Practicalities of dealing with a deceased person’s estate and the role of the financial planner?

2. Practicalities of dealing with a deceased person’s estate and the role of the financial planner? • Ian Bond Solicitor, Michelmores LLP

3. Overview • Key stages of administering the will or intestacy, paying IHT and obtaining probate • Working with other professionals • Post death planning issues including deedsof variation • The benefit of leaving assets in Trust – how trusts are affected by the death of a settlor, trustee or beneficiary • Dealing with the family – psychological, behavioural finance and other issues

4. Overview (1) • Key stages of administering the will or intestacy, paying IHT and obtaining probate • Working with other professionals • Post death planning issues including deeds of variation • The benefit of leaving assets in Trust – how trusts are affected by the death of a settlor, trustee or beneficiary • Dealing with the family – psychological, behavioural finance and other issues

5. Benjamin Franklin • … in this world nothing is certain but death and taxes Benjamin Franklin

6. Clients die • Over 550,000 people die in England and Wales each year • On average over the last 10 years between 60 and 70 per cent of people died without leaving a will (die intestate) • Comparing court figures for death and divorces shows that more people commit intestacy than commit adultery • Make sure your client is in the minority who die having a will

7. Stages of estate administration • Valuing the estate • Preparing HMRC and Court papers & paying IHT • Issuing of the Grant • Collection of assets, paying of debts • Estate accounts • Distribution of assets to those entitled

8. Valuing the estate • What is in an estate? • All assets held in the sole name of the deceased and his/her share in assets held as tenants in common: • Also included for tax purposes: • Gifts made within 7 years of death • Gifts where a benefit has been retained • Assets subject of a life interest trust • In some cases, pension policies or life assurance payments for example that have not been written in trust

9. Valuing monetary investments • Contact all relevant institutions to requestdate-of-death values of all monetary investments • Bank accounts • Building society accounts • Financial investments • National Savings • Cash

10. Valuing shares and investments • Contact the relevant registrars or portfolio manager to confirm the holding. • Obtain date-of-death valuations for share investments and historical share valuations for shareholdings. • This can be difficult where companies have amalgamated, reorganised, changed their name.

11. Valuing other assets • Professional valuations of all land and property within the deceased’s estate • Open market valuations obtained for all of the deceased’s personal effects • Look also for: • Salary arrears • Rents due • Tax rebates • Unclaimed pensions • Refunds from utilities

12. Valuing debts and Liabilities • All relevant institutions are contacted to ascertain the deceased’s outstanding debts • These can include the cost of the funeral and reasonable mourning expenses • The mortgage on a property and other loans and overdrafts • Memberships • Utility bills • Credit cards and store cards • Hire purchase agreements

13. Estate valuation completed • Once the value of the taxable estate is known, IHT can be calculated and must be paid before the grant can be issued, but… the grant is needed to cash the assets! • We can use • IHT payment scheme • Loans from beneficiaries • IHT loans

14. Paying the tax - IHT Forms • There are two types of IHT form based on estate value and the type of assets held by the deceased: • IHT400– 16 pages plus additional schedules based on the deceased’s circumstances. • IHT205 – 4 page simple form with no additional schedules required. • In most cases, for taxable and complex estates fill in the IHT400 and for non-taxable estates fill in the IHT205.

15. Inheritance Tax • IHT is a tax which is paid on the value of a person’s net estate on death (but also on some lifetime transfers) • There are two tax bands… • £0 - £325,000 = 0% tax • Known as the nil rate band • £325,001+ = 36% / 40% tax • Known as the taxable estate

16. Payment of IHT • Time limits: • IHT payable 6 months after month of date of death • Interest payable on late payment • Penalties if tax return sent later then 12 months • Failure to submit return fine of up to £3,000

17. What is Probate? • By and large people just use the word Probate when talking about the legal process required • A Grant is a document issued by the Family Division of the High Court giving conclusive proof as to the terms and due execution of any will, or the fact that the deceased died intestate • Different types of grant • Grant of Probate – with a will • Grant of Letters of Administration – without a will

18. Post Grant – Gathering the assets • To cash or transfer assets, the financial institutions need… • A sealed office copy of the grant • Encashment forms • Original certificates of investment, bank books etc. • It can take a couple of days or a number of weeks to cash the accounts, depending on the particular turnaround time

19. Post Grant – Estate Accounts • Before the estate funds are paid out, the Estate Accounts are prepared, typically showing: • Assets and liabilities at date of death • Joint assets transferring • Amendments to date-of death valuations (gains/losses) • Income received • Administration expenses • Schedules of shares and dividends • Calculation of tax paid/payable

20. Overview (2) • Key stages of administering the will or intestacy, paying IHT and obtaining probate • Working with other professionals • Post death planning issues including deedsof variation • The benefit of leaving assets in Trust – how trusts are affected by the death of a settlor, trustee or beneficiary • Dealing with the family – psychological, behavioural finance and other issues

21. Henry Ford • Coming together is a beginning. Keeping together is progress. Working together is success Henry Ford

22. Opportunities • Why solicitors should want to work with you: • You own a key relationship with the client • You have built trust through the provision of financial expertise • You understand their personal situation, their family tree and their intended future plans • You have regular contact with your clients • Your records! • Details of assets and liabilities • Previous gifts and transactions • Family tree and personal details

23. Dying tidy • Ensure that • your client has a will and lasting power of attorney; • the will is reviewed regularly; • you have a copy of those documents on your file; and • the clients solicitors, executors and beneficiaries know who you are

24. Working together on challenges • Uncertain economic future • House prices • Share prices • Complex family structures • Debt-free generation is falling • Baby Boomers caring for parents and children • Indebted generation to follow

25. Charitable giving • 74% of people in the UK support charities during their lifetime and 7% leave gifts to charities in their wills • These legacy gifts are valued at £2 billion per annum and they enable charitable work to be undertaken that would otherwise go unfunded. From 6 April 2012 people who leave at least 10% of their net estate to charity can pay a reduced rate of 36% instead of 40%

26. Overview (3) • Key stages of administering the will or intestacy, paying IHT and obtaining probate • Working with other professionals • Post death planning issues including deeds of variation • The benefit of leaving assets in Trust – how trusts are affected by the death of a settlor, trustee or beneficiary • Dealing with the family – psychological, behavioural finance and other issues

27. Post death planning • Inheritance Tax is a levy paid by those who distrust their relatives more than they dislike the Inland Revenue! Roy Jenkins

28. Instruments of variation • It is possible to amend or vary a Will or indeed an Intestacy after a death to alter who receives the benefit of the deceased persons estate • There are many reasons why this may be desirable

29. Instruments of variation • … can re-write the deceased’s Will (or the intestacy provisions) for IHT and CGT purposes • Everyone adversely affected agrees • There is no reciprocation – no one is compensated for what they give up • None of the assets are affected by a Gift with Reservation • If the variation affects the rights of children or unborn children, Court approval will be needed

30. Overview (4) • Key stages of administering the will or intestacy, paying IHT and obtaining probate • Working with other professionals • Post death planning issues including deedsof variation • The benefit of leaving assets in Trust – how trusts are affected by the death of a settlor, trustee or beneficiary • Dealing with the family – psychological, behavioural finance and other issues

31. Why use a trust? • The purpose of a trust is to place the right assets with the right person at the right time • The benefits of a trust include IHT planning, protection against divorce or bankruptcy & protecting the less financially astute (including minors) from themselves • Can be created during the clients lifetime or upon death in their Will

32. Types of trusts • Generally two types: • Interest-in-Possession Trusts • Those where the income or benefit must be given to the specific beneficiary – it is his or hers by right. • Discretionary Type Trusts • There are several types but the common feature is that the benefits are allocated at the trustees’ discretion to any one or more of several beneficiaries. The trustees might even decide, for a time, to benefit no one; the income being accumulated for future use.

33. Interest in possession trusts • Used where the client is concerned that long term care may become an issue and that the estate may be eroded by care costs. • Where the client is concerned about his spouse/partner becoming involved in another relationship after his death and depriving his intended beneficiaries of their inheritance. • Where there is someone living in the client's property and he would like them to continue living there either until their death or until a specified future time at which point the property would be sold and the proceeds divided between specified beneficiaries.

34. Discretionary trusts • Used where the client wishes to protect a vulnerable beneficiary. The client would provide the trustee with discretion over how/when the trust funds are to be used. • The beneficiary may be a minor and the discretion maybe for them to graduate from university before they inherit. • The beneficiary may have a disability and their means tested incapacity benefit may be reduced or stopped as a result of holding money in their own name. • Divorcing or unstable marriages/civil partnerships • Beneficiaries that are likely to be bankrupt or cannot be trusted to spend wisely.

35. Overview (5) • Key stages of administering the will or intestacy, paying IHT and obtaining probate • Working with other professionals • Post death planning issues including deeds of variation • The benefit of leaving assets in Trust – how trusts are affected by the death of a settlor, trustee or beneficiary • Dealing with the family – psychological, behavioural finance and other issues

36. Bereavement, grief and mourning • Bereavement • is what happens to you. • Grief • is what you feel. • Mourning • is what you do.

37. What is bereavement • …grief experienced by the loss of a loved one…

38. Key stages of grief • Doubtthat the death has occurred and a want to know the details surrounding it. • Rejectionof the death, a sense of disbelief that a loved one is no longer alive. • Searchfor the deceased and will travel to the hospital or place where the death occurred or where the deceased is resting. • Sorrow. The bereaved person, may be tearful, depressed and withdrawn. Alternatively, they may talk almost unceasingly about the deceased.

39. Helpful points • Be the families “trusted advisor”,available in good times and bad • Be mindful of dates • Good record keeping and diary function is the key • Anniversaries • Birthdays • Date of funeral • Marriage anniversaries • Death anniversaries • Christmas • Easter

40. Helpful points • Listen in a non – judgemental way thereby understanding something of what they are going through • Ask questions that help the customers gain clarity and move them on • Don’t take any anger personally • Accept that you cannot make them feel better • Be aware of your limits

41. Finally • What questions do you have …

42. Contact me • Ian Bond • Michelmores LLP • E- mail: ian.bond@michelmores.com • Telephone: 01392 687 542