Wills and Intestacy Substituted Decision Making Bankruptcy

1. Wills and IntestacySubstituted Decision MakingBankruptcy Audley Financial Training

2. Wills and intestacy • The importance of making a will. • The conditions for a valid will • The probate process • Intestacy rules • The taxation of an estate • Deeds of variation and Disclaimers Audley Financial Training

3. Why make a will • It instructs who should benefit from your estate • You appoint executors that you can trust. • It can leave burial instructions • It can help in reducing IHT on the estate • It can appoint guardians for minor children • It is essential for couples in an unmarried relationship Audley Financial Training

4. Essentials of a will Audley Financial Training

5. Audley Financial Training

6. Mirror wills • Couples often make mirror wills leaving everything to each other. • A clause such as, ”to my wife/husband and then to our children” may be used • This may work if both die within a short time of each other. • But the surviving partner can draw up a new will. • They might remarry and pass everything to their new spouse Audley Financial Training

7. Ways round this problem • Set up a trust in the will. • Write a mutual will. • This means on first death the will binds the survivor and the beneficiaries cannot be changed. • Use a 28 day clause Audley Financial Training

8. The will states all assets pass to the spouse (or beneficiary) if they are alive 28 days after the testator’s death. Otherwise the assets pass to the children Mrs Brown survives 28 days so inherits Mr Brown dies. His will uses this clause She does not survive 28 days so doesn’t inherit His estate is passed to their children Audley Financial Training

9. But there are IHT issues Mr Brown Died 1/7/18 Mrs Brown Died 20/7/18 As none of Mr Brown’s assets passed to his wife his estate can only claim his NRB The transfer to Mrs Brown was exempt. Therefore her estate can claim both her NRB and her late husband’s NRB Children Audley Financial Training

10. Executors identify and value deceased’s assets & liabilities Deceased left a will, executors appointed Submit an IHT return and pay any liability Prepare accounts and pay residue of estate to beneficiaries Applies for a Grant of Probate Executors take control of the assets and pay off any debts Probate Registry Office Audley Financial Training

11. Probate made easy • A Grant of Probate isn’t needed; • If all property in joint names, the survivor automatically inherits but executors will still need to submit a list of all assets to HMRC • If deceased’s assets are less than £5,000. • Banks have their own limits for closing an account without a Grant of Probate Audley Financial Training

12. If you die with no will • You die intestate • Someone has to apply to be the administrator of your estate • Estate divided along intestacy rules • Your property might go to people you didn’t want to benefit • Unmarried partners have no rights under intestacy rules Audley Financial Training

13. Joint Tenancy Tenants in common Co-owner 50% Solely owned property Deceased’s estate Audley Financial Training

14. Rules of intestacy • Two key factors. • Was the deceased married or in a civil partnership at date of death • Did the deceased have children • David and Karen were married previously but they have no children from this marriage. • David has no children Karen has two from her first marriage. • If David dies intestate he is married with no children • If Karen dies intestate she is married with children Audley Financial Training

15. Married no children Surviving spouse gets everything Audley Financial Training

16. Married with children Deceased’s estate £650,000 £200,000 split equally between children of the deceased. Absolutely if over 18 Held in trust if under 18 £250,000 + personal possessions £200,000 £400,000 Audley Financial Training

17. If a child had pre-deceased parent Zoe had died intestate. The estate due to her children was £300,000 She had had two children, Ben and Fiona but Fiona had died Fiona has a child If Fiona had no children then Ben would be the sole beneficiary and receive £300,000 Ben receives £150,000 £150,000 to Fiona’s child Audley Financial Training

18. Married with children • Spouse receives statutory legacy of £250,000 plus deceased’s personal possessions. • Anything above this is split 50/50 • 50% goes to spouse absolutely • 50% is split between children, absolutely if over 18, held in trust if under 18 • If a child had died earlier, any of their children will take their share Audley Financial Training

19. Not married with children Sally Tom Neither Sally or Rachel can inherit Rachel If Tom dies then his situation would be unmarried no children Rachel gets everything Audley Financial Training

20. Unmarried, no children • If Tom’s parents alive they inherit. • If parents dead any living brothers or sisters inherit his estate equally • If one or more siblings dead, their children inherit • Split at brother/sister level. • If Tom had three brothers, all of whom had died and he had left £120,000 • One brother had one child who gets £40,000 • One brother had two children, each gets £20,000 • One brother had four children each gets £10,000 Audley Financial Training

21. Taxation of deceased’s estate • Any interest or dividends received by the estate is taxable • No Personal Allowance, no PSA or Dividend allowance • Interest charged at 20%, Dividend 7.5% • If death occurred after 6/4/18, the deceased’s ISA can be designated as a Continuing ISA to maintain its tax free status • CGT is charged at 20% (28% for residential property) but can use the deceased’s CGT exemption for two years after death • Estate’s acquisition price is value at date of death Audley Financial Training

22. This is a PET so her NRB is reduced for the next 7 years She is independently wealthy and gifts this to her son Parent leaves £250,000 to his daughter She does a Deed of Variation that means the £250K is treated as being paid from her father’s estate and leaves her NRB intact Audley Financial Training

23. Deeds of Variation • Must be executed within two years of death • No consideration paid • The person making the DOV must be over 18 and sane • All affected beneficiaries must agree but each beneficiary can make their own decision • Deed must refer to the will being varied and state that it is to be altered as if the deceased had made it • DOV can also be used in cases of intestancy • If IHT on estate is increased, executors must agree Audley Financial Training

24. Father This is not a PET! It is a transfer from the father Betty Charles Alan £150,000 £0 £300,000 £150,000 £300,000 Audley Financial Training

25. Disclaimer • You can disclaim an inheritance provided you haven’t received it. • You cannot stipulate who will get the money • It must be disclaimed within two years of the death • There must be no money or consideration paid for making the disclaimer • The instrument of disclaimer must contain a statement that it is to have effect for IHT as if the disclaimed benefit had never been conferred Audley Financial Training

26. Substituted Decision Making Audley Financial Training

27. Substituted Decision making Informal or formal arrangement? I can make my own decisions but can I help a vulnerable adult make a decision and when could I make that decision for them? • If a formal or legal arrangement is required this could be done by • an Ordinary Power of Attorney • A Lasting Power of Attorney or • A deputyship order A informal arrangement should still follow some key principles Audley Financial Training

28. The Act introducing LPA and the way vulnerable adults are treated Safeguards the financial and welfare affairs of vulnerable people Makes legal decisions Executive branch of the COP Maintains a register of LPA and Deputies Supervises deputies Audley Financial Training

29. Mental capacity and decision making • Individuals who do not have mental capacity cannot make decisions for themselves. • The MCA recognised that there is no hard line between having and not having mental capacity. • Rather it’s a spectrum. • Some individuals may not have full mental capacity but can still make decisions provided they have some assistance • This is embodied in the five principles Audley Financial Training

30. MCA 2005 Five key principles Relate to how someone must deal with individuals if they lack mental capacity Relate to the individual An unwise decision does not indicate a loss of capacity Must act in individual’s best interest if they lack capacity Supported to make their own decisions Rights and freedoms of the individual should be preserved as far as possible A presumption of capacity Audley Financial Training

31. The three tests Can an individual understand the information required to make a decision Can an individual retain the information long enough to make a decision Can an individual use that information to make a decision If one test is failed the individual does not have mental capacity to make that decision Audley Financial Training

32. The two types of decision making • Supported decision making • The process of providing support in making a decision to an individual whose decision making ability is impaired • Substituted decision making. • Making a decision on behalf of an individual who cannot make that decision themselves because they lack mental capacity • This can only be done by an attorney of a LPA or a deputy under a deputyship order Audley Financial Training

33. Lasting Power of Attorney v Deputyship • Set up by the donor before mental capacity is lost. • Donor selects attorney(ies) • Can be for Personal/Finance or Welfare or both • “Reactive” supervision • The donor can indicate their preferences and wishes. • Fee £82 • Set up after mental capacity is lost • Deputy appointed by the COP • Deputy can only act within the terms of the Deputyship order • The deputy must complete an annual report to the Office of the Public Guardian. • Much more expensive! Audley Financial Training

34. Cost of a deputyship order £385 application fee +£500 if application needs a court hearing £100 assessment fee if you are a new deputy Fee for medical assessment to confirm loss of medical capicity Pay an annual premium for a “security bond” from an insurance company £320 annual supervision fee (Could be £35 if managing less than £21,000) Audley Financial Training

35. Setting up a Lasting Power of Attorney • Must be done on the prescribed form • One or more persons nominated to act as attorneys. • Must be signed by an independent third party (the certificate provider) who confirms the donor knows what they are doing • The donor can ask for up to five people to be told when the LPA is registered • The donor can include Preferences and Instructions. • It must be signed, dated and witnessed. • Sent to the OPG who provided there are no issues will register it Audley Financial Training

36. Key decisions Do I want to tell other people that I’ve set up an LPA? Who should I appoint as my attorney? Should I have more than one? Finance or welfare or both? When do I want it to start? Do I want to include preferences and instructions? Audley Financial Training

37. Choosing how attorneys make decisions Replacement attorney I take over LPA continues Jointly and severally Sole attorney We must act unanimously Joint Attorneys The LPA can continue The LPA will lapse The LPA will lapse Audley Financial Training

38. Informing other people I object! I’ve set up an LPA with my wife as my attorney How come the attorney is driving a Lexus? Audley Financial Training

39. Preferences and Instructions I would like to donate £500 a year to the RSPCA I prefer to invest in ethical funds My attorney must not invest outside the UK Audley Financial Training

40. Life sustaining treatment (health and welfare) • The form has two options • Option A – I give my attorneys authority to give or refuse consent to life sustaining treatment • Option B – I do not give my attorneys authority to give or refuse consent to give life sustaining treatment on my behalf • Further preferences or instructions can be given for option A Audley Financial Training

41. When can the attorney act? • For a financial LPA there are two options on the form • As soon as my LPA has been registered (and also when I don’t have mental capacity) • Only when I don’t have mental capacity • Whilst the donor has mental capacity he or she has control of their finances and the attorney can give only give supported decision making if requested by the donor. • Once mental capacity has been lost, attorney can give substituted decision making • The attorney can only act on welfare LPA only comes when the donor has lost mental capacity Audley Financial Training

42. Duties of an attorney or Deputy • Follow the five principles of the MCA 2005, particularly acting only in the donor’s best interest • Consider what the donor has done in the past • Apply a high standard of care, e.g. getting advice from professionals. • Keep the individual’s assets separate from their own • Keep financial records • Keep the donor’s affairs confidential • Ensure there is no conflict of interest Audley Financial Training

43. Powers of attorneys • The attorney can do anything the donor would have done themselves in relation to their financial affairs • They can maintain the donor, their spouse/CP or child under 18. • They have only a limited power to make gifts • Payments to Trust Funds for grandchildren, or paying grandchildren’s school fees and interest free loans to family members would be considered as gifts • They cannot gift the donor’s property away to avoid paying care home fees Audley Financial Training

44. Two exceptions Happy Christmas Congratulations on your wedding Happy Birthday Congratulations on your Bar-Mitzvah Audley Financial Training Thi

45. IHT planning • Any large gifts must be authorised by the Court of Protection BEFORE they are made • However prior permission isn’t needed for gifts up to the annual exemption (£3,000) or small gifts (up to 10 people) PROVIDED • The estate is more than the NRB (£325,000) • Life expectancy is less than 5 years • The gifts are affordable and won’t affect the quality of care and quality of life. • There is no evidence the donor would be opposed to these gifts Audley Financial Training

46. Revoking an LPA • The donor can revoke the LPA at any time whilst they have mental capacity. • It can be revoked by the OPG if there is abuse by the attorney • It will be automatically revoked if: • The donor dies, control then passes to the executor • Death of the sole remaining attorney • Bankruptcy of the donor or attorney • Dissolution of the marriage of donor and attorney Audley Financial Training

47. Advising individuals with an active LPA If attorney claims the donor has no mental capacity the adviser should get confirmation as to how this was established The donor, not the attorney, is your client The adviser should apply the three capacity tests in giving advice to the donor Audley Financial Training

48. General Power of attorney • A deed executed by a donor that gives the attorney the power to act on the donor’s behalf. • It must be signed by the donor and witnessed by at least one person • It can be restricted to certain actions or be time limited • The attorney cannot make health or welfare decisions for the donor. • It is revoked if the donor loses mental capacity. • Unlike an LPA it doesn’t need to be registered nor is there a set form. Audley Financial Training

49. GPA: some points to note The donor is responsible for the actions of the attorney An attorney cannot make gifts unless authorised in the deed An attorney cannot delegate their powers* An attorney cannot sign a will on behalf of the donor* If the donor is a trustee or an executor of a will, the attorney cannot act on their behalf* * These also apply to a Lasting Power of Attorney Audley Financial Training

50. Bankruptcy “My creditors grow cruel” Antonio; The Merchant of Venice Audley Financial Training