Wills & Probate

Wills

A will can only be made by someone who is over 18 and has the necessary mental capacity to do so. If a person dies without a valid will then the law sets out who will inherit. These rules can often produce unwanted results.

They make no provision for the appointment of guardians
Children become entitled at 18
In the case of a single person who dies childless their birth parents will inherit equally between them if both are living at the child’s death even if one parent has had no contact for many years.
Only couples who are married (which includes registered civil partners) benefit from each other’s estates.

If a person lacks capacity to make a will the Court of Protection can authorise a statutory will to be made on their behalf. Although this can be complex and expensive there will be many situations where it is a good investment.

If a member of the family lacks capacity to manage their financial affairs any provision for them should be held in trust. You will need to discuss what type of trust will be most appropriate with your solicitor. Some benefits of a trust are:-

The trust assets should not be taken into account when assessing eligibility for means tested benefits.
The trust will look after the assets rather than the disabled person.
The trust assets can be used for the disabled person’s benefit as the trustees see fit.
You can leave a note setting out how you would like the trustees to use the asset for the disabled person’s benefit.

There are various different types of trust and your solicitor will need to advise on what is most appropriate in all the circumstances – which will include tax aspects.

You will need to consider who should be the executors and trustees. The trustees will look after the assets and be responsible for making relevant decisions. The trustees will also be responsible for completing tax returns and making investment choices. You will probably want one trustee who knows the disabled person well and one trustee who is a professional and familiar with the tax and other legal issues.

Any member of the family or a friend who might leave assets to the disabled person needs to consider these matters. This might include grandparents, aunts and uncles and brothers and sisters.

It may be appropriate to set up a separate trust during your lifetime so that people can leave money to that trust by their will and so avoid lots of small trusts.

This is a brief overview of the many aspects to consider. You should consult a solicitor who is familiar with these issues – including the different types of trusts and their different tax regimes.

Probate

Probate is the process of sorting out a person’s assets and belongings after they have died.

The first steps will be to register the death and arrange the funeral. The next step will be for the executors to get valuations of all the deceased’s assets including property valuations, details of bank balances as well as a note of the amount of any outstanding bills. When all that information has been gathered in there will be forms to complete for the benefit of the HMRC (for inheritance tax purposes) and the Probate Court who will issue the grant of probate which is the document that confirms the authority of the executors to close bank accounts, sell assets, pay bills and distribute any balance to the appropriate people.

If there is a valid will this will govern both who are the executors and who inherit the assets. If there is no will, or it does not deal with everything, there are rules governing who will be the executors and who inherits.

If there is a property it is important to make sure that this is still insured and any valuable items are kept somewhere safe.

It can be a long process before everything is sorted out – not least sorting out income tax and inheritance tax liabilities.

Care needs to be taken before distributing assets in case: -

Unknown liabilities come to light
A beneficiary is bankrupt
Someone claims that they should have received more; or
Someone challenges the will.

Steps can be taken to avoid or minimise these risks.

The tax implications can be complex: there may be reliefs or exemptions available as well as other ways of reducing the tax liabilities.

Trusts may be created which can give rise to investment responsibilities and tax implications.

It can therefore pay to seek professional help to make sure that everything is correctly sorted out.

Autho: Alexander Elphinston, Senior Associate Solicitor, Anthony Collins Solicitors