SHAKESPEARE and LPAs???

When incapacity strikes the Lasting Power of Attorney (LPA) become a family’s ultimate problem solver.
No other legal document can match it for preventing financial loss, opening doors, eliminating bureaucracy, and preventing loss of control when needed the most.
Provided of course, that it is complete and well drafted!

You may have created your own, paid a solicitor or used the Office of the Public Guardian’s (OPG) form-fill service. Whatever way, you now possess a registered LPA, which in turn convinces you that you now possess a ‘ready-to-go‘ and complete LPA. But as Shakespeare said:  “All that glistens is not gold, and is so very true of a great many LPAs!

The simple truth is that an LPA will be registered even if all it contains are the details of the donor, one attorney and the certificate provider, and nothing else!
Registered certainly; complete, no! It may possibly work up to a point, but will be a long, long way from being wholly dependable.
Many such documents will fail wholly or partially at some point, and before that cause frustrations and problems for the attorneys and ultimately for the family.

A few of the more common causes of failure/problems:

 1.Poorly chosen attorneys
2. No replacement attorneys
 3. Attorneys and/or replacement attorneys incorrectly appointed
4. No instructions on how replacement attorneys are to come forward
5. No Will access clause
6. No investment clause
7. Badly worded/inappropriate instructions or preferences

   …and outside the LPA itself:
   8. Attorneys not knowing how to do the job
9.  Attorneys not equipped with certified copies.

The repercussions of an inadequate LPA will be very expensive.
Rescind and restart almost certainly the cheapest option.
Be certain that your LPA is 100% dependable before registration

 

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A new light on the the new Residence Nil Rate Band (RNRB)

Confused about the new Residence Nil Rate Band (RNRB)?

Several newspapers and Solicitor’s articles have suggested that anyone who has placed their main residence into a discretionary trust will need to urgently review their planning or be unable to benefit from the new Residence Nil Rate Band (“RNRB”).

Should estate planners be advising their clients to scrap their Discretionary Trusts?

Is it impossible to enjoy the protection of a Discretionary Trust and benefit from the new RNRB?

ABSOLUTELY NOT!

After months of speculation and panic, we have been told that the RNRB will (in most circumstances) only be obtained if a client leaves their property to a “lineal descendant”, in most cases this will be a child/children.

In repeated articles we are told, that if you leave your home via a Discretionary Trust you cannot benefit from this new IHT relief. This would only become true should your estate and your beneficiaries not have the right professional advice available when it was required.

“I don’t want to lose out on this additional relief to minimise my Inheritance Tax”

We are asked to believe that the only way to proceed is to leave a share of your property to a “Lineal Descendant”, ensuring that on your death that the share of the house will belong absolutely to that named person (normally a child).

But what would happen if the child you have nominated is going through a Divorce or Bankruptcy at the date of your death or thereafter?

What happens if the Child is about to enter or has entered Long Term care … or is simply financially irresponsible?

Should we as estate planners be advising our clients to “pick” someone now, maybe twenty, thirty, forty years before that gift will be effected, completely unaware of what the circumstances will be at that point in the future???

SURELY NOT!

But what alternatives do we have?

We are being told that Discretionary Trusts are no longer a viable option because in order to benefit from the RNRB you need someone to “inherit” that share of the property absolutely.

As late as March 2017 HMRC have confirmed that the RNRB would apply where the asset transfers to a Trust and there is Qualifying Life Interest or Interest in Possession.

So how do you maintain the flexibility and protection that a Discretionary Trust offers whilst also ensuring that your estate still gets the benefit of the RNRB?

One less reported aspect of the RNRB and its impact, is how the Trustees can benefit from a strategy in a little known section of the Inheritance Tax Act 1984 (Section 144) which gives the Trustees the power to make their choice later, and decide who is best to inherit within two years of a death. Two years to choose the best person to receive the new RNRB allowance, who might possibly be the youngest member of the family.

What if your Trustees forget?

If your choice of trustees is your spouse and/or your children or a good friend how likely is it that they will know that they have two years to jump into action?

If your plan is to depend solely upon family or friends as trustees then no, you should not risk using a Discretionary Trust. Hoping that ‘family Trustees’ know or remember to do their job, is risky to say the least!

What if there were a Discretionary Trust that removed the risk and speculation of who would be the best person to receive the RNRB?  A Trust that gives the Trustees a chance to choose the best person at the date of death, but also ensures that if the Trustees neglect to do so, the allowance will be received regardless by default in the terms of the Trust.

That trust is Countrywide Tax & Trust Corporation’s latest creation:

FLEXIBLE FAMILY TRUST

This new Flexible Family Trust ticks all of the boxes.

First, the peace of mind from knowing, that within two years of death your trustees can “pick the right person”.

In addition, and unlike any other trust, it includes a ‘fail-safe’. Should the trustees neglect their job  when the time comes, the trust defaults for them, ensuring that the relief is never lost.

And, like all the solutions we offer, the Flexible Family Trust is both very dependable, and exceptionally good value.
No need to be confused and no need to lose out.

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A Will is not always enough

When you think about it, everything has a downside, a disadvantage. To arrive at a ‘balanced decision’ you need to know the good and the bad.
So why then, when we go to arrange one of the most important documents we’ll ever possess, we don’t ask, “What are the disadvantages to making a Will?
If we did I suspect that would put more than a few solicitors and Will Writers on the spot! You can just imagine their consternation!

First, they would need to point out that after death, your Will becomes a public document, and for just £10 anyone can a get a copy! That will shock a great many people who genuinely believed that Wills are confidential and remain that way.

Their biggest difficulty will be to explain the significance that gifts made via a Will are absolute. This is not easy to explain, but it is essential you know because its effect puts the legacies your family receive at more risk than anything.

First off, absolute gifting means you cannot place conditions or restrictions on any of your legacies. The moment the beneficiary receives the gift he/she can do what they like with it no matter what your Will says.

It also means that your gifts are received with no protection whatsoever. From the moment your beneficiary receive your gift it can be lost to Nursing Care Fees, Divorce, Death and remarriage, Creditors/bankruptcy and Inheritance tax. The wealth that you built up can so easily end up in a stranger’s hands. You didn’t plan this, it is simply the consequence of using a Will to pass along your estate.

If you want certainty that the legacies you leave will stay within the family, a Will alone is not the answer. Put aside any preconceived ideas you may have about Trusts and take a good long look what modern Trusts can do and how they really work. You will be surprised to learn at just how flexible, beneficial and affordable they have become.

Trusts have been protecting assets since medieval times. Their initial purpose was to enable the Nobility and wealthy landowners to avoid paying taxes to the Crown. Today there are different threats, and so we now have a wider and more flexible range of trusts.

Don’t let their history fool you; trusts are no longer the prerogative of the wealthy.

Today, a pensioner can acquire the same Trust protection as any millionaire has, but with a much smaller price tag!  Life Planning not only provides trusts at a fraction of High Street prices, none of our trusts include any ‘maintenance’ fees so often associated with other trusts.

What’s more, you will be able to understand them!  We start with simple explanations (most trusts are in fact very simple indeed)and each trust we provide comes with its own ‘commentary’ explaining the different clauses etc.

Life Planning not only offers the fullest range of trusts at very affordable prices, but you don’t even have to leave the comfort of your own home to arrange a thing!

 Before you commit everything to a Will, do your family a favour and  consider how much good trusts might do for them.

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An Inheritance can be a very expensive problem!

Govt figures tell us that a record number of UK families will face an Inheritance Bill. Therefore, a greater number of individuals will be receiving an inheritance.

Leaving an inheritance sounds like a nice thing to do, but in fact in can turn into a distinct unkindness …. depending on how it was arranged. Take John, a Norfolk resident, truly amazed at his good fortune when he heard he was to receive a legacy worth £200,000. His euphoria was somewhat diminished when he realised learn that his inheritance brought some unexpected problems.

The legacy would increase his own estate value landing him with a substantial Inheritance Tax liability. Moreover, John realised that others would now have a distinct interest in his newfound wealth, not the least his ex-wife!
John soon cheered up after learning that it was indeed possible to have his legacy without any of the problems!

The solution is a Deed of Variation (DoV). This is a legal mechanism which could remove John’s IHT problem, and ensure that his legacy got maximum protection.
A DoV enables the Beneficiaries of a deceased’s Estate to alter the distribution of that Estate, or relinquish a bequest from an Estate.

A DoV must be executed within two years of the Testator’s death, be in writing and signed by the Beneficiary varying the gift left to him or her in the Will or under Intestacy.

Why Use a DoV?
Because it avoids the usual situation whereby assets, via a Will (or intestacy), are  distributed absolutely to the beneficiaries, leaving the assets immediately exposed to risk of attack such as:

  • Survivor spouse’s Re-marriage
  • Divorce or Separation Settlements
  • Creditors or Bankruptcy Claims
  • Long Term Care Fees
  • Further Inheritance Tax bills (Generational IHT)

 Who can use a DoV?
Any person who will benefit under the Will or Intestacy Rules and wants to reject or redirect their interest, provided they meet certain statutory requirements.

The original Beneficiary

  • can vary, even though a benefit has been obtained under the original gift
  • can vary part of a gift
  • can re-direct to whom the gift is to go to
  • can obtain Inheritance Tax (IHT) and Capital Gains Tax (CGT) benefits
  • will still benefit from the trust that subsequently holds his/her legacy

Death without a Will, can the Beneficiaries still effect a DoV?
Yes, Will or no Will, a DoV can still be considered.

Grant of Probate already obtained, is this too late for a DoV?
No, provided the DoV is executed within two years from the date of death.

With multiple beneficiaries can just one of them consider a DOV?
Yes. All the Beneficiaries do not need to agree and a DOV can be undertaken for just one beneficiary and for any part of his/her Inheritance.

Truth be told, Deeds of Variation would not be required if more thought were given to estate planning at the outset. Break the long held myth that ‘all you need is a Will’ and with more people using trusts we would see far more assets staying within the family, a lot less tax paid and far fewer post death legal problems!

But until then Deeds of Variation are still a very valued but massively under used Estate Planning tool. The advantages gained in reducing generational IHT, protecting assets from care cost, or being attacked by divorce of the beneficiaries cannot be overestimated.

With ever increasing property values we all have need of professional estate planning. Fortunately, reliable and in-depth advice is now affordable by most of us, and no longer the privilege of the very wealthy. It’s also good to know that very often the right planning can actually ‘pay for itself’.

Garry Streeter
Life Planning

 

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LPAs – much more than you realise

Of all the ‘legal tools’ available today, nothing compares with the Lasting Power of Attorney’s (LPA) scope to resolve problems, to save time and money. Its capacity to ‘smooth the way” for a family at such a traumatic time makes LPAs the ultimate ‘must have’ documents.

However, nearly all LPAs come with one very serious drawback.
It is very simple: most LPA attorneys have no knowledge or understanding of how to do the job!  This is hardly surprising as LPA attorneys are invariably family members with absolutely no knowledge or training for the job. Sons and daughters don’t hesitate to ‘sign up’, only to discover later the enormity of the role.

Acting attorneys liken it to walking through a minefield. They don’t know which way to turn, what they need to do, or what they are not allowed to do!

The problem can have very serious consequence. We have seen Attorneys stripped of their role, and others hauled into Court all because they didn’t know right from wrong. Each case leaves another family at the mercy of the Court of Protection!

Practical help is needed. Our answer is the UK’s first, Attorney’s Guide to the LPA (property).  Our guide concentrates many hours of research into just eight simple pages of practical guidance. We don’t pretend it will solve every problem; but it will help you deal with many issues, and hopefully steer you away from other pitfalls.

All attorneys of Life Planning clients get a free copy. But if you arranged your own LPAs you can obtain copies for your attorneys for just £12 each post free.

Having well drafted LPAs is the first step. Common sense suggests the next step is to ensure your attorneys are equipped for the job!

Garry Streeter
Estate Planner

 

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What does your Will have to do with your LPA?

To do their job well, LPA attorneys must always consider the potential consequences of their decisions. All their decisions will be important, but some will more far reaching than others.

To help the attorney(s) the donor might well include ‘instruction’s or ‘preferences’ within his/her LPAs. However a very useful tool is missed out, a Will Access Authority. This is essential, as Attorneys have no legal right of access to the donor’s Will.

Imagine the situation. Your attorneys have to sell one of your assets, in order to contribute to the cost of your care? They have done nothing wrong and their actions are well within their legal remit. However, after your death your executors cannot fulfil your Will instructions regarding that asset, because it is no longer there! Your executors now have a partial intestacy to resolve!

This, and other Will related problems are so easily avoided if you provide your attorneys with the authority to view your Will.

Including this clause it is yet another reminder to you attorneys that they need to think about the consequences of their decision making.

All Life Planning LPAs will contain such a clause as standard

 

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A ‘Letter of Wishes’ for every LPA?

By far the biggest deficiency of most Powers of Attorney is their inability to fully, and accurately demonstrate the donor’s wishes. An LPA after all bestows authority, but not fully explain the donor’s wishes. In an LPA this is left to any ‘instructions’ and ‘preferences‘ included within the document itself, and/or the appointed attorneys own translation and recollections. All open to challenge and misunderstanding by family, financial institutions and of course the Courts.

The law itself is not overly helpful as it’s general instruction to is attorneys to ‘act in the donors best interests‘, which can, and is interpreted in any number of ways.  Potentially the best solution is for donors to direct their attorneys to previously drafted ‘Letter of Wishes’, one for financial and one for health/medical matters. If this is sufficiently detailed it should remove any doubt or misunderstanding as to what the donor’s ‘best interests’ are. These would not only make decision taking much easier for the attorney, it should also eliminate the possibility of any accusation of wrongdoing.

With individual estates now often worth many hundreds of thousands £££s,’ we should all now realise that LPAs are as essential a part of estate planning as Wills and Trusts, and requiring just as much attention to detail!

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