A Will is the only way to make sure your savings and possessions (your estate) to go the people and causes that you care about. If you do not have a Will, the law of intestacy dictates who will inherit your assets. Many people believe that without a Will, their assets will pass to their spouse, civil partner or “common law spouse” which may not be true.
Under the rules of intestacy, spouse or civil partner can inherit if they are actually married or in civil partnership with the deceased at the time of death. Hence, where the deceased was divorced or have legally ended their civil partnership, you cannot inherit the deceased’s estate under the rules of intestacy. If the partners were separated informally, you can still inherit under the rules of intestacy.
What can happen?
The following are some of the main examples of what can happen if you die intestate and are survived by a spouse or civil partner (“your spouse”):
Who will not benefit?
Under the intestacy laws, there are certain people who will do not have a right to a share of your estate, these include:
Your co-habiting partner – the law does not recognise a “common law spouse” which means that he or she does not have an automatic right to a share of your estate. He or she would have to go to Court and bring a claim if they cannot reach agreement with the intestacy beneficiaries;
Stepchildren; Foster children; Some distant relatives; Friends.
By making a Will you can choose who will inherit your wealth, instead of allowing the intestacy laws to decide who will receive your assets
A Trust is a relationship which is recognised by the Courts, and the details of the Trust are contained in a formal Trust Deed, which acts rather like your family legacy rule book.
Creating the Trust has the advantages of being able to satisfy most of the reasons why you might wish to dispose of your property, namely:
What are the possible disadvantages of a Family Trust?
Your choice of Trustees
The Trustees' responsibilities
The Trustees do not have any power to go beyond the terms of the Trust Deed. However, most things which a person would want to do with his own money or property can be done by the Trustees provided it is for the benefit of the beneficiaries.
The Trustees must:
It is advisable that the trustees have an annual meeting to review the trust. This can simply be minutes of a discussion between the Trustees and is simply to ensure that the Trustees comply with their responsibility.
The terms of the Trust Deed
Can the Trust be terminated?
The simple answer is yes, if all the beneficiaries agree then they can instruct the Trustees to close the Trust. However, this cannot be done if a beneficiary is a minor or lacks the capacity to agree; also, a Trust cannot be closed if you have retained a right to live in the property or receive income, so you will always be protected. You can always remove the assets from the Trust.
Whilst you remain in the property, tax should not have a great impact. According to HMRC whilst there is no income being generated by the Trust or a capital gain has been made by the Trust selling assets, there is no need to register the Trust and a yearly tax return will not be issued by the Tax Office.
Whilst you live in the property, you will not pay a rent for the right to reside in the property and therefore there is no income tax charge. If, however, it is rented out at a later date or the sale proceeds generate an income, then income tax will be payable at the lower or basic rate of tax depending on the asset type.
Stamp Duty Land Tax
Generally, there is no tax to pay on founding the Family Trust. Stamp Duty Land Tax may arise if the property is sold and an alternative property is purchased by the Trust for you to live in. However, this is the same as if the property was in your own name.
Pre-owned asset tax
This does not apply where you have an interest under a Family Trust; it only applies in special circumstances, usually involving more complex inheritance tax planning schemes.
Provided that the value of your home is below the current nil rate band threshold (£325,000 or £650,000 for a married couple), inheritance tax is neither saved nor increased by transferring your home into a Family Trust.
If, however, your home is valued close to or over the nil rate band threshold, then you will need to tell us and we will explain to you the inheritance tax consequences of creating the Trust.
Capital Gains tax
Reducing the cost of long term care fees
One of the possible benefits of transferring the family home into a Family Trust may be avoiding the
need to sell the property for residential care or nursing home care charges, thus securing the
family’s inheritance. However, we cannot give you any guarantee that this will be successful in this regard, as there is no fool-proof way of avoiding the value of the property being taken into account in means testing. There are anti avoidance measures contained in the law to enable some gifts or disposals of property to be ignored by the authorities and even possibly set aside by the Court. The rule of thumb is that the Trust must have been in place for a minimum period of seven years to comply with the gift rule which reduces the possibility of the gift to the Trust being set aside, by the authorities or the Court.
Do we need to open a bank account?
This will depend on whether the assets in your Trust are based on cash, or involve the payment of sums. If the Trustees decide to sell the assets, then a bank account will be required. A bank account
will need to be opened by the Trustees in the name of the Trust.
How Do Beneficiaries obtain the Benefit?
Normally, a beneficiary can receive the benefit based on several things:
How to effect Benefit from the Trust?
When can I make an LPA?
As long as you have capacity and understand the decisions that you are taking by registering a Lasting Power of Attorney then you are able to make an LPA.
When should I make an LPA?
There is never a “right time” or “the perfect time” to create your Lasting Power of Attorney.
Our advice…the sooner, the better! Once your LPA is created, you have peace of mind. You have to have capacity in order to register your LPA and as none of us know what is going to happen tomorrow, if we wait for the “right time”, it may never come.
Who should I choose to be my Attorney?
Your Attorney should be someone that you trust implicitly and who is over the age of 18.
There is no right answer when it comes to who is best. The best Attorney for you will be different to anyone else and so is very much an individual decision.
We can give you guidance and discuss this with you, but ultimately…you know best who you can trust to act in your best interest and to make decisions for you when you are unable to.
You can appoint professional Attorneys, such as solicitors, as an alternative to friends and family and we can discuss this option with you if you would like. You do not require to have the same Attorneys for each LPA.
How long will the process of registering an LPA take?
From the initial call to the registered Lasting Powers of Attorney being delivered to you, the whole process (including home consultations to go through the Lasting Powers of Attorneys and any discussions with your proposed Attorneys) can be completed within three months. The Office of the Public Guardian (OPG) take around 8-10 weeks to process the application and so a three-month time period allows for the OPG to check and register the Lasting Power of Attorney and for us to receive this and deliver it back to you ready for use.
When we deliver your Lasting Power of Attorney we will also give you information as to how the Lasting Power of Attorney can, and should, be used as well as answer any questions that you have.
What happens if I don’t have an LPA?
If you haven’t registered an LPA prior to losing capacity, then your loved ones may well need to make an Application to the Court of Protection in order to appoint a Deputy to make decisions for you. The decision will be made by the Court and so may well not be the choice that you would have made when appointing someone to make decisions for you. This process is also lengthy and costly causing unnecessary stress and delay for those closest to you.
If you require any further advice or assistance in considering whether Lasting Powers of Attorneys, please contact our office 0191 3787620 or firstname.lastname@example.org. A member of staff will be happy to assist with your enquiries.
All figures save for the court fee are subject to VAT at 20%
Per LPA- £300 Preparation and acting as Certificate Provider
£82 Court fee payable to OPG for each registration (no VAT added) unless fee exemption or remission applies
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