotland, confirmation forms C1 and C5 are used, as well as the fuller inheritance tax forms. In England and Wales, the equivalent forms are PA1 and IHT205 . Oath Every grant in England and Wales must be supported by an oath, which must be sworn (or affirmed) by those seeking the grant in the presence of (usually) an independent solicitor. In Scotland, there is no such procedure, though one of the executors must sign a declaration on behalf of all of the executors, declaring that the content of the confirmation forms is accurate to the best of their knowledge. Bonds of caution Where a deceased dies intestate in Scotland, the executors may have to obtain a bond of caution (pronounced kay-shun ), which is a type of insurance policy, before confirmation may be obtained. There is no such requirement in England and Wales. Statutory provisions ensure that grants of confirmation are recognised in England and Wales and grants of probate are recognised in Scotland, but it is important to identify which succession laws will apply from the outset, and to seek professional advice in the correct jurisdiction.

Explaining the reasons why a will may be altered post-death. To have peace of mind that your affairs will be managed in accordance with your wishes when you die, you should have a properly drafted will in place.   But even when such a document has been prepared, unforeseen circumstances may require your will to be altered after you have died. Typically, this will be by way of executing a deed of variation. Variations can also be made where there is no will and the beneficiaries (under the intestacy rules) agree between them to vary the distribution of assets.  What is a deed of variation? A deed of variation is a document that allows a beneficiary of an estate to alter their entitlement from that estate (such as land, a share of the residuary estate or cash). The deed allows the beneficiary to redirect their entitlement to another person, without suffering any tax consequences.  The effect of the deed is that the terms of the document are regarded as being written back into the will, as if the new gift had, in fact, been made by the deceased.  What are the requirements of an effective deed of variation? In order to be effective for inheritance tax purposes, a deed of variation must: be made within two years of the death be signed by all beneficiaries who ‘lose out’ as a result of the variation clearly identify the part of the estate being varied and who is to benefit from the variation include in a prescribed form a statement that the beneficiaries intend the variation to be effective for inheritance tax and/or capital gains tax an application to the court for consent if the beneficiaries are under 18 When might it be necessary to vary a will? There are a number of occasions when the option of altering a will post-death may be helpful: If there is a dispute/claim as to the validity of a will It may be that there is a dispute as to whether a will is valid. For example, it may be alleged that when the will was made, the testator did not have the required mental capacity , did not understand the nature and effect of the will, or was subject to undue influence. If a claim of this nature is successful, it would result in the will being invalid.  Given the stress, cost and delay caused by litigation, the parties may wish to achieve certainty and a swift conclusion by reaching a settlement between themselves. Such a settlement can be recorded within a deed of variation.  A claim under the Inheritance (Provision for Family and Dependants) Act 1975 The act allows certain categories of person to claim against an estate where a will, or the intestacy provisions, are claimed not to make reasonable financial provision for the claimant. If such a claim is successful, or the parties are able to achieve an amicable solution, the new arrangements can be recorded in a deed of variation. Reduce the amount of inheritance tax payable A person receiving assets under a will who is already subject to higher rate tax may wish their entitlement to pass elsewhere, as doing so could be more tax efficient. For example, a beneficiary of an estate who is a higher rate tax payer may decide to pass their inheritance to their children outright, or potentially into a discretionary trust for their benefit, in order to avoid the funds being taxed at 40 per cent. While the beneficiary could receive the monies and make gifts, if they were to die within seven years of the date of those gifts, their value would be taken into account when calculating the inheritance tax on their estate.  Being able to pass assets on to the next generation, or to others who are in greater need of funds, may ultimately be more tax efficient. And it may be desirable to redirect assets that qualify for relief from inheritance tax from an exempt beneficiary to a non-exempt beneficiary, to prevent the relief from being wasted. For example, if there are assets qualifying for agricultural relief , and these passed to a spouse as part of the residuary estate, then the agricultural property relief will not apply, because the beneficiary is already exempt from inheritance tax. It may be more efficient for the asset to pass elsewhere.  Possible capital gains tax saving If there is an asset that has risen in value dramatically since the date of death, it could be transferred to a beneficiary with a significant capital loss, meaning that there will be minimal capital gains tax on the disposal.  What are the advantages of a deed of variation? The chief advantages spring from the retrospective treatment, ie from death, of the variation. It is this that can make it an effective form of estate planning.  It also allows a beneficiary some say in redirecting their entitlement. An alternative for a beneficiary who does not want to benefit from an estate is that they can disclaim their interest, ie refuse it completely. To be able to do so, they must not have accepted any benefit from it before disclaiming. It also means that they have no control over who should receive the benefit in their place.  The will may say what will happen if a gift is disclaimed. If it does not, the property will be returned to the estate. If the gift was a pecuniary or specific legacy, it will fall into the residuary estate. If it is a gift of residue, it will fall under the intestacy rules.  It is always best to make a properly considered will and to seek to mitigate tax liability prior to death, where possible. However, it may be that a deed of variation could be a useful tool in seeking to resolve issues that arise after someone has died.  Bear in mind that if a will is varied with the intention of avoiding care home costs, the local authority can ignore the variation when making its assessment. In addition, there is no guarantee that deeds of variations will not be abolished in the future , given that they are used in the main to achieve tax savings for beneficiaries.

Explaining that to protect your interests, and those of your business, you should consider making a business LPA.  What is a lasting power of attorney? A lasting power of attorney (LPA) is a legal document through which you authorise a chosen person (an attorney) to make certain decisions on your behalf.  The decisions that you authorise your attorneys to make can be either in relation to your finances, for which an LPA for property and affairs will be created, or in relation to your personal life, where an LPA for personal welfare will be created. An LPA is a very important document, as it ensures continuity in the management of your life and your finances, should you become unwell or lose the capacity to make decisions. Perhaps you feel that an LPA is not necessary, and assume that family members can step in, when necessary, to make decisions. But this is not the case; family members do not have the automatic right to make decisions on your behalf.  LPAs for business As a business owner, it’s important to consider what would happen to your business if you were unable to make decisions. This may be if: you were abroad on holiday or for business you were to have an accident you were to have a medical condition that incapacitated you In such circumstances, who will authorise the payment of bills, sign cheques, service a business loan or pay salaries? Don't assume that a family member or a business colleague will gain the authority to make these decisions on your behalf – this assumption could leave your business exposed to risk.  To protect your interests, and those of your business, you should consider making a business LPA.  Is a business LPA right for me? A business LPA will be appropriate in most circumstances, but it’s important to first consider the type of business you own.  Sole trader If you are a sole trader, your business is not likely to have a separate legal entity from you. This means that appointing an attorney under a business LPA will be an effective way for you to make provision for the continuity of your business, in the event that you are incapacitated.  Partnerships If you are a partner in a partnership that has several partners, check the terms of the partnership agreement. Some partnership agreements may already include provision for what would happen should one of the partners become incapacitated. If such a provision exists, it may already adequately provide for the continuity of the business, in which case, a business LPA wouldn’t be necessary.  However, if you’re in doubt about the provision made in the partnership agreement, or you feel that an LPA may be required, you should seek advice on the wording of the LPA, to ensure that it doesn’t conflict with the provisions already made in the partnership agreement.  Directors of companies: articles of association If you’re a director of a company, check the company’s articles of association. Very often, articles of association will provide for the termination of a director’s appointment in the event that the director loses capacity. This is often done to protect the company’s interests. If such a provision is not included in the articles of association, you may want to seek advice and consider including such a provision.  If you are the sole director of a small private company, the articles of association are not likely to simply terminate the director’s appointment, or there would be no one else to continue running the company. In such circumstances, a business LPA would be appropriate.  Can you make an LPA covering your personal and business affairs? It may be possible to have just the one LPA appointing attorneys to manage your personal assets and your business assets. However, it may not be appropriate for the same person to make both personal and business decisions, due to a potential conflict of interests. You could consider making an LPA appointing certain attorneys to manage your personal assets, and others to manage your business assets. But bear in mind that this could create confusion regarding the scope of the attorneys’ powers, and the Office of the Public Guardian is likely to reject the LPA.    Fortunately, it’s possible to make more than one LPA. You could consider making one for your personal affairs and a separate one for your business affairs. Often, people like to keep their business affairs separate from their personal affairs, so this option tends to appeal. If you are considering making two LPAs, each should contain specific instructions limiting the scope of the attorneys’ powers – for example, a personal LPA should specify that your attorney will have general power in relation to your personal affairs, except for the relevant business assets in respect of which you have executed a separate business LPA. Your business LPA should contain specific instructions in this respect, too. Your attorneys will then be clear about their powers and will not encroach on each other’s responsibilities and decisions.  What happens if I don’t make a business LPA? If you’re unable to make business decisions in the future, and have not made a business LPA, it may become necessary to make an application to the Court of Protection for the appointment of a deputy to act on your behalf.  The process can be expensive, and there’s no guarantee that the Court of Protection will choose someone you would have chosen.  It could also take more than six months before a deputy is appointed, during which time your business may be vulnerable and at risk. To avoid disruption, it should be part of any business owner’s continuity plan and crisis management strategy to consider making a business LPA.

Explaining a few of the tricky issues that probate presents that can mean it’s far from a DIY matter.  It has become common for executors to administer estates without enlisting legal advice. There’s a considerable amount of information available online on government websites and elsewhere, and many people believe that dealing with a deceased person’s estate is just a simple matter of filling in a few forms and they can save thousands of pounds of solicitor fees. While that may be the case with the simplest estates, such as those containing only English bank and building society accounts and a very straightforward will, many people’s affairs and relationships are more complex than this. The examples given below are some of the matters which can cause lay executors problems in even apparently straightforward estates. Deceased or bankrupt beneficiaries Where a beneficiary or legatee has died and the will does not specifically state what happens to the gift, executors may make an incorrect assumption as to what happens to that gift – for example, that it should pass to the beneficiary’s spouse. If the mistake comes to light after the gift has been made, the executors will be personally liable to the correct beneficiary if they can’t recover the gift from the incorrect beneficiary. If a beneficiary is bankrupt and the executors pay them, rather than the beneficiary’s trustee in bankruptcy, again, the executors may find themselves liable. Investment bonds It’s quite common for the deceased’s investments to include non-UK investment bonds, which will terminate on the death of the last of the lives assured (which may be the deceased). The insurance company will issue a chargeable event certificate showing the income, which is chargeable in the tax year the bond terminates; however, unlike UK bonds, there is no credit for basic rate tax, and the executor must report this and pay the tax as part of the administration of the estate. As HMRC receives details of the chargeable event direct from the investment company, the executors may be surprised to receive a demand for many thousands of pounds of tax after they have distributed the estate. Where the deceased is not the last life assured, which may be the case where an investment bond is written ‘in trust’, professional advice should always be sought before dealing with the bond. Property and shares Many estates will contain a property, or shares, which will need to be sold . If the property or shares have increased in value since the date of death, there is a potential capital gains tax liability. In this case, it is vital that executors take legal advice before arranging a sale, as it may be possible to save tax by formally ‘appropriating’ the property or shares to the beneficiaries, so that the gains are taxed on them. This is important where there are charitable beneficiaries, as gains made by them are exempt. Once contracts have been exchanged, it is too late for appropriation. Creditors and claims against the estate Executors need to be aware that certain categories of people are entitled to make a claim against the estate within a period of six months after the grant of probate, if the deceased has not made reasonable provisions for them. If the executor has distributed the estate within that period, they may be personally liable, should a successful claim be made and they cannot recover what they have distributed. The same applies if the executors become aware of a creditor but have distributed the estate without placing a deceased estates notice in The Gazette and in a newspaper local to the deceased, under the Trustee Act. Executors should also be aware that the Department for Work and Pensions (DWP) may make an enquiry in relation to means-tested benefits including pension credit, and this may not be made until many months after the date of death. Executors should not distribute the estate until DWP has confirmed the position. Insolvent or insufficient estates If the deceased’s estate is insufficient to pay their debts , there is a specific order for payment of these; and if the estate is solvent but insufficient to cover all the legacies and specific gifts in the will, there is a specific order for the gifts and legacies to be satisfied. Executors may be liable if they do not comply with this. Gifts Executors must be careful to make detailed enquiries as to gifts made during the seven years (and in certain cases, 14 years) prior to the deceased’s death, which includes gifts of items and payments made by the deceased on behalf of another, rather than just gifts of cash. There are penalties for deliberately or negligently failing to declare gifts. Trusts Many professionally drawn wills contain trusts , such as property protection trusts to preserve a share of the deceased’s home against their partner’s remarriage, or long-term care fees, or discretionary trusts, particularly in wills made prior to the introduction of the inheritance tax (IHT) nil-rate band. Executors should always seek advice in these circumstances to ensure that the trust is properly set up at the outset, and that the trustees know their responsibilities and duties during the life of the trust. Where the deceased received income from a will trust during their lifetime, executors are often surprised to find that the capital value of the trust aggregates with the value of the deceased’s own estate for the purpose of calculating IHT in the deceased’s estate. This may mean that the estate is subject to IHT, even though the deceased’s own assets are under the nil-rate band. There may be penalties for failing to disclose any such trust, in addition to the tax and interest on late payment. Following the introduction of the transferable nil-rate band, the ‘nil rate’ discretionary trust is no longer required to save IHT, but it is not uncommon for executors to ignore its presence in a will, and to distribute the entire estate to the surviving spouse. This does not dispose of the trust, as the legacy to the trust remains outstanding, and it is necessary to either implement the trust or to wind it up by deed of appointment, preferably made within two years of the death. Executors should take legal advice as to the options available, as there may be planning opportunities that they are unaware of. Assets abroad It’s not unusual for there to be a Jersey bank account among the deceased’s investments, which will require a Jersey grant of probate . This is something that lay executors might find difficult to handle without assistance. Assets such as holiday homes outside the UK will be subject to UK IHT, and may also be taxed in the country where the asset is situated, although a double taxation treaty may apply. In these circumstances, the assistance of a specialist UK lawyer and/or lawyer within the jurisdiction will usually be required. While this is not an exhaustive list of potential pitfalls, it does indicate that even where there might not appear to be anything complex about the deceased’s estate, it is always best to seek advice to ensure that there are no hidden traps.

Recently there has been an increase in interest in so-called 'bloodline wills'. But what is a bloodline will? And do you really need one? This article explains what you need to know about bloodline wills. What are ‘bloodline wills’? Bloodline wills is an informal term that broadly describes estate planning measures that seek to carefully limit and control the overall value of wealth passing into the hands of a surviving spouse or partner, upon the death of the other. Instead of a straightforward gift of all assets to the surviving partner, care is taken via a will to ensure that a proportion of the wealth of the first spouse is ring-fenced for the ‘ultimate' intended beneficiaries. Commonly, these 'ultimate' beneficiaries consist of members of the next generation, who may (though not necessarily) have been born to a previous relationship. Bloodline wills is not a term of art, and there are not a finite number of types of wills. Rather, each will should be drafted in a bespoke way to take into account the testator's individual circumstances and objectives. How do ‘bloodline wills’ work? A common starting point of bloodline wills involves consideration of the nature of an individual's share of jointly-owned property, including the family home. In England and Wales, it is possible to change the type of joint ownership of a property (even without the consent of the other joint owner) so that your interest in it no longer passes automatically to the remaining owner upon death. If you hold an English property as joint tenants , this can be converted to a tenancy in common , meaning that each owner holds a distinct share of the asset, which they can then pass on via their will. The process for jointly-owned properties (and the terminology used) in Scotland is different, but in broad terms the same options apply. Once your lawyer has checked and ensured that your property interests are structured appropriately, each partner/spouse can pass their own distinct share of the property to a trust created under their will. Any other assets that the individual parties similarly wish to ring-fence can also be passed to the same will trust. The surviving partner/spouse is generally then granted certain rights to the property left in the will. These rights must be considered and drafted carefully. The important point is that the survivor does not inherit the entire property. Instead, the trustees of the first will effectively control this pot. If the survivor therefore subsequently remarries, enters long-term residential care, or becomes vulnerable to financial interference, for example, a level of protection is afforded where the assets previously owned by the deceased are concerned. Why are the disadvantages of ‘bloodline wills’? Preparing wills of this way can have many advantages. Preserving a measure of control over the destination of your assets while simultaneously providing for your spouse/partner is often the main goal. These types of wills aim to achieve that in the most efficient manner possible. However, you should be fully advised upon the legal and administrative responsibilities that will apply to your chosen trustees, following the first death. The perspective and the future needs of the surviving partner should also be considered, given that they will not have completely unfettered access to the trust funds left by the first party. The powers that you wish to give to your trustees should be drafted according to the provision to be made for the surviving partner/spouse, as well as other considerations, including taxation. For example, where only the first estate is likely to be eligible for the residence nil rate band for inheritance tax, and/or either party has been previously widowed, this may impact upon the way the trust is drafted to secure maximum available allowances. It is therefore extremely important that a bespoke approach, tailored to your individual needs, objectives and wishes is adopted. Following the first death, be aware that there will be work to undertake in setting up the will trust properly. As a minimum, this will involve registering the trust with HMRC, and updating the title to any property which has passed (wholly or in part) to the will trust. However, provided both parties understand and are happy to build in some flexibility to the provisions of the wills at the drafting stage, that flexibility can be of significant practical assistance following the first death. If all parties do not wish for the trust to continue, or would prefer to reduce its scope, this can often be achieved. Summary It’s important not be tempted to adopt a DIY or off-the-shelf approach to this type of estate planning. Your circumstances are unique and should be carefully reflected in the drafting of any trust provisions you choose to incorporate in your will. The consequences of not following such an approach can lead to increased costs and difficulties following the first death. It is also extremely important that the position regarding jointly owned property is checked (and adjusted as necessary) before the wills are affected. For those with property interests in England or Wales, or who are domiciled there, it is important to consider how the law of England and Wales specifically affects your planning.

Why are lasting power of attorneys (LPAs) important to equity release? Article explains the relationship between an LPA and equity release. What is a lasting power of attorney (LPA)? A lasting power of attorney (LPA) is a legal document which allows someone (the donor) to appoint one or more people they trust (the attorney(s)) to make decisions on their behalf when they no longer have the ‘capacity’ to do so themself. An LPA is not just for older people in poor health to consider, everyone should have one. Contrary to popular belief, your next-of-kin does not automatically get this responsibility to become your attorney, which is why it is so important to set it up in advance. There are two types of LPA that can be set up: LPA for your property and financial affairs – your attorney would have the power to make decisions on your behalf about money and property, including paying your bills, managing your bank accounts or investments, selling your home or taking further drawdowns on your equity release mortgage. LPA for your health and welfare – your attorney would have the power to deal with your doctors, nurses and social services in respect of your health, medical treatment and personal welfare. To set up one or both types of LPA. You must be: over 18 have full mental capacity pay a fee to register the LPA, unless you are exempt When does someone lack mental capacity? The  Mental Capacity Act 2005  provides that “a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain. It does not matter whether the impairment or disturbance is permanent or temporary.” This means that a person lacks capacity if they are unable to make a decision for themselves in relation to a given matter if, with appropriate assistance as necessary, the person is unable to understand the information relevant to the decision, to retain that information, to use or weigh that information as part of the process of making the decision or to communicate his decision by whatever means.  What is a court appointed deputy? Once you have lost mental capacity, it is too late to set up an LPA. The Court of Protection would have to appoint someone to act as a deputy on your behalf. If your loved ones want to apply to be your deputy, it will be time consuming and there will be legal costs involved to have your application heard. The application may then even be refused, with the council being appointed instead. It is also a very long process often leaving people in limbo, with finances being frozen and financial decisions delayed. Do you need a lasting power of attorney (LPA) when taking out equity release? It is not a legal requirement to set up a n LPA when taking out equity release, but it has been recommended by the Equity Release Council that people entering into a drawdown lifetime mortgage should have an LPA in place. There is a recognised myth that equity release cases involving an LPA are more difficult and take longer to complete than other cases. However, there is no reason why a case involving an LPA should take longer than any ordinary case. The borrower must have lost their mental capacity for their attorney(s) to act. If they are just physically frail or don’t like dealing with paperwork, the lenders solicitors will insist that the borrower signs, rather than their attorney(s). If there is an LPA in place for property and financial affairs, your attorney(s) will have authority, if you lose capacity, to arrange further drawdowns on your behalf. If you don’t have an LPA for property and financial affairs in place, and you haven’t taken the maximum mortgage drawdown but have now lost capacity to do this yourself, an application would have to be made to the Court of Protection as detailed above, which can involve considerable expense, uncertainty, and access to any further drawdown would be suspended until the Court have made such a decision. For example, you and your spouse decide to take out £50,000 and leave another £50,000 in a drawdown facility to draw down later. However, for you and your spouse to make any further drawdowns, both of you must have mental capacity and be able to sign the papers. If one of you loses capacity and the other is not appointed through an LPA as your attorney, you would not be able to get a further drawdown without your spouse or family members applying to the Court of Protection to be your deputy. Ultimately, having an LPA for property and Financial Affairs in place is essential to ensure ongoing access to further funds from a drawdown plan. Should you use a solicitor to set up a lasting power of attorney (LPA)? It is not a legal requirement to use a solicitor to set up an LPA, but it may be beneficial to use one for several reasons: You are unsure of the process – The right solicitor will be dealing with the preparation and administration of LPAs on a day to day basis. They have all the right systems and required knowledge. Your affairs are complex and may need specialist advice – Again, the right solicitor will have the required knowledge to ensure that you receive the best advice tailored to you. A solicitor can act as ‘Certificate Provider’ – You will need a ‘Certificate Provider’ to sign your LPA to confirm you are of sound mind. You cannot use a relative as your ‘Certificate Provider’. To ensure that no mistakes are made – If you draft the LPA yourself and make a mistake, you may be charged by the Office of the Public Guardian for minor corrections or worse, forced to start the process again and have to pay the registration fees again. This will also delay your application by several weeks. Data issued by the Freedom of Information suggests that almost 130,000 LPAs have been rejected between 2018-2023 due to mistakes.

When administering an estate, the to-do list can be daunting. So can initiating the sale of the deceased’s property be started early? This article explains what can and can’t be done. The short answer is that the deceased’s home can’t be sold before a grant has been obtained.  Although executors derive their authority from the will, they can only prove their rights by taking a grant of probate . If the deceased died without a will (intestate), the administrators have no authority before the grant of letters of administration is issued. However, there are steps that can (and should) be taken at an early stage to ensure that when the grant has been obtained, the sale of the property proceeds smoothly. Check HM Land Registry The personal representatives (which includes executors and administrators) should check whether the title to the deceased’s home is registered at HM Land Registry . Although registration is now compulsory on virtually all land transactions in England and Wales, in many areas, it didn’t became compulsory to register a purchase until 1 December 1990 – and gifts and assents of property didn’t become compulsorily registrable until 1 April 1998.  If the title is registered If the title is registered, copies of the title entries, plan and documents referred to in the title entries should be obtained, to check: that the property is in the deceased’s sole name that the deceased’s name is shown correctly that the title plan covers the entire extent of the property whether there is any mortgage or other charge (eg equity release) on the property The personal representatives should contact the lender in relation to any charge securing money on the property, to obtain details of the amount required to repay the charge – both to ensure that there will be sufficient funds, and because this information is required in order to apply for the grant. There may be restrictions in the proprietorship register indicating that the property is subject to a trust, or that a third party’s consent to sale, or a certificate of compliance with obligations in a document such as an option or overage agreement, is required. In this case, the personal representatives should take advice from their solicitor to ensure that the restrictions can be complied with. If the property is leasehold, such as a flat or retirement property, there will be further restrictions and requirements in the lease, and these should also be checked. Unregistered titles If the title is unregistered, the physical title deeds will need to be located. These may be kept at the deceased’s home, or may be held by the deceased’s solicitor or bank. If the property was subject to a mortgage, the lender will normally hold the deeds. If the personal representatives have engaged a solicitor to deal with the estate administration, deeds can normally be released to the solicitor, but where personal representatives are dealing with the estate themselves, deeds will not usually be released until the grant has been obtained. Unregistered title deeds should be checked by a conveyancing solicitor for the same reasons as with the registered title, to ensure that they are complete and that all of the necessary documents are present. The document transferring the property into the deceased’s name may contain references to earlier documents containing plans or more detailed descriptions of the property, and setting out rights and covenants which benefit the property and to which it is subject.  Checking that the deeds are in order If there are any documents missing, or if the deeds don’t cover all of the property, or contain all of the necessary rights, such as rights of way, it’s helpful to know that at an early stage, rather than when a buyer has been found!   It’s quite common for the selling solicitor to find that the death of the deceased’s spouse or former co-owner has not been registered, and that a death certificate is required to perfect the title. This may take several weeks to obtain from the General Register Office if one can’t be found among the deceased’s effects by the personal representatives. Having the title checked at the outset allows time for further investigation into any problems while the application for the grant is being dealt with. Putting the property on the market If the title has been checked and is in order, the personal representatives can take the preliminary steps ready to market the property , such as selecting an appropriate estate agent, agreeing sales particulars and signing the agent’s terms of business.  If the estate is straightforward and the personal representatives expect that the grant will be issued within, say, a couple of months, they can instruct the agent to market the property. However, if a buyer is found, the sellers don’t have the authority to exchange contracts until the grant has been issued. If there is any delay in obtaining the grant, this will cause problems for the buyer, so if the sellers have any concern that there may be a challenge to the will, they shouldn’t arrange to market the property until the grant has been issued. If the property was co-owned If the deceased wasn’t the sole owner of their home, legal title to the property passes to the co-owner, who will be able to sell the property without needing to wait for a grant to be issued in the deceased’s estate. If the property was held as joint tenants, it will pass automatically to the surviving co-owner. In either case, the deceased’s death certificate will be required. If the property was held as tenants in common, this will be evidenced by a restriction in the proprietorship register, stating that a disposition by a sole proprietor under which capital money arises can’t be registered unless authorised by the registrar or the court. In this case, the surviving co-owner will need to appoint a new ‘trustee’ to give a receipt for the deceased’s share of the sale proceeds of the property, which must then be paid to the personal representatives named in the grant in the deceased’s estate.  The personal representatives should also seek a solicitor’s advice as to the implications of the property being held as tenants in common, as there is usually a reason for this, such as a trust in the deceased’s will – and wherever a trust arises, it is imperative that legal advice is taken. Death of seller before exchange of contracts In the unfortunate situation where a seller has died after exchanging contracts, but before completing the sale, it will be necessary to obtain a grant urgently in order to complete the sale and avoid the contract being rescinded.  In these circumstances, it is possible to obtain a grant of administration ad colligenda bona , which is a grant limited to a specific purpose, such as sale of a property (but not distribution of the proceeds). The application must be supported by an affidavit providing evidence that the estate will suffer if the grant is not issued, and the extent of the powers requested. A full grant will still need to be applied for in the usual way.