What needs to go into a will and what can go into a letter of wishes?

When you make your will, you may wonder whether or not you also need to write a letter of wishes.  The key distinction is that your will is a legally binding document.  While a letter of wishes is not legally binding, it can offer flexibility and guidance to executors and trustees which can be very useful to them when managing your estate or a trust set up in your will.

‘Unlike a will, a letter of wishes does not have the same formalities and legal requirements. You can use this to express preferences, provide additional instructions, or explain the reasoning behind certain decisions made in the will,’ says Lucy Brown, head of the wills and probate team.  ‘Obtaining legal advice is crucial to ensuring you place the relevant provisions into the appropriate document.’

Lucy highlights some of the key issues when considering which provisions need to go into a will and which are more suitable for inclusion in a letter of wishes.

Key provisions to appear in your will

Key provisions that should appear in a will include:

• the appointment of executors;
• the appointment of guardians for any children;
• the distribution of assets – the way in which you choose to allocate any part or the whole of your estate should be clearly outlined in the terms of your will. This might include specific monetary gifts, the allocation of assets, or how you wish for the residual estate to be divided (i.e. what remains after specific gifts have been distributed and all debts and expenses have been paid). Including clear instructions on specific assets provides clarity to the executors for the management of the estate. This is particularly crucial in circumstances where there are complex matters such as a blended family, large portfolios of property and investments, or where you wish to do something that may be quite technical (such as distributing business or intellectual property assets) or controversial (such as gifting your estate to charity).
• any specific bequests or conditions attached to gifts, for example, if a beneficiary needs to reach a certain age to receive their gift or inheritance. An age-contingent trust provides a mechanism to ensure that assets intended for minors are managed responsibly until the specified age is reached; and
• whether you want to be buried or cremated, by placing instructions in the will, you can ensure that your final wishes are respected.

If you want the provisions to be legally binding, they must be included directly within the terms of your will.  For example, if you wish to leave your house to a specific person, this is generally not a gift which is suitable for a letter of wishes.

The fact that the provisions are legally binding means they can be enforced against your executor or trustee if not performed or if performed incorrectly.

Examples of provisions to include in a letter of wishes

It is important to remember that a letter of wishes is not a legally binding document. While it can provide valuable guidance to your executors and trustees, it will not be enforceable in the same way as a will.  Executors and trustees are not legally obliged to follow the instructions contained in a letter of wishes, although they ought to take them into consideration when making decisions regarding the estate or trust.

Common examples of provisions which appear in letters of wishes, and the benefits of including them in such documents, are as follows:

Setting out explanations

A letter of wishes can be used to set out your reasoning behind the decisions in your will.  This may be, for example, because you have left unequal shares to your children and you would like to clarify the rationale behind this division.  Whilst a letter of wishes is usually confidential, the trustees can still use the information in the document to provide evidence as to your views in the case of a dispute among beneficiaries.

Funeral arrangements

You can use a letter of wishes to articulate your preferred funeral arrangements, with specific instructions for the funeral service itself such as the selection of hymns and arrangements for the wake.

Charitable gifts

If a will trust is used to implement a charitable gift, a letter can provide guidance on the extent to which charities should benefit. It can take into account the lower rate of inheritance tax (IHT) of 36% for testators leaving at least 10% of their estates to charity, as the lower rate may be obtained by retrospective IHT treatment of trust distributions within two years after the testator’s death.

Children

If you are appointing guardians in your will, a letter of wishes can specify how you would like your children to be brought up, addressing issues such as where the children should be raised, what school you would like them to attend and so on.

Dealing with inexpensive chattels

When it comes to the distribution of inexpensive but sometimes sentimentally valuable chattels, a letter of wishes can provide a flexible way of issuing instructions to executors and trustees.  Often a will may refer to a letter or memorandum of wishes to be held alongside the will, which can deal with chattels.  This approach enables personal instructions for allocating items without cluttering the will with provisions concerning items of minimal commercial value. Additionally, if your wishes were to change, the letter could be altered without updating your will.

Digital assets

Digital assets, such as online accounts, digital currencies, social media profiles, and intellectual property stored online, often require specific handling that may not be easily addressed in the formal structure of a will.  A letter of wishes allows you to provide detailed guidance on accessing, managing, and transferring these assets. This document can be updated easily as digital assets and preferences change, ensuring that executors or digital trustees have clear and up-to-date instructions.

Pets

By using a letter of wishes for pet care instructions, you can name your preferred people to look after your pet and allocate funds for the pet’s maintenance outside the formalities of a will.

Use of a trust in your will

If your will establishes a trust, the letter of wishes can offer guidance to the trustees on how the trust should be administered on a range of issues.

Trustees of a discretionary trust have considerable freedom in exercising their powers in favour of beneficiaries, but you can offer them guidance in a letter of wishes setting out your personal views, principles, and priorities.

For example, you can set out who should benefit, when and to what extent.  This may include who is to be considered as the primary beneficiary, whether children should be treated equally, and to what extent tax should be considered in the decision making of the trustees.

As the letter, generally speaking, is confidential to the trustees, it can express sensitive information about beneficiaries, such as concerns about a beneficiary’s risk of divorce, gambling issues or alcoholism, which may be the rationale for protecting the assets through a trust structure.

For people who value their privacy, a will trust with a confidential letter of wishes ‘behind the scenes’ helps ensure the provisions of their will do not become public.

Reviewing and updating documents

A letter of wishes is usually signed at the same time as the will, but you can amend or rewrite it any time to take into account any changes of circumstances.

Both your will and letter of wishes should be reviewed periodically to ensure they reflect any changes in your circumstances or preferences.  Life events such as marriage, divorce, birth of children, or significant changes in financial circumstances may necessitate updates to these documents.

Using a letter of wishes offers the freedom to update or amend these instructions as needed without the formalities required for modifying the will, to cater for changing circumstances or preferences.

How we can help

It is very important to engage the expertise of a solicitor to ensure that all legal requirements are met and your wishes are clearly stated and where appropriate, legally binding.  This includes the drafting of a comprehensive and expertly written will in conjunction with a bespoke letter of wishes that can offer personal guidance from you to executors and trustees to help them fulfil their role appropriately. 

For further information, please contact Lucy Brown in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

As an attorney under a financial lasting power of attorney (LPA), you will play an important role in safeguarding the financial interests of a vulnerable individual.  Understanding the legal framework, recognising common pitfalls, and implementing prudent strategies are essential to fulfilling your duties effectively.

‘We often see attorneys coming unstuck in relation to bank accounts and savings,’ says Lucy Brown, Head of the wills and probate team. ‘There can sometimes be a lack of understanding of the role of an attorney when it is taken on, so it is very important to navigate these issues carefully and seek legal advice if you are unsure of a proposed action.’

In this article, Lucy highlights some of the common pitfalls when you are dealing with the donor’s bank accounts and savings under a power of attorney.

You have a fiduciary duty

Your primary duty is to act in the best interests of the donor, exercising diligence and integrity in their financial matters.

This involves understanding the donor’s preferences and instructions regarding their finances, and making decisions that are consistent with their wishes, to the extent possible.

The authority granted by a power of attorney is a fiduciary duty, requiring you to prioritise the donor’s interests above your own and avoid any conflict of interest. Clear communication with the donor, financial institutions, and other relevant parties is important to ensure transparency, accountability, and compliance with legal obligations.

Legal framework and penalties

The Mental Capacity Act 2005 sets out the legal framework for a lasting power of attorney, outlining the requirements for creating, registering, and exercising powers.

You must adhere to the principles outlined in the Act, which include acting within the scope of authority granted, promoting the donor’s best interests, and considering their past and present wishes and feelings. Failure to comply with these legal requirements can have serious consequences, including civil penalties.

The Office of the Public Guardian oversees the registration and supervision of lasting powers of attorney, and you will be subject to their scrutiny for your actions.

Any breach of fiduciary duty, financial misconduct, or abuse of authority may result in legal proceedings, financial penalties, and your removal as an attorney.

Common pitfalls with bank accounts and savings

Several common pitfalls can arise when managing bank accounts and savings under a lasting power of attorney, which highlight the importance of careful attention to detail and adherence to legal requirements.

• Failing to register the lasting power of attorney with the financial institution can lead to complications and delays in accessing and managing the donor’s accounts, as each organisation will require proof of the attorney’s authority before allowing transactions.
• Ignoring or disregarding any limitation of powers specified in the power of attorney can result in unauthorised transactions or decisions which may expose you to legal liability and a potential dispute with other stakeholders. For example, an LPA may include a specific limitation that the attorney must only make low-risk investments to ensure the security of the donor’s retirement funds.  If the attorney decides to invest in high-risk investments to attempt to generate higher returns, disregarding the limitation, this can lead to multiple problems with the attorney potentially liable for any losses due to the unauthorised actions.
• Disagreement among attorneys can lead to inefficiency or delay. For example, if two attorneys (siblings) are appointed jointly, they must agree on all financial decisions.  The donor owns a large family home and has moved into a care home.  One attorney believes that selling the house is the best course of action to save the costs of maintenance and insurance, while the other attorney opposes the sale because of its sentimental value and potential future appreciation, arguing that renting out the property could provide an ingoing income stream. Failure to decide on a course of action could result in delays obtaining funds necessary for care.
• Insufficient record keeping can make it challenging to track and account for financial transactions, increasing the risk of errors, disputes, or allegations of financial misconduct.
• Missing a deadline can lead to additional costs and complications. For example, if attorneys fail to file the donor’s tax return on time, it can result in penalties, fines and interest charges from HM Revenue and Customs (HMRC). A missed deadline can also trigger scrutiny from the regulatory body, leading to legal complications, and, in some cases, investigations into the attorney’s handling of the donor’s finances.
• Failing to consult donor about decisions, particularly when the donor still has the mental capacity to express their wishes, can lead to actions which are inconsistent with the donor’s preferences or best interests. This in turn can cause distress and a sense of loss of control for the donor, resulting in family conflict and sometimes even complaints or a legal challenge.
• Liquidity problems can arise if funds are locked into high-interest, long-term investments like bonds or fixed-term deposits. Although these investments can offer attractive returns, they often come with restrictions or penalties for early withdrawal. This lack of liquidity can create problems when funds are needed for immediate expenses, such as care costs, medical bills, or equipment. If the attorney has not planned for sufficient accessible funds, they might find themselves unable to meet the donor’s short-term financial needs.
• Poor investment decisions may be made by attorneys who lack expertise in financial matters, leading to financial losses or excessive risk exposure for the donor. Instead, engaging an independent financial advisor (IFA) can mitigate these risks, providing professional guidance tailored to the donor’s specific needs and goals.  Failing to seek professional advice when appropriate could also lead to legal consequences for the attorneys if they are found to have breached their fiduciary duty.

Strategies to mitigate risk

You must adopt proactive measures to mitigate the risks involved and ensure you uphold your duties effectively, for example, you should:

• carefully review and understand the scope of your powers to ensure compliance and avoid exceeding your authority;
• maintain effective communication with the donor, all financial institutions, and other family members to ensure transparency and accountability – this should include regularly updating the donor and seeking their input where feasible;
• if you are acting jointly with other attorneys, you should try to maintain communication, engage in constructive dialogue at all times to resolve disagreements amicably, and document your decisions;
• establish thorough record-keeping systems to ensure transparency, accountability, and compliance with your legal obligations; and
• engage IFA assistance where appropriate.

It is important to stay informed about relevant legal obligations and seek professional advice where appropriate.

How we can help

Our private client solicitors can assist you in navigating the complexities of a lasting power of attorney, from drafting and registering the document to advising on the ongoing management of a donor’s financial affairs.  This will minimise the risk of common pitfalls that we often see in practice and safeguard the interests of the donor.

For further information, please contact Lucy Brown in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Delays in the probate system have hit the headlines of late, with bereaved families having to wait many months to obtain a grant of probate – a stark contrast to the 16 weeks the Government says the application should take.  Adding to this, further delays at HMRC mean that estates are taking much longer to finalise before everything can be distributed and wrapped up by the executors.

‘Unless an estate is very small or simple, the grant of probate is essential for families after the death of a loved one. Without it, the executors of a will (or personal representatives if there is no will) have no legal authority to deal with the deceased person’s assets,’ says Lucy Brown, Head of the wills and probate team. ‘Bereaved families may be stuck in limbo, unable to receive their rightful inheritance and move on with their lives.’

Very often solicitors are blamed for the delays in the probate process, leading to client complaints, however many factors are outside of their control.  Nigel highlights some of the many issues which can cause delay in the administration of an estate.

Delays in obtaining grant of probate

Staff shortages and a backlog of cases within the probate service (part of HM Courts & Tribunals Service) have worsened since the Covid-19 pandemic. This has been exacerbated by the move away from applications being submitted to experienced local probate registry teams to a centralised system.

Delays with HMRC

Stringent HM Revenues & Customs (HMRC) reporting requirements and ongoing problems for tax payers trying to get through to the HMRC helpline have also added to delays. Tax may be payable at the following points:

• inheritance tax should be paid within six months of a death;
• income tax may be payable on assets which continue to generate income after the death until they have been transferred or sold; and
• capital gains tax may also be payable on assets which have gone up in value since the person died or since being valued for inheritance tax.

If inheritance tax is not paid within six months of a death, HMRC charges interest at an annual rate of 7.5%. A grant of probate cannot be obtained without inheritance tax being paid, so in the past – unless there was enough money available in the deceased’s bank account to transfer under the Direct Payment Scheme or by liquidising some investments – many were forced to take out a loan to cover the inheritance tax bill, counting on the fact that they can recoup this cash through selling estate assets once probate is granted.

It is possible for personal representatives to obtain a ‘grant on credit’ – meaning they can administer the estate and access funds before inheritance tax is paid – if they find it impossible to raise the funds required to pay the inheritance tax bill. This will only be granted, however, if they can show HMRC that they have made a very practical effort to raise the money; HMRC’s guidance also makes it clear that they will only issue such a grant in ‘exceptional circumstances’. The spring budget removed the requirement to have sought a loan to pay the tax, but it is unclear as yet if HMRC will be willing to allow more of these grants on credit.

Once final tax calculations for income and capital gains tax have been submitted to HMRC, along with a final payment, the executors will have to wait for confirmation from HMRC that everything is in order before the final accounts can be agreed. This final confirmation is reportedly taking between 6 and 12 months, while HMRC delays in finalising income tax and capital gains tax requirements can also result in late payment penalties or interest charges, as well as executors missing deadlines for tax advantages.

Impact on property sales

One of the most profound impacts of the probate delays is linked to inheritance tax and property sales.

Although estate assets, such as a property, can be marketed during the probate application process, none can be sold until probate is actually granted. Delays in the probate process therefore, mean that people are faced with mounting interest charges from HMRC or a loan company while they wait for probate to be granted.

Mistakes by inexperienced executors

Delays can also arise when inexperienced executors do not seek expert legal advice and fail to follow the correct process for applying for probate.

Problems and delays can also arise where disputes break out between the executors, creditors, beneficiaries or HMRC. For example, if incorrect inheritance tax figures were stated.

Sometimes the probate service requires more information before probate can be granted. This may be because key documents are missing, further confirmation may be required that the correct documents have been sent in, or more information is needed about the signing of the will. Alternatively, there may be defects in the application itself, such as the beneficiary names on the application not exactly matching those listed in the will.

Challenges for executors

Sometimes delays arise which are outside of everyone’s control. A solicitor frequently has to grapple with problems such as:

• issues with the will;
• a reluctant or deceased executor;
• difficulties tracing a beneficiary;
• third-party agency delays – such as with financial institutions or valuers;
• inheritance tax complications; and
• disputes among beneficiaries or other family members.

All of these take time to sort out and can add to the costs of the probate process through no fault of the solicitor.

How we can help

Our team of specialist solicitors can help ease the enormous and time-consuming pressure that is placed on an executor. They will manage the entire probate process in the correct order, ensuring that all the forms are filled out correctly and gather all the documents needed to submit with the probate application.

They can intervene if disputes are holding up the process, regularly check the progress of the application with the probate service, negotiate with HMRC where needed, and help you avoid any of the many pitfalls which can hold up a grant of probate process.

For further information, please contact Lucy Brown in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

‘Your pets are an important part of your family, but providing for them in your will is not as straightforward as providing for other family members,’ says Lucy Brown, Head of the wills and probate team. ‘Whilst a cat or dog might be relatively easy to care for, pets such as tortoises, llamas, or horses will likely require specialist care by someone who has sufficient time, knowledge and property to give your pet the care they need.’

Pets do not have a distinct legal personality and are technically belongings, but they sit in their own category between possessions and dependants and need to be considered carefully.

This means that you need to leave instructions about them in your will, and any financial provision you want to make for them cannot be a gift to the pet.

Livestock or pet?

There is a distinction between pets and livestock for the purpose of a will. You might, for example, have two pigs or llamas that you keep as pets, which would be treated as any other pet would in your will. However, if you have, for example, a rolling stock of 20 pigs that are used for breeding, or sold for their meat, this would likely be considered livestock and a business asset. Leaving livestock as a business asset under your will should be dealt with very differently and you should seek specific advice on this point to consider any pre-existing business agreements, as well as the most tax effective options for disposal on your death.

Leaving instructions about a pet in your will

First, you will need to consider what you wish to happen to your pet.

The most straightforward way is to leave your pet directly in the care of another person. This could be an existing owner of the pet, such as your partner or children, or it could be another family member or friend who does not currently share ownership of your pet. As with any gift in your will, you can leave your pets to whomever you wish and they do not need to know, or pre-approve, your intentions. However, a beneficiary of your will is not obliged to accept their gift and it can, therefore, be worth checking in advance that they are happy to take on responsibility for your pet.

Alternatively, you may prefer to leave your pet to a person or organisation for them to find the pet a suitable new home. This could be an animal charity, a family member, a trusted friend, or an executor, for example. You can state your wishes in regard to rehoming, but you should bear in mind that these would not be legally binding and the person or organisation would be ultimately responsible for deciding where your pet should end up going.

At the time of your death, it is possible that an individual may not be best placed to take on the responsibility of rehoming your pet, (for example, if ill or in unsuitable housing), and you should also consider the possibility that they may decide to pass the responsibility on by involving an animal charity.

In the case of a larger animal, for example, a horse, it may be that they can be sold by the estate and the sale proceeds paid to your beneficiaries. Your executors will have the authority to sell the pet, and it can be useful to leave a separate letter of wishes to guide your executors as to how, where, when, and to whom you would like the pet to be sold.

A professional can help you to decide the best approach for your circumstances.

Practical factors to consider

If your pet requires unusual care, or extensive facilities or land, this may need extra consideration when it comes to deciding who the best person is to care for your pet.

If you are leaving your pet to a charity to be rehomed, you should consider any specific wishes you might have about the type of home you would like them to go to and any particular way in which you would like them to be cared for. If you have more than one pet, you might also wish to request that they are not separated. As well as a will, a solicitor can draft a detailed letter of wishes for you so that your executor, and the person or charity to whom the pet is left, is aware of your wishes.

Financial considerations

If you opt to leave your pet to an existing owner, it is less likely that they would require a pot of money for your pet’s upkeep. However, another individual might need some financial assistance in this regard.

Whilst an animal charity is unlikely to need funds specifically for your individual pet, as they will already have their own general funding, a monetary gift to them in recognition of the fact that you are leaving your pet in their care might be appropriate.

Whilst you cannot leave money to a pet, you can leave money to the person who will become responsible for looking after your pet. Any such gift should be by way of a bare trust, to allow the person or charity to use the funds for your pet’s benefit, including food, vet bills, and other such essential costs.

You should think about an appropriate level of funds, as well as how flexible you want to be with the terms under which it can be spent, including any additional wishes you would like known.

Any money left in a bare trust for your pet’s upkeep will need to include a provision about what would happen to any remaining funds if your pet is no longer in need of the trust money. You might want this to revert to your family or friends, or you might want it to be passed to a charity of your choosing.

How we can help

Pets must be considered carefully within a will, and a well-drafted will, prepared by an expert, will ensure that all eventualities are covered.

For further information, please contact Lucy in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

If you are helping a loved one who is ill or vulnerable in their later life, whether formally or informally, there are various bodies that you might encounter with whom you will need to liaise to assist you with your loved one’s affairs.

Lucy Brown, Head of Wills and Probate highlights the main organisations and outlines why you may need to deal with them.

Whilst some organisations might be happy to liaise with you on an informal basis, many will not. Even those bodies which are willing to discuss your loved one’s affairs will require proper authority before allowing you to make any decisions for them.

In addition to your loved one’s solicitor, the main organisations that you might need to contact during this stage include, the Office of the Public Guardian and the Official Solicitor. You may also have to deal with the NHS, and your local authority.

Making sure you have the right authority

If you know that your loved one has planned ahead by making a power of attorney, you will need to locate the original. This might be stored with their papers at home, but it is more likely that their solicitor will be holding it for safekeeping. If so, they will need identification from you to release the original. Some solicitors will also require either your loved one’s authority or, if they no longer have mental capacity, some form of medical proof of such lack of capacity.

Office of the Public Guardian

The Office of the Public Guardian is responsible for registering powers of attorney and maintaining records of all the registered powers of attorney in England and Wales.

If you are uncertain about whether your loved one has made a power of attorney, it is possible to request a search of the Office of the Public Guardian’s records. This requires a specific form, which our solicitors can assist you to complete.

If you already know that a power of attorney exists, then you might need to liaise with the Office of the Public Guardian to register it. Again, this is a process with which our solicitors can assist. The process is dependent on the type of power of attorney:

• if your loved one made an enduring power of attorney, then it will be up to you to register this; or
• if they made a lasting power of attorney then this may already be registered.

You should check the position with a solicitor to ensure you are fully aware of what is required of you.

The Official Solicitor

The Official Solicitor’s Office is a governmental body which acts on behalf of those who are vulnerable and unable to instruct a solicitor of their own volition.

If the Official Solicitor is appointed, they will be appointed on behalf of your loved one, rather than you, but you will need to liaise and negotiate with them, and our solicitors can assist you with this. The Official Solicitor’s Office is an independent government body.  If the appointment of the Official Solicitor is deemed necessary, the cost of this service will be met from your loved one’s funds.

Acting for your loved one once authority is established

If you are appointed as your loved one’s attorney or deputy, you would then need to deal with various organisations to ensure their affairs continue to run smoothly and that their needs are taken care of. This would include financial institutions, such as their existing banks and any investment companies, as well as potentially the Land Registry and conveyancing solicitor if they have a property that needs to be sold, and a financial advisor who specialises in later life clients to ensure that your loved one’s funds are securely and appropriately invested in a risk-averse way that will yield the best possible returns.

Whilst your loved one’s financial position is important to ensure that they have access to suitable care, if a loved one is ill or vulnerable you may also be concerned about the health organisations you need to contact.

Local authority – social services

Depending upon their financial circumstances, your loved one’s local authority may be involved in ensuring that they are placed in a suitable care home or that suitable at-home care is provided. The local authority will also be key in establishing whether funding for your loved one’s care is available.

Provided you have the relevant authority, you are entitled to attend any meetings with the local authority when financial support is discussed. Before attending any care funding meetings, you should seek advice from a solicitor so that you are fully aware of your loved one’s rights and options. If required, you are also entitled to request that your solicitor attends the meeting with you.

National Health Service (NHS)

Similarly, the NHS may be involved in discussions and decisions surrounding care funding. NHS care funding is available in limited circumstances, but you should obtain legal advice and explore whether this applies to your loved one. You may also be required to attend meetings with NHS doctors, or other medical staff, to discuss aspects of your loved one’s care and how this should be managed.

If you are making decisions on their behalf, it is important that you ensure you are involved in the process all the way along so that you can make decisions on a fully informed basis and one that is in the best interests of your loved one.

How we can help

Acting for a loved one when they are ill or vulnerable can be very rewarding, but it can also be an onerous responsibility. Our solicitors can help you to ensure that your duties as an attorney or deputy are adhered to properly and fully, and that your loved one is cared for in the best possible manner.

For further information, please contact Lucy in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

The perils of a DIY will

‘Many people who opt to make a home-made will do so because they think they will save money on legal fees. Unfortunately, this can lead to problems and unexpected costs later down the line for the family who may be left to unravel problems at a difficult time,’ says Lucy Brown, head of the wills and probate team.. ‘DIY wills are sometimes declared invalid, or they can result in problems that require court intervention far more commonly than wills that have been professionally drafted.’

What can go wrong with a DIY will

The worst-case scenario with a home-made will is that the entire document is declared invalid. If this is the case, then your estate will not pass in accordance with your wishes and assets could end up in the hands of someone who you do not wish to inherit.

Alternatively, a home-made will might cause problems in relation to certain aspects of the contents, typically due to not fully understanding the legal requirements for a will. For example:

• Executors – Some home-made wills fail to appoint an executor because the person who has made it incorrectly thought it was only necessary to state who they wish their estate to pass to. An executor appointment is a vital part of the will. Without naming an executor, the remainder of the will may be valid, but pre-existing laws will determine who deals with the estate administration. This could, therefore, be someone who you would not wish to be involved. The same issue can occur if you appoint an executor without thinking about a replacement who could step in if your first choice is unavailable.
• Trustees – If your will requires trustees and you do not include the correct legal provision for this, it may result in an expensive and time-consuming court process for suitable trustees to be appointed after your death. The costs of such a process would be taken from the trust assets, leaving less for your beneficiaries.
• Children – In the case of young children, a will should always appoint a suitable guardian. If the will fails to do so and you die leaving children who are under the age of 18, someone will need to apply to the court to gain legal responsibility for them. Not only could this end up being someone who you do not necessarily trust to raise your children, it would involve lengthy court proceedings which may use up a large amount of your children’s inheritance.
• Gifts – Aside from issues with the people who should be named in the will but are not, a DIY will might result in issues with the gifts listed. Beneficiaries of a will should be carefully named or defined. The items to be gifted should also be clearly defined. If there is any doubt as to who the intended beneficiary is, or what the gift is, it can end up being a decision for the court to determine. Again, this is likely to prove costly and time-consuming, reducing the inheritance ultimately available and delaying the time by which this will be paid to your beneficiaries. The court could also rule that the intended beneficiary was someone different to the person you intended.
• Beneficiaries – It may also be the case that a DIY will does not contain a default provision, which will mean that if the first intended beneficiary has died the estate will end up passing by intestacy instead. Sometimes, a home-made will may also seek to leave a gift to a beneficiary that is not a valid legal entity for the purpose of receiving gifts, which again could result in the intestacy rules applying instead. These may not be in accordance with your wishes.
• Taxes and costs – Certain gifts might require some consideration in terms of specific requirements, such as who should pay any associated costs involved (for example costs of sale or taxes), or the age at which the gift should be inherited. If the will does not specify these aspects, then the law will determine them, and this may end up causing costs to beneficiaries unfairly or against your wishes. It could also result in higher taxes having to be paid, which a solicitor could have advised on and drafted the will to mitigate.

The benefit of using a solicitor to draft your will

Solicitors undergo rigorous training and receive regular updates on case law to ensure that they are fully aware of the correct legal terminology to use in a will so as to give effect to your wishes. They are also familiar with common issues and how to avoid these, as well as relevant tax laws and the appropriate ways in which to structure a will to make the most of any tax allowances.

A solicitor will discuss all of your family and financial circumstances with you to help you make an informed decision about the exact terms of your will so that you can ensure you and your loved ones are protected.

When choosing a firm of solicitors, it is advisable to seek a firm with appropriate accreditations. Solicitors are regulated by the Solicitors Regulation Authority and may have belong to other professional bodies, such as STEP or SFE which demonstrate a greater level of knowledge or experience.

As well as the benefit of solicitors being regulated, individual solicitors and their firms are also required to obtain professional indemnity insurance, giving you a route to redress if anything were to go wrong.

How we can help

Preparing your own will at home may seem like a good idea, but the cost-saving could backfire on your loved ones after your death. It is usually worth spending a small amount upfront to protect your assets and your family in the long term. Our solicitors can help you to ensure that your will is fit for purpose and achieves your desires. For further information, please contact Lucy Brown in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Carrying out the duties of an executor is both a privilege and a burden.  You have been tasked with ensuring that someone’s wishes are carried out after their death, and this can often be more complex and take longer than you imagine.  Some people prepare well for their death and leave their affairs in good order with clear instructions – but this is not always the case, and problems can come from a multitude of directions.

‘Before the administration of an estate can be completed, there are several important final steps to take,’ says Lucy Brown, Head of the wills and probate team. ‘Wrapping up the estate administration involves finalising distributions, as well as dealing with final taxes and preparing the accounts. Taking care with all the last steps thoroughly will help to prevent any last-minute niggles.’

Distributing remaining assets

At this point it is likely that you have distributed any legacies, whether specific items or monetary gifts, and that you are left with the residual pot of assets to allocate to one or more beneficiaries.

As an executor, you must be satisfied that any final distributions are:

• in accordance with the will or intestacy; and
• appropriate and in line with the estate assets available.

If there is a will, this sets out the shares each beneficiary is to receive. If there is no will, the intestacy rules must be followed. If you are unclear on the will’s interpretation or you are uncertain what the intestacy rules entail, you should seek advice before making any distributions to ensure you do so correctly.

Paying out too much from an estate could see you personally liable if you are left with insufficient funds to pay creditors or other beneficiaries. It is important to make sure that the figures add up by preparing draft estate accounts and ensuring these are updated throughout the administration, taking into account all of the known liabilities and estate expenses. Only once you are satisfied that all relevant liabilities and expenses can and have been paid should you make the final distributions.

Not paying the beneficiaries enough from estate funds can be equally tricky. In some instances, you will have no choice but to hold on to funds. For example, certain types of investments can take a long time to liquidise, or you may still be trying to establish contact with a beneficiary. If you find yourself holding onto funds that are no longer required for the estate administration, for example if you have retained too much for the payment of liabilities or tax, you will need to account to all the beneficiaries again for the small sums held. This is not only time-consuming but could also prove costly to the estate if you end up requiring legal advice at this late stage.

Paying tax liabilities

Where any estate assets generate income, such as a rental property or shareholdings, it will usually fall to you as executor to calculate and pay any income tax due.

You will also need to consider capital gains tax if assets have been sold for more than their probate value, for example property or shares.

If you fail to deal with the income or capital gains taxes before distributing the estate, it will be your responsibility to pay the tax due if you cannot reclaim it from beneficiaries. If the beneficiaries do not agree to paying funds back to the estate for this purpose, it could become necessary to issue court proceedings which can easily become a protracted and costly exercise.

There may be circumstances where it is more beneficial to appropriate assets to beneficiaries so that they become responsible for the income tax and capital gains tax arising on those assets. Appropriation is similar to transferring an asset however you, as the executor, remain as the legal owner and the beneficiary only receives the beneficial interest in the asset. Appropriation can be done at any point, and can be a useful tax-saving tool, but you should seek advice on this point early to ensure that you are dealing with the estate in the most tax-efficient way for everyone concerned as soon as possible during the estate administration.

If assets are appropriated, then it is important to make sure that everyone is clear about who is responsible for which taxes and that all beneficiaries are fully advised and aware of their responsibilities. If you fail to make a beneficiary aware of the implications of appropriation, you could find yourself personally liable for resulting tax payments.

Estate accounts

Finalising the estate accounts is a vital part of any estate administration. It forms part of your executor’s duties to prepare accounts to be presented to the court on demand. Estate accounts set out:

• the estate summary, which details the value of the assets and liabilities at the date of death;
• the capital accounts, which details administration costs, inheritance tax liabilities, and all other capital income and expenses during the administration period;
• the income account, which details all of the income received and tax due during the administration period; and
• the distribution accounts, which set out how the net value after expenses is distributed.

To calculate the net value after taxes, you will need to account for:

• any capital received since death, such as a refund of care fees or council tax;
• any income received since death, such as interest on bank account or dividends on shares; and
• executor expenses, such as any valuation fees or the probate application fee and professional costs – such as legal fees, accountants’ fees, conveyancing costs and searches.

As executor, it is for you to approve and sign off the draft estate accounts. Once signed, the final estate accounts should be sent to all the residual beneficiaries for their agreement before distributions are made. Beneficiaries are not required to approve the estate accounts, but it is courteous to seek their agreement to the final accounts.

Unallocated assets

In the event that there are any assets that you have been unable to deal with, or payments that you have been unable to finalise, you should discuss these with the beneficiaries. Ideally you will be able to plan together how best to resolve the situation, including any necessary contingencies for additional payments that might fall due or additional assets that might later be realised by the estate. For example, sometimes foreign shareholdings can prove difficult to access and to sell. If the shares only represent a very small portion of the overall estate, you and the beneficiaries may choose not to pursue the sums, instead agreeing that the shareholders should donate them to a local charity. If there is a beneficiary who cannot be located, you and the other beneficiaries will need to decide who holds on to their share. This could be you, the court, or the other beneficiaries on the proviso that they repay this should the missing beneficiary later appear.

Retaining paperwork

Once the estate accounts have been finalised and the estate can be wound up, it is important to ensure that a copy of the accounts is retained by you and any other executors in case these are required in the future, either by creditors, beneficiaries, or the court.

You should keep the accounts ready for presentation for as long as possible, but in any event for at least six years.

How we can help

Before finalising an estate and making final distribution payments to beneficiaries, it is important to ensure that all final matters are fully concluded, including payment of all tax liabilities, and the preparation of estate accounts.

Even if you have dealt with the estate administration yourself, it can be beneficial to instruct a solicitor for these important final steps, especially if there is any risk of a future dispute. You may still find yourself personally liable if you simply failed to seek appropriate advice.

Our solicitors can help you to ensure that your tax and accounting duties are adhered to properly and fully. For further information, please contact Lucy Brown in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

When dealing with the administration of an estate, distributing the gifts is one of the final stages. It is important that executors do not make distributions too soon, to protect themselves and the estate against debts or claims. Executors are advised not to pay out gifts before obtaining the Grant of Probate as time limits for claims against an estate usually run from the date of the grant, rather than the date of death.

‘Often executors and beneficiaries alike do not realise exactly how many different steps are required to administer an estate, but there are several parts of the process before distribution will be possible,’ says Lucy Brown, Head of Wills and Probate. ‘Once you are in a position to make distributions from the estate, there are various considerations that will need to be made.’

Beneficiaries

Even though you will not be able to distribute the estate until late in the process, you should already have located all the beneficiaries and notified them that they are due to receive items or money from the estate. You should, at this stage, check that their contact details remain the same and check their bank details in readiness for payment of the sums due to them.

If you have not yet attempted to locate any beneficiaries, now is the time to do so. If you have been unable to locate any beneficiaries, or you are now unable to re-establish contact with them, you will need to hold onto any items or money due to them until they are found, or until you have taken satisfactory alternative steps.

You must take all reasonable steps to locate beneficiaries. If you cannot locate a beneficiary yourself, you should seek help from a reputable tracing agent. If the tracing agent is also unable to locate the beneficiary, there are options available to you to ensure that you are not forced to hold on to that beneficiary’s share of the estate forevermore. Some of these options involve reaching an agreement with other beneficiaries, some will involve making an application to court. A solicitor can help you to identify the most suitable option for your circumstances and help facilitate the process.

Communications

Beneficiaries often do not understand why things take so long, so proactive communication with beneficiaries is key to the prevention of frustration.

You should let them know as soon as the grant of probate has been received and when they can expect to receive their gift.

No beneficiary is obliged to accept a gift left to them in a will. It is always worth checking with beneficiaries if they actually want what has been gifted to them, especially if it is a particular item.

Before distributing gifts to beneficiaries, make sure you check how they would like to receive the gift. For example, if the beneficiary is due to receive shares, they might prefer to receive the shares themselves so that they can retain these as an investment. Alternatively, they may not wish to deal with the complexities of shareholdings and simply prefer for the estate to sell the shares and then to receive the monetary value instead. You should always be led by the beneficiary’s preferences and wishes. If a beneficiary has no preference as to whether they receive a gift of shares as shares or as money, you should consider whether selling would be disadvantageous. For example, if the shares have recently dropped significantly in value but they may well go back up, it might be more advantageous to transfer the shares to the beneficiary so that they can retain them until they increase in value.

Unwanted gifts

If the beneficiary does not wish to receive it, they can disclaim their gift, which could then leave the item available for another beneficiary who does wish to receive it as part of their share.

Disclaiming a gift requires a formal written document, which a solicitor can help you to arrange.

Practical distribution of gifts

Where specific items are to be shipped to a beneficiary, the will should specify who is to pay the cost of the shipping. This is particularly important if the beneficiary is based overseas or when the shipping would be more expensive than usual for any other reason.

Until gifts can be distributed, the executor should keep these somewhere safe and should insure items of significant monetary value.

For gifts of shares, the cost of selling or transferring these would be borne according to the terms of the will. If the will does not specify who should pay the costs, it will be for the beneficiary of the shares to bear the burden.

Timing

If some assets are taking a long time to realise, you may be under pressure from beneficiaries to distribute whatever you can. Specific gifts, such as jewellery or artwork, can be passed on to the recipients as soon as it is available, so long as the gift is not under dispute. You can also make interim distributions to those beneficiaries who are due to receive the residue of the estate whilst you are awaiting receipt of any remaining assets.

How can we help?

As with all stages of estate administration, any distribution must be in accordance with the will (or intestacy rules) and in the best interest of all the beneficiaries. If you are unsure about what you are allowed to distribute, or if you find yourself dealing with any difficult beneficiaries, our solicitors can help.

For further information, please contact Lucy Brown in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

‘Trusts are typically used to preserve assets for loved ones in private client estate planning, and many trusts are fairly inactive a lot of the time,’ says Lucy Brown, Head of the Wills and Probate team. ‘Often action is only required when the trust is first set up, when assets are distributed, or when the trust needs to be wound up. These events involve strict legal requirements, and you must fulfil your obligations as a trustee, so obtaining advice from a solicitor at key times will help you to ensure full compliance with these duties.’

Requirements during the trust period

When a trust is set up, or if changes are made to it during its term, you must register the trust or update the trust registration. The Trust Registration Service is a legal requirement and it is the trustees’ duty to register the trust, failing which you may have to pay a fine for which you would be personally liable. If you have been appointed as a trustee for a new trust, or if you are a trustee of an existing trust which has not yet been registered, you should contact a solicitor to help you navigate the Trust Registration Service.

If the trust is subject to income or capital gains tax, you will need to submit an annual tax return to report the tax due to HMRC. Tax returns should be completed carefully, and you should seek advice as to any tax mitigation that might apply to the specific trust for which you are acting as trustee. It may be that the type of trust or the assets held within it have special tax benefits, and you could find yourself personally liable to beneficiaries if tax is overpaid as a result of failing to obtain legal advice.

Inheritance tax should also be considered when setting up a trust, paying in further monies, or paying money out. Our solicitors can help to ensure that inheritance tax is fully considered and reported.

Whenever you make a decision as a trustee, for example deciding to distribute assets, to add discretionary beneficiaries, or to change the trustees, that decision must be recorded. This might take the format of straightforward trustees’ minutes, or it may require a formal legal document.

Once a decision has been reached, and recorded, the implementation of that decision will usually require a deed. A deed is a specific formal legal document, and it needs approval from and signature by all relevant parties. The trustees will need to sign, and in certain circumstances so will beneficiaries and/or the person who originally set up the trust, as well as any new parties who are being added. A solicitor can help to draft the deed and ensure that it is legally compliant.

Requirements when the trust ends

When a trust ends, the Trust Registration Service needs to be notified and any final tax return submitted to HMRC. This will probably be the time when further inheritance tax is triggered, which again must be separately reported to HMRC.

Much like when a key decision is made during the trust period, a deed is required to formally wind up the trust and bring it to an end, so it is advisable to consult a solicitor on this final step.

How can we help?

It is relatively straightforward to be a trustee while the trust is simply accumulating income, but when action is required matters become far more complex. As a trustee, you are obligated to adhere to certain rules and requirements, and your decisions should be recorded and actioned appropriately.

Our solicitors can help you to ensure compliance in your role, to accurately draft relevant documentation, and to liaise with relevant organisations. For further information, please contact Lucy in the Wills and Probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

If you have been asked to be an attorney for someone under their power of attorney, whether for finances or health and welfare, then they have placed their trust in you to act in their best interests at all times. This will also be the case if they did not have a power of attorney and the Court of Protection has appointed you as a deputy.

‘In practice, this can be easier said than done with difficult decisions such as whether the person should be cared for at home or in a nursing home setting, whether they should receive specific medication, or whether their house should be sold,’ says Lucy Brown, Head of Wills and Probate at Kidd & Spoor.

Fortunately the Mental Capacity Act provides guidance and sets out various factors that you must consider when deciding what is in another person’s best interest. It is important to follow what the Act says, and a solicitor can help you to understand your obligations under the law.

Mental Capacity Act factors

The key things to consider when making a best interests decision are:

• whether the person is likely to regain capacity to make the decision at some point in the future;
• the person’s general beliefs and values;
• the person’s past and present wishes and feelings;
• whether the person has made any written statement about their wishes;
• as far as is possible, you must also permit and encourage the person to participate in their own decision making; and
• you must also take into account the views of anyone who is involved in the person’s care.

If the person is likely to regain capacity, then you should factor this into any decisions you make, ensuring that they are as temporary as is suitable for the circumstances. Depending on the decision to be made, and the surrounding circumstances, it may also be appropriate to delay the decision if the decision cannot be temporary, or would be significantly life-changing, and it is not urgent.

If they have some capacity to participate, you should make sure that they are given the opportunity to do so as far as possible. For example, somebody may have capacity to decide what they want to eat for their dinner but not what medication they should take.

How to gauge a person’s wishes and feelings

Ideally, if you are appointed as someone’s attorney, you should discuss with them in advance what they would like to happen in various situations. However, this is not always possible (for example, if you are appointed as a deputy, the person will have already lost capacity and you may no longer be able to have certain conversations). Circumstances can change over time, and questions may arise which you have not considered.

Whilst any previously discussed wishes and feelings (or any that the person has recorded in writing) would be the most important factor, some useful guidance from previous cases in this area of law is that the following should be considered:

• what was the person like before they lost capacity?
• what was their job or their hobbies?
• what was important to them?
• what were their likes or dislikes?
• did they have any specific religious, spiritual, or ethical beliefs?

Involving others in a best interests decision

If you have co-attorneys, you should ideally all come to a best interests decision unanimously. Even if you are acting alone, it is useful to consider the thoughts of the person’s family and friends.

Where the decision to be made is one of a medical nature, you should also bear in mind the views of medical staff involved in the person’s care. Key questions to ask the medical professionals are what the risks and benefits of each possible option are, the likelihood of those risks or benefits occurring, and the seriousness of each risk and benefit.

If you are concerned that the correct decision may not be made, you should request a best interests meeting with medical staff. This can greatly assist with the decision making process and help to reduce the pressure you may feel around having to make such a decision on someone else’s behalf.

What if there is a disagreement?

Best interest decisions should be taken carefully and with consideration of all the relevant circumstances. One person’s best interest may not mirror another’s, even if they are a couple or they are closely related or otherwise heavily involved in one another’s lives.

If there is more than one attorney and you cannot agree on something; whether one can make a decision without the other(s) will depend on the way the Power of Attorney was set up. If attorneys are appointed jointly and severally, one may make decisions and authorise actions without the others necessarily agreeing. Practically, this is likely to cause upset, and you should always seek to agree in the first instance or opt for some third-party input or mediation if agreement cannot be reached.

If you are appointed under a Health and Welfare Lasting Power of Attorney, the final decision lies with the attorney(s). This does not, however, prevent any person from contesting your decision if they believe it is not in the best interests of the person you are acting for.

In the case of continuing disagreement, an application can be made to the Court of Protection to intervene and make a ruling.

How can we help?

If you are struggling with making a best interest decision or you wish to understand the law in this area a little more clearly, our solicitors can help. If you have concerns about the actions of another attorney, or any decision they have made, our litigation team can assist.

For further information, please contact Lucy in the wills and probate team on 0191 297 0011 or email whitley.bay@kiddspoorlaw.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.