Paying inheritance tax when estate funds are tied up

When applying for probate in regard to an estate which is subject to inheritance tax, the Probate Registry requires tax to be paid before the grant of probate application. This can prove difficult as most financial institutions will not pay out sums to executors without first seeing the grant, but there are ways to deal with this dilemma.

‘If assets are tied up in a business or property, then executors may not be holding sufficient liquid funds to pay the inheritance tax up front,’ says Nigel Miller, a Director in the wills and probate team with Kidd & Spoor Solicitors Limited. ‘However, executors can apply to a bank which is holding estate assets and request the bank to pay HMRC directly. In addition, certain inheritance tax payments can be deferred.’

What are the rules for paying inheritance tax?

If inheritance tax falls due on an estate you are dealing with, you must pay this within six months of the person’s death. Payments made after the six month deadline will be subject to interest and possible fines.

This six month period represents a maximum time limit, as inheritance tax must be paid upon submitting the inheritance tax account to HMRC. Without first paying the inheritance tax liability, HMRC will not allow the Probate Registry to release a grant of probate, and without the grant of probate you cannot continue the administration of the estate.

As a grant of probate is needed in order to access most estate assets, it is common for executors to apply to one or more of the banks holding funds and to request the bank pays the inheritance tax due directly to HMRC. Once the tax liability has been settled HMRC will confirm this to the Probate Registry, and you will be free to obtain the grant of probate.

If funds held in bank accounts and other liquid investments are insufficient to cover the tax liability in full, you may find yourself in a position where you are unable to clear the tax until a grant of probate is obtained and assets can be sold, whilst also being unable to obtain the grant of probate until the tax liability is paid. In these circumstances speak to our solicitors to discuss whether deferred payments could be an option for you.

Paying inheritance tax by instalments

HMRC do allow inheritance tax to be paid by instalments over a ten year period on certain estate assets which are:

  • land and real property;
  • business assets;
  • shares which gave the deceased complete control of a company; and
  • certain unquoted minority shareholdings (dependent upon specific criteria).

Inheritance tax falling due in respect of any of these types of assets can be split into 10 equal instalments. However, the first of the 10 instalments is payable prior to the grant of probate being issued.

When opting for payment by instalments, it is important to note that interest may accrue. If instalments relate to business assets or shares, interest only arises on each instalment if it is paid late. With land or real property, the instalments carry interest from six months following the date of death until the full inheritance tax is settled, even if all instalments are paid on time.

Because of this, many executors opt for the instalment option in order to obtain the grant of probate but then pay all of the inheritance tax due as soon as assets are sold to minimise interest. When assets are sold which themselves are subject to inheritance tax by instalments, the full inheritance tax due on that asset must be paid at the point of sale. The minimisation of interest should also be a key factor when executors are considering their duties to the beneficiaries, as it is of course in the beneficiaries’ best interest to pay as little interest on inheritance tax as possible.

What can be done if funds are not sufficient to pay the first instalment of inheritance tax?

If you are the executor of an estate where all, or most of, the assets are land or real property, you may find yourself without available funds to pay any of the inheritance tax due prior to obtaining the grant of probate. You, or the beneficiaries, may have to temporarily meet the inheritance tax liability personally, by way of a loan to the estate. Alternatively, you can apply for a bank loan to cover the tax due.

Either of these options will require you to ensure that the terms of the agreement are clear and fair, and you should seek advice as to the suitability of these options in your individual circumstances.

Where executors and beneficiaries are unable to cover the cost of inheritance tax and a bank loan is not an option, HMRC may agree to the issue of a grant of credit. HMRC will require a professional undertaking that inheritance tax will be paid once assets are sold and may even require confirmation that a purchaser has already been found. As such, this option will usually only be available when you have a legal representative acting on your behalf.

How can we help?

Payment of inheritance tax can be tricky to navigate, as is it often a circular issue between payment of tax and release of the grant of probate. However, it is not an insurmountable issue and can be resolved with the correct professional advice. Obtaining advice as early as possible can prevent stress and unnecessary interest.

Our solicitors can advise you on the payment of inheritance tax and which options are likely to be the most suitable for your needs.

For further information, please contact Nigel Miller or Noel Dilks in the wills and probate team on 0191 2970011 or email nm@kiddspoorlaw.co.uk or nd@kiddspoorlaw.co.uk.

Intestacy lessons from the rich and famous

While celebrities often have many professional advisors who look after their business affairs, like many ordinary people they sometimes do not get around to making a will and setting out their particular wishes.

‘When you die without a will, predetermined laws of intestacy decide who should inherit your estate and in what shares, and while these laws seek to deal with matters in a fair way, they cannot take into account modern family structures, family dynamics or personal wishes,’ says Nigel Miller, a Director in the wills and probate team with Kidd & Spoor Solicitors Limited.

It is only by seeking advice on the preparation of a will that your own situation can be fully considered. There are many ways in which intestacy provisions might not be suitable for your needs.

Nigel highlights some of the lessons that can be learned from Pablo Picasso, Prince, Amy Winehouse, Rik Mayall and Stieg Larsson, and why you should not put off making your will.

Stieg Larsson’s lesson for unmarried couples

Depending on your family circumstances, the intestacy rules may not provide for those who are closest to you. Author Stieg Larsson, who famously wrote the Girl with the Dragon Tattoo series, died intestate. His vast wealth passed to his father under intestacy, leaving his long-term partner with nothing. Unmarried couples are not entitled to each other’s estates, regardless of the seriousness or length of the relationship, so the only way to ensure your partner receives any of your assets is to leave them under a will.

Rik Mayall’s lesson in tax planning

Intestacy is often not the best approach when it comes to tax planning. When actor Rik Mayall died intestate, his wealth was subject to a substantial inheritance tax liability that might have been reduced if he had planned his affairs during his lifetime. Obtaining advice around pre-planning and putting suitable provisions in place can help you to ensure that your estate benefits from available tax savings in the best way possible. One of the most important ways to achieve this is with a will.

Pablo Picasso’s lesson to save delay and costs

Without a valid will, a complex and extensive estate can be difficult to deal with, resulting in unnecessary delays and high costs. Whilst an average estate takes around one year to administer, when Pablo Picasso died without a will his estate reportedly took six years to settle and cost approximately $30 million. Instructing a professional to make sure everything is set out beforehand means your loved ones receive their money more quickly and your estate’s legal costs are lower.

Prince’s lesson for philanthropists

Family feuds over who should inherit may be more likely and harder to settle where there is no will, as the person’s wishes remain unknown. After the artist we call Prince died, intestacy rules meant that all his assets passed to his siblings, leaving his five half-siblings without a share of his estate. Had Prince made a will, he could have given some money to his half-siblings as well. He might also have chosen to leave some gifts to the various charities he gave generously to throughout his lifetime, something which can never be achieved without a will. Appropriate legal advice can help guide you to ensure that all your favourite charities are provided for, without disadvantaging your loved ones.

Amy Winehouse’s lesson for entrepreneurs

Intestacy rules do not consider the continued management of estate assets like a business or intellectual property such as royalties from music. Amy Winehouse’s intestacy resulted in her £4 million estate being almost entirely depleted within two years of her death after her companies passed into the control of her parents. A will would have allowed her to appoint an appropriate person to manage the companies on behalf of her beneficiaries and to ensure that they remained viable assets. If you are a business owner, it is important that you understand how that business will be dealt with on your death. You should seek professional advice to consider the continuing needs of your beneficiaries as well as anyone associated with your business.

How we can help

Whether you have a significant music back-catalogue or a special collection of vinyl records, making a will is the most effective way of determining who will benefit from them. It ensures that you are in control of how your estate passes, that you have planned in the most tax-efficient way, and that your loved ones will not be left arguing after you have gone.

Our solicitors can advise you on preparing a will in a way that ensures your choices are clear and legally binding, as well as advising you how best to pre-empt or manage potential conflicts and how your estate might be affected by various taxes.

For further information, please contact Nigel Miller of Noel Dilks in the wills and probate team on 0191 2970011 or email nm@kiddspoorlaw.co.uk  or nd@kiddspoorlaw.co.uk

 

Protecting your business if you lose mental capacity

With people seeking greater flexibility and a better work-life balance, small and medium-sized businesses (SMEs) now account for 99 per cent of all private businesses in the UK.

‘Launching and building your new startup is an exciting time and contingency planning is vital. But many entrepreneurs do not consider the longer term and the impact that personal health problems might have on their business,’ says Nigel Miller, a Director in the wills and probate team with Kidd & Spoor Solicitors Limited. ‘It is just as important to plan for health problems of key directors as it is to insure against fire or other business risks.’

A separate lasting power of attorney for your business interests may be one way to ensure that your enterprise is protected if you lose mental capacity.

What would happen if you became seriously ill?

What would happen if you had a serious accident or a debilitating illness which left you unable to carry out your duties within the business?

To some extent this will depend on the type of business structure and whether you have fellow directors or partners. In this case, your business (or your share of the business) would be managed in accordance with any pre-existing agreement between you and your partners or co-directors.

However, startups and family businesses often operate without formal corporate structures and agreements.  So, if you are a sole director without a lasting power of attorney, and no other signatories on your business bank account, no one will have authority to deal with your business decisions. Even if your account does have another signatory, their authority is likely to be limited to operation of the bank account only.

Some people may have already made a financial lasting power of attorney, but there may be no distinction between decisions relating to personal finance or the business. Your attorneys would have authority to make decisions on your behalf, but they may not be the best people to deal with your business affairs and their involvement could cause problems. For example, if you have appointed your children to deal with your finances but they are not familiar with your business then their input might be problematic for an experienced business partner or manager.

If you have not made any arrangements, your business partner or a staff member, or a member of your family, could apply to the Court of Protection to deal with your affairs on your behalf. An application to the Court of Protection can take several months, during which time no one would be authorised to run your business. There may be practical steps that staff members can take to help keep the business ticking over, but they may be unable to access your accounts or make certain decisions.

While a successful application to the Court of Protection would result in a deputy being appointed on your behalf, this is unlikely to relate specifically to your business decisions unless this issue is addressed during the application process. Therefore, your deputy may not have the necessary skills to operate your business. It could even prove necessary for them to make further applications as and when specific decisions need to be made which are outside the scope of powers granted to them under the general deputyship order.

Alternatively, an application may be made by someone who is able to manage your business in the way you would, but that person may not be the most appropriate person to deal with your personal finances.

The benefits of a lasting power of attorney for business

Whatever the situation there can be problems, but by making a specific lasting power of attorney for your business decisions you can decide who will step in if you can no longer run your organisation yourself, whether this is a temporary or permanent situation.

In the event of permanent incapacity, you can even include preferences in your lasting power of attorney which direct your attorney to work with a specific accountant or solicitor, or to sell the business on your behalf.

Pre-planning in this way is not only beneficial to you and your business, but it prevents additional stress being placed on your loved ones. Instead of having to worry about your business affairs, they can concentrate on helping you with your personal financial and healthcare concerns.

Having a lasting power of attorney in place for your business decisions also creates greater certainty for customers, suppliers, and others you may work closely with, as they will be able to continue engaging with your business without major disruptions.

Creating your business lasting power of attorney

The process for a business lasting power of attorney is the same as one for your personal financial affairs, and you will need to appoint someone who you trust.

For most people, it is unlikely that you will want your business attorney to have access to your personal finances, so it is crucial to make sure that your authority appropriately limits the scope of your attorney’s decision-making.

You will, therefore, need to make two lasting powers of attorney – one which specifically relates to your personal finances only and another which specifically relates to your business affairs. Appropriate drafting is key, and your solicitor can help with this.

Careful drafting is also key in ensuring that your attorney continues to run the business in your best interests. Including preferences and instructions in your lasting power of attorney will help to guide your attorney so they can confidently make decisions on your behalf knowing that you would approve. Preferences and instructions do have to be considered carefully, as they must be both legal and workable. If you are unsure about what guidelines you may include, seeking advice early can prevent delays and additional costs when it comes to registering your lasting power of attorney.

If you have a business partner or co-director, you also need to consider their position. You should always discuss any proposed lasting power of attorney for the business with them, as well as ensuring that the arrangements you make are not in opposition to any existing agreement in place.

 

How our solicitors can help

Obtaining advice from a solicitor and having your lasting power of attorney professionally drafted will ensure that it adequately protects all your business interests.

For further information, please contact Nigel Miller or Noel Dilks in the wills and probate team on 0191 2970011 or email nm@kiddspoorlaw.co.uk  or nd@kiddspoorlaw.co.uk.

Can I give up or amend a legacy after someone has died?

While the specific terms of any will are up to the individual who makes it, after they have died there may be circumstances where those left behind wish to pass their gift to someone else.

‘Beneficiaries are not obligated to accept their inheritance, whether under a will or under the terms of intestacy,’ says Nigel Miller, a Director in the wills and probate team with Kidd & Spoor Solicitors. ‘There may be a number of reasons why beneficiaries wish to give up their interest in an estate, ranging from purely financial to the more personal.’

Often a will may have been made several years prior to a person’s death and family circumstances have changed. This could mean that their estate passes in a way which is no longer the most appropriate for the needs of their family, or in a way which is no longer tax efficient.

For example, when children are young, it is likely to be sensible to leave an inheritance by way of a trust. However, if you are the adult child of someone who has done so, the cost implications and administrative duties of dealing with a trust may no longer be worthwhile. Alternatively, the deceased person may have left their estate to their children equally, but now one is more financially independent than the other and content to forgo their own share to benefit their sibling.

Many wills are drafted to be as tax efficient as possible based on circumstances at the time of drafting, and it may be the case that changing circumstances and new tax rules mean that the will terms no longer achieve the desired effect.

Where there is no will

In the case of an estate where there is no will, intestacy rules will prevail and this may not provide for those left behind in the fairest way possible. Changing the way an estate is to be distributed can allow you to ensure that someone who would otherwise miss out will be provided for. For example, intestacy does not provide for unmarried couples, no matter how long term or serious the relationship. Varying an intestate estate of someone in this situation can allow for the deceased’s partner to inherit rather than, say, the deceased’s sibling.

Again, saving tax may be a consideration. Intestacy rules are designed to ensure that close family members are provided for and they have little concern for tax planning. As such, varying those provisions might be advantageous when it comes to how much tax an estate will be liable to pay.

Disclaiming a legacy

If you simply do not wish to receive a gift due to you from an estate, without being concerned about who else should, you may disclaim your inheritance. You may disclaim your gift in full as long as you have not accepted any part of it. If you are due to receive several gifts from the same estate, you can disclaim any one or more of them without necessarily giving up your right to the others.

If you disclaim any one individual gift you give up your right to that particular gift in its entirety. For example, if you have been left a vase, £10,000 and one quarter of the residue, you can disclaim the vase and the residue whilst still taking the £10,000 but you cannot disclaim £5,000 of the total £10,000.

If you choose to disclaim any gift, the estate will be distributed as though you have died before the testator and the will or intestacy rules will determine who should receive your gift instead. You have no control over its destination. For this reason, disclaiming is not as common as the alternative, which is to enter a deed of variation.

A deed of variation

A variation of an estate is in the hands of the person seeking to vary the will and a beneficiary, so has a much greater level of control than disclaiming. If you do not wish to receive your entire entitlement under a will, or under intestacy, you can vary your entitlement without giving it up altogether. For example, if you were due to receive £500,000 but you only need £250,000, you could forgo half of your entitlement and keep the rest.

If you vary the share of an estate which is due to you, you can decide who should receive the inheritance in your place. It could be that you feel another beneficiary (or even someone who is not already entitled to a share of the estate at all) is more deserving or more in need so that you wish that person to receive your share.

Alternatively, it may be that it is more tax efficient overall if the inheritance is redirected to a specific person. Due to the extra control a variation offers, it is often the preferred choice for a beneficiary who has chosen not to receive some or all of their inheritance.

How to vary an estate

If you choose to alter your entitlement, either by way of disclaimer or variation, you will need to do so within two years of the date of death for it to retrospectively effect inheritance and capital gains tax.

A disclaimer may be made verbally, but it is best to record the decision in writing. A variation must take place in writing.

It is important to note that some trusts and other more complex provisions may not be variable in the same way as a straightforward gift will be. It is always best to seek legal advice upon your own individual circumstances.

How can we help?

If you do not wish to benefit from an inheritance, there is no obligation on you to accept it. Giving up an inheritance does have consequences for you and for the estate, and you should seek advice before disclaiming or varying your interest so that you are content it is the right decision, and you go about it in the best way.

Our solicitors can advise you on disclaiming or varying an interest in an estate, as well as on the probate process in general, to help you make sure that you are making the best decision and that your choices are clear and legally binding.

For further information, please contact Nigel Miller or Noel Dilks in the wills and probate team on 0191 2970011 or email nm@kiddspoorlaw.co.uk or nd@kiddspoorlaw.co.uk.

Shining a light on secret and half secret trusts

A secret trust can be a useful way of leaving a gift in your will if you do not wish the details of that gift to become public knowledge.  Historically, secret trusts were used by those wishing to pass assets to extra-marital partners or illegitimate children without revealing the relationships to the immediate family.

While there are many reasons why someone may wish to keep details of a gift private, rather than see it published in their will after their death, extra care needs to be taken in the use of a secret trust in estate planning as they can be fraught with difficulty.

‘Secret trusts are legally recognised, though not lightly,’ says Nigel Miller, a Director in the wills and probate team with Kidd & spoor Solicitors. ‘If you do intend to make a secret trust, make sure you obtain expert advice and that you understand the potential pitfalls.’

Earlier this year, a case involving a secret trust went before the High Court. In Titcombe v Ison, Mrs Titcombe’s niece argued that her aunt had left all of her jewellery to her using a secret trust. However, as she was not able to provide sufficient evidence to prove the existence of the secret trust, the court rejected her claim and Mrs Titcombe’s niece did not receive any of the jewellery.

Secret trusts explained

Secret trusts are, by their very nature, secretive. Within a secret trust, assets are left either outright to the trustee or to the trustee to hold on trust. However, behind the scenes the trustee has given explicit instructions to hold the assets for a third party who is unknown to any other person. Whilst this allows for redirection of assets without your wishes becoming public knowledge, it does mean that you are heavily reliant upon the confidence you place in your chosen trustee. If you intend to pass assets into a secret trust, it is imperative that you have full and unquestionable faith in your trustee to carry out your wishes.

A trustee of a secret trust is under the same legal obligations as any other trustee, but from a practical perspective it is far easier for the trustee of a secret trust to deny the trust’s existence. It can also prove extremely difficult for an intended beneficiary to assert their rights without appropriate documentary evidence.

Fully secret and half secret trusts – what is the difference?

There are two types of secret trust, the fully secret trust and the half secret trust.

Under a fully secret trust, the existence of the trust is known only by the testator and the trustee. On face value, the will appears to leave an outright gift to the trustee. For example, a will might state ‘I leave £10,000 to Joe’, whereas the testator has in fact told Joe that he is to hold the £10,000 on trust for the benefit of the local animal shelter.

With a half secret trust, the fact that the assets are to be held on trust is known from the terms of the will, however the beneficiary remains a secret. Here, the will clause might state ‘I give £10,000 to Joe to hold on the trust we have previously discussed’, and only Joe knows that the money is to be held for the benefit of the local animal shelter.

In order to form a valid secret trust, you must communicate your intention to create the secret trust to your trustee and your trustee must accept the role. Therefore, you cannot simply incorporate a secret trust into your will without telling your trustee anything at all but then leave a separate letter addressed to them setting out your wishes. Neither can you incorporate a secret trust that your trustee has refused to accept in the hope that they will change their mind and accept this on your death.

If you do create a valid secret trust, the law states that this can be enforced against a trustee who tries to deny its existence – however, the court will first need to be satisfied that such a trust does exist, which could be difficult to prove.

What if you are a trustee or beneficiary of a secret trust

Agreeing to become a trustee of any trust is not a decision that should be taken lightly. This applies even more so in the case of a secret trust, as a dispute is more likely to lead to costly and time consuming litigation. Before agreeing to become trustee of a secret trust, you should seek advice as to the role and your responsibilities in relation to the trust.

If you believe that you are the beneficiary of a secret trust and that you are being denied your rights under its terms, you should seek advice as to your position and the steps you can take to ensure that the trust is enforced.

Whether you are a trustee or a beneficiary, our solicitors can provide you with the expert advice necessary to navigate this tricky area.

How else can we help?

If you are not a trustee or beneficiary, but you think you may wish to set up a secret trust, we can advise you in relation to this.

Our solicitors can advise you on secret trusts, as well as your more general requirements to help make sure that your wishes are clear and legally binding in your will.

For further information, please contact Nigel Miller or Noel Dilks in the wills and probate team on 0191 2970011 or email nm@kiddspoorlaw.co.uk or nd@kiddspoorlaw.co.uk.

Managing financial affairs under a lasting power of attorney

Making a lasting power of attorney for your finances is an important part of lifetime legal planning, especially if you have built up a portfolio of assets and investments which require regular management. While this legal authority needs to be set up well in advance of when it might be required, it can also be difficult to predict exactly what situations might arise in the future.

Fortunately, our private client solicitors have supported many people through the drafting and implementation of powers of attorney, and they know all the potential pitfalls.

‘Generally, best practice is to allow your attorneys flexible and wide ranging powers so that they can act in your best interests despite changing circumstances’, says Nigel Miller, a Director in the wills and probate team with Kidd & Spoor Solicitors. ‘In addition to managing bank accounts and selling property, you can clarify your wishes for a wide range of financial decisions especially if you have a complex or international estate.’

He highlights some of the key issues to discuss with your solicitor before they can draft your financial lasting powers of attorney.

Funds

You may have investments in certain funds which require your express consent before your attorneys can be authorised to deal with them.

One common problem we see with a lasting power of attorney which was not professionally drafted, is that they do not allow for money to be held in any discretionary management funds. If you hold assets in such funds, your attorney will be unable to access those assets on your behalf without a further expensive and time-consuming application to the Court of Protection.

Even if you do not hold such funds, it may be in your best interests to have your assets held in this way in the future. Your lasting power of attorney can include a provision allowing your attorneys to invest funds in this way. If it does not contain such a provision, your attorneys will be restricted as to the types of funds they can invest in on your behalf.

Trusts

Where assets are held in trust, thought should be given to how your attorney will interact with the trustees. If you are a trustee or a beneficiary of assets held in trust, you might need to provide specific authority for your attorneys to access trust records and to liaise with the trustees in your place.

Overseas assets

If you hold any assets overseas, it is important to note that a financial lasting power of attorney made in England and Wales may not be recognised by the jurisdiction in which those assets are held. In such a case, your attorneys would be unable to deal with those assets for you without further authority.

To save your attorneys the expense and difficulty of having to deal with this when you no longer have capacity, you should obtain legal advice in each separate jurisdiction in which you hold assets to ensure that your attorneys can act on your behalf throughout the world.

Gifts

The law provides for attorneys to make small gifts in limited circumstances on your behalf, but you may authorise your attorneys to make larger or more regular gifts.

For example, you may wish your attorneys to make such gifts for tax planning purposes because you already make regular generous gifts to certain persons, or because you would like to provide for family members who may need a little extra financial assistance.

Whatever the reason, you will need to include a specific authority to allow such gifts to be made. Depending upon the nature of the gifts you wish your attorneys to make, such authority might include detailing to whom gifts can be made, on what occasions, and the financial limits of those gifts.

Dependants

You may be concerned about a family member or another dependant who relies upon you financially, especially if they are unable to manage their own finances.

Your power of attorney will only come into force when you lack capacity, and your attorneys must act in your best interests at all times. There may be times where your interests could conflict with those of your dependant. In these circumstances, your attorneys must ensure that your financial needs are taken care of, but this could be to the detriment of your dependant.

This will require careful thought and discussion with your solicitor who can advise you how to include specific instructions within the lasting power of attorney in order to extend your attorneys’ powers.

Business assets

If you run or have any interest in a business, you should ensure that the attorneys appointed in respect of your business decisions have the necessary insight and business acumen to continue to run things smoothly.

If you wish to appoint separate attorneys for your business decisions, you will need to make two separate financial lasting powers of attorney, one for your personal financial decisions and one for your business decisions. You should obtain professional legal advice before doing so, to ensure that the two do not contradict one another.

Legal drafting

With each of these potential issues, as well as any other specific financial concerns you may have, it is key to ensure that additional powers given to your attorneys are appropriately drafted. Preferences and instructions need to provide the authority that is intended whilst also adhering to the law.

If your instructions conflict with any pre-existing laws, the law will always prevail and your attorneys will not be authorised as you wish. It is important to obtain professional advice to ensure that wishes can be met in a way which is consistent with all necessary legalities.

Avoiding common mistakes

Many people choose to appoint the friends or family closest to them without considering whether that person is right for the role. If your closest friend, or your child, is not good with their own money then think carefully about trusting them with yours.

No matter which type (or types) of lasting power of attorney you choose to make, it is advisable to appoint more than one attorney, or replacement attorneys who would step in if your first-choice attorney can no longer act for you. By only appointing one attorney and no replacements, you run the risk of that person being unable or unwilling to act and having no one to deal with your affairs on your behalf.

How we can help

Before making your lasting power of attorney, we can guide you through the types of decisions which you need to consider and will advise you on the appropriateness of the powers you intend to grant.

Our solicitors will prepare your lasting power of attorney, as well as drafting the documents for you to ensure that all your requirements are clear and legally binding.

For further information, please contact Nigel Miller or Noel Dilks in the wills and probate team on 0191 2970011 or email nm@kiddspoorlaw.co.uk or nd@kiddspoorlaw.co.uk.

Do I need a letter of wishes alongside my will?

Making a will is an important part of lifetime legal planning, but do you need to put all your wishes in your will? Where should you set out your wishes for gifts or your funeral arrangements? Is it appropriate to explain your decisions about your legacy? These are some of the questions which we are asked when people want to make a will for the first time, or if they wish to make provision for something out of the ordinary.

‘For your will to be legally binding, it must be worded using specific legal terminology which does not leave much scope for creativity or for your personality to shine through,’ says Nigel Miller, a Solicitor in the wills and probate team with Kidd and Spoor.

‘Alongside your will, you can write a letter of wishes in which you can express yourself in a more personal way. While such a letter is not legally binding, it does place a strong moral obligation for those involved in your will to follow your guidance.’

Uses for a letter of wishes

Gifts

One of the most common ways a letter of wishes is used is to leave small items, such as personal belongings, to certain beneficiaries without having to include specific gifts in your will. Provided your will references the separate letter of wishes, this is a perfectly acceptable and even a common way of leaving such items. Your chosen beneficiaries will not be legally entitled to the items, but your executors should ensure that they receive them unless there is a very good reason why your wishes cannot be honoured. Leaving gifts by way of a letter of wishes is often useful as it prevents complicated legal issues arising if the item is no longer in your possession when you die, or if your chosen beneficiary has already died.

Funeral wishes

Another popular use for a letter of wishes is to outline funeral wishes. A letter of wishes relating to your funeral can include preferences as to cremation or burial, instructions for your funeral service(s), or even who should be notified of your death and how they should be notified. You might, for example, have an idea of a specific announcement that you would like to be placed on certain social media platforms.

Trusts and children

If your will contains any trusts, or if you are appointing guardians for your children, your letter of wishes could be focused on providing guidance as to how you would like the trust to be managed, or specific ways you would like your children to be raised.

Explanations

As well as offering the opportunity to express your wishes in relation to certain circumstances or specific gifts, a letter of wishes can also be used to explain why you have chosen to structure your will in the way you have.

For example, if you have left a greater share of your estate to one of your children or a charity, a letter of wishes can enable you to explain the decision more fully which may prevent or reduce discord between the family after your death. It will also provide evidence of your views should a claim be made against your estate.

Benefits of a letter of wishes

As a letter of wishes does not have to be drafted in any particular legal language, you are free to set out your views and guidance in your own words. This means that you can feel more confident about the way your wishes have been expressed, as it leaves a more personalised message for your family to hear which is written in your voice. This can be a comfort both to you during your lifetime and to those you love when you have gone.

While the main consideration when making a will is that it covers all necessary provisions, the best wills are usually ones which are simple and straightforward. Creating a separate letter of wishes means that the will itself remains succinct and is less likely to result in complications when administering your estate.

If specific requirements are set out in a letter of wishes, this will sit alongside your will as an independent document. A letter of wishes can be changed as often as needed, without you having to review your will each time, saving you time and money.

Other considerations

Letters of wishes are just wishes, they are not legally binding on anyone involved in (or outside of) your will. If you want your wishes to be binding, they must be included directly within the terms of your will.

Whilst a letter of wishes offers a great deal of flexibility, it will not be suitable for all purposes. For example, if you wish to leave a valuable piece of artwork to a specific person, this is not a gift which is suitable for a letter of wishes and it must be included within your will. Equally, a letter of wishes cannot be used to allow your executors to decide who should be appointed as guardian for your children, this is a decision which you must make and which you will have to include as a specific term of your will.

Probably the biggest downside to a letter of wishes is that, because it is a distinct and separate document, it could get lost or become separated from your will. If this happens, your executors would be unaware of your wishes and these would, therefore, not be followed.

How we can help

A letter of wishes is a useful aid in ensuring that your voice can continue to be heard after you have died, however it is important to remember that it will not be legally binding, and it is equally important to understand when a letter of wishes is and is not appropriate.

As a general rule, anything that you would like to be absolute should be included within your will, however you also need to ensure that everything contained within your will is appropriate and has a solid legal grounding. You should seek advice from one of our solicitors before making any will and before writing a letter of wishes to ensure that it is suitable for your purposes and that you understand the legal, and any other, implications.

Our solicitors can advise you on wills and letters of wishes, as well as drafting the documents for you to ensure that all your requests are clear and legally binding.

For further information, please contact Nigel Miller in the wills and probate team on 01912970011 or email wb@kiddspoorlaw.co.uk

Probate and overseas assets

Born in Greece and educated in France and Germany before coming to the UK, at his death in April of this year Prince Philip reportedly left a multi-million-pound estate which includes assets overseas. The administration of those assets, and therefore his estate, is likely to take several years to conclude.

‘Overseas assets add a further level of complication to estate planning and administration,’ says Nigel Miller, a Solicitor in the wills and probate team with Kidd and Spoor in Whitley Bay. ‘Foreign assets can often go undiscovered until long after an individual’s death and once uncovered they often result in delays and additional costs, including the potential for those assets to be taxed in more than one jurisdiction.’

Domicile

Domicile is the first thing to be considered to determine which assets pass according to which jurisdiction’s laws.

As a legal concept, domicile is distinct from nationality and residence. A person who was born in England to English parents may not automatically be domiciled in England and Wales at their death.

An added complication is that the UK has three territories for domicile. Whilst an individual may be UK domiciled for tax purposes, as the UK is not a legal jurisdiction, they will be domiciled in either England and Wales, Scotland, or Northern Ireland for the purpose of governing law.

If there is any uncertainty whatsoever about the domicile of the deceased person, you should seek advice on the issue. Evidence may be required to prove domicile and we can help guide you through this process.

Practical considerations

The administration of overseas assets is dependent on the lifetime planning that an individual has undertaken.

A person can specify within their will whether it should apply to all their assets worldwide, or whether the will should only apply to assets held in England and Wales. However, even if a will has been made in England which stipulates that it is to apply to all worldwide assets, some jurisdictions will not allow this.

If a jurisdiction fails to recognise the validity of an English will, this can lead to forced heirship which means that the succession laws of that jurisdiction will apply to the assets held there. The EU Succession Regulation does avoid forced heirship in some cases, but advice should always be sought as to the specific rules of the jurisdiction where overseas assets are held.

In the case of intestacy (where the deceased did not leave a will) the situation is likely to be even more complicated. Intestacy rules are highly dependent upon the domicile of the deceased individual and not necessarily the location of their assets.

Resealing

Where assets are held both in England and Wales and overseas, it may be necessary to reseal a grant. Resealing is the process by which an overseas grant becomes valid in England and Wales. The overseas grant, which has already been sealed in the overseas territory is sealed again with the seal of the English Probate Registry, giving the grant the necessary approval it needs to be authorised for use in England and Wales.

It could be that an overseas grant needs to be resealed in England and Wales, or vice versa. To deal with this, you should seek advice from solicitors in all relevant jurisdictions. Our solicitors are experienced in liaising with experts from overseas and can deal with these liaisons on your behalf.

Tax considerations

UK inheritance tax may be due on both the English assets and the overseas assets. In addition, equivalent succession taxes could fall due in the foreign jurisdiction(s) where assets are held.

As an executor (or administrator) it is your responsibility to ensure that all relevant taxes are paid and that they are paid on time. To avoid personal liability, it is advisable to seek expert advice about the tax that is payable in respect of all assets, no matter where in the world these are held.

Preventing unnecessary problems

Seeking advice during your lifetime in respect of your will and inheritance tax liabilities is the best way to ensure that the estate administration process runs as smoothly as possible when the time comes.

Our solicitors can help you ensure that your assets in England and Wales will pass according to your wishes. If you own property or other assets overseas, you may also need to instruct legal experts in the jurisdiction(s) where other assets are held.

When making more than one will, it is important to ensure that all your solicitors are aware of the wishes you are formalising. The best way to do so is to make sure that copies of each will are provided to every solicitor. Dealing with multiple solicitors can prove costly and time consuming, but our team can help make this easier by liaising with your overseas solicitors directly.

How we can help

It is vital that all worldwide assets are dealt with as part of any estate administration. If you are an executor, you should seek professional advice about your duties and obligations. If you are an individual with overseas assets, forward lifetime planning will make the estate administration easier for your executors.

Our solicitors can advise you on the implications of overseas assets and the process for dealing with this. We can also draft the documents for you to ensure that all your wishes are clear and legally binding.

For further information, please contact Nigel Miller or Noel Dilks in the wills and probate team on 01912970011 or email nm@kiddspoorlaw.co.uk