Wills and Executries

Wills

A Will, properly drawn up by a solicitor, provides instruction to ensure that on your death, everything that you own will be handled in accordance with your wishes and be passed on to the people of your choice. There are several reasons you should make a Will, these are just a few:

• You can ensure that your estate will pass to your intended beneficiaries. It is especially important to have a Will written if you have family members who financially depend on you, or if you would like to leave something to an individual outside your immediate family.
• It is a popular belief, for example, that on the death of a husband, his whole estate will pass automatically to his wife. This is not necessarily the case. On intestacy (where there is no Will), a widow has certain prior and legal rights, but after these have been paid, the remainder of the estate will go to any children or even to parents and siblings of the deceased, in preference to the widow.
• In your Will, you will appoint an Executor or Executors of your choice. Your Executors may be family, your solicitor or someone else. Peterkins Trustees Limited can also be appointed as your Executor at no extra cost. It is the duty of the Executors to see that the terms of the Will are carried out and to deal with any legal formalities. If you have not made a Will, an Executor will have to be appointed by the court, which will incur a delay and expense that can be avoided if there is a Will.
• Where your beneficiaries are children, you can incorporate provisions in your Will to deal with their shares until they reach a certain age. Additionally, you can appoint legal guardians for your children.
• You can take steps in your Will to reduce the amount of Inheritance Tax payable on your property and money left behind, thus leaving more for your beneficiaries.

If any of your personal circumstances have changed, such as marriage, divorce, the arrival of children or grandchildren, purchase of property and so on, we would strongly recommend you make a new Will. We advise our clients to review their Will every 5 years to make sure it is still fit for their needs.

The whole process is usually completed in approximately 4-6 weeks, depending on how quickly you respond to inform us that the draft Will we have prepared fits your requirements.

Executries

The role of an Executor is to stand in the place of the deceased to wind up his or her estate. In a situation where there is no Will, and therefore no Executor appointed, the Court will appoint an Executor Dative. However, if there is a Will, then an Executor Nominate will have been chosen by the individual. Both types of Executor have legal obligations in dealing with a deceased person's estate, and It is important they take advice from a solicitor.

The main duties of an Executor include:

• In most cases, applying to the local Sheriff Court for a grant of Confirmation. This is a legal document which gives authority to the Executor to uplift all of the funds and other property due to the estate, and deal with their assets as per instructions in the Will.
• Calculating and paying Inheritance Tax on the estate.
• Ensure Income Tax matters are closed for the deceased’s lifetime record with HMRC.
• Ingather all of the assets of the deceased, pay the funeral expenses and all debts, including debts known as Legal Rights. Under Scots Law, irrespective of the terms of any Will, a surviving spouse and children are entitled to Legal Rights out of the estate, so these must be settled. The remainder of the estate should then be settled by paying or transferring to the beneficiaries in the terms of the Will, or if there is no Will, in terms of intestate succession (the law will decide how the estate is distributed).

Inheritance Tax

Inheritance Tax (IHT) defines tax on the estate (the property, money and possessions) of the deceased individual. It can also apply to gifts made during an individual’s lifetime. The threshold at which Inheritance Tax (IHT) becomes payable is set annually in the Budget. The tax-free threshold, or otherwise referred to as nil rate band (NRB), is £325,000 for the current tax year. If part of your estate is of greater value than this threshold, it will be subject to 40% tax. Married couples or civil partners can have a combined NRB of up to £650,000, as unused NRB of the first civil partner or spouse to pass away, referred to as transferable nil rate band (TNRB), can be claimed on the passing of the survivor.

Another tax band to be aware of is the residence nil rate band (RNRB). This is applicable for deaths on or after 6 April 2017, where the deceased owned a home or share of a home, which is then inherited by direct descendants. The RNRB first came into effect in tax year 2017/2018 at £100,000 and will increase by £25,000 each year until reaching £175,000 in tax year 2020/2021. After this, it will increase by the Consumer Prices Index (CPI).

With thorough planning, however, there are many ways to reduce the liability of an estate to IHT. Many pension and life assurance policies can be written in trust allowing any lump sum benefits to fall out with the deceased's estate and are therefore free of IHT. In addition, gifts made during a person's lifetime, provided certain conditions are met, are "potentially exempt transfers" (PETs). These gifts become exempt only if the donor survives for seven years, although life insurance may be available to protect the estate against the cost in the event of an early death.

Further Tax Planning advice can be obtained from our Financial Services Department. Please contact:

John Barrowman, Head of Financial Services, JB@peterkins.com, 01224 428270

Trusts

Trusts can be set up by Wills as a mechanism to deal with a person's estate after death or can be set up to operate during the creator's lifetime. A third party, known as the 'Trustee', will take care of the assets to avoid anything passing to an individual you do not wish to benefit.

Reasons for the establishment of a trust include:

• To provide for children while they are young
• To preserve the family wealth
• To provide an income for a person while preserving the capital to pass to another person at a later stage
• To transfer wealth in a tax efficient way
• To provide for people who are incapacitated
• To administer funds for charitable purposes

Establishing trusts can be advantageous for many different situations. At Peterkins, we have extensive experience of creating and administering various types of trust, both during your lifetime and in terms of Will structures.

Power of Attorney

A Power of Attorney (PoA) is a legal document which gives authority to another person or persons to manage your affairs and make decisions on your behalf.

In the unfortunate situation that you are no longer able to manage your own affairs in the future, due to illness or old age for example, then having a PoA previously signed will ensure things are taken care of in the way you would expect. A PoA can also be used to allow a representative to act for you in your absence, for example, if you are leaving the UK for an extended period.

Anyone you wish can be appointed as your PoA, usually this would be a family member or close friend. Peterkins trustee company, Peterkins Trustees Limited, can also be appointed to act on your behalf.

If you become debilitated and do not have a PoA, one or more family members or friends will be required to initiate a Court process to become a Guardian. This is a timely and costly process: usually upwards of 6 months and costs minimum £3,000. By having a Power of Attorney, you can avoid this.

It is usually recommended that any individual who owns an asset should have a Power of Attorney.

At Peterkins, we strongly advise that clients put a PoA in place, regardless of age or health. A Power of Attorney can only be granted when you have the mental capacity to do so, therefore it should be done sooner rather than later so it can act as a safety net.

There are two main types of powers which are used by your Attorney, these are detailed as follows:

A Power of Attorney can be revoked at any time – providing you have the mental capacity to do so.

Your Power of Attorney must be registered with the OPG (Office of the Public Guardian) before it can be used.

The process usually takes a few weeks for a PoA to be signed, depending on how quickly you respond to our initial draft. Once the PoA is signed by you, the OPG’s target is to complete registration within 30 working days, although this can be brought forward to 5 working days if the circumstances are urgent. For example, if you require to be moved into assisted accommodation and payment to the care provider needs to be made as soon as possible to facilitate this.

Disclaimer

The Financial Conduct Authority do not regulate tax, IHT, wills and trusts.