Why do I need a will and a trust?

Why do I need a will and a trust
  • To ensure that your estate ends up with those you care about
  • To ensure your property is not lost in the event your spouse remarries
  • To insulate your estate from care fees and other creditors

 

I shall restrict my answer to consideration of ‘will based trusts’ (as opposed to lifetime trusts), and within that sphere, to one category of trust, being that to which the above question most often (though by no means exclusively) relates in my experience: the ‘life interest’ trust. For the avoidance of doubt, this article does not address issues relating to discretionary or vulnerable persons’ trusts.

Trusts have been a feature of English law for many centuries. Their core function is to separate legal and beneficial ownership. Will based trusts come about when a will is activated (on death of a testator – they do not exist from the moment the will is executed). In a sense they allow one to define a wholly new beneficiary in their will and, by this means, exert some degree of control/protection over assets for a period after death.

Perhaps the most common type of trust seen in modern wills are ‘life interest trusts’. As the name suggests these instruments allow the individual making the will to give a ‘life interest’ to someone (known as ‘the life tenant’) whilst retaining some agency over the final destination of the asset. A ‘life interest’ describes an ongoing benefit to the life tenant e.g. the right to live in a house (or to sell it and hold a new property on trust) which persists only while the life tenant lives.

By way of an example, ‘Mr’ and ‘Mrs’, a couple in their early fifties, own a substantial home. Should either pass, each wants the other to be able to live in the family home until their own death, however, they have worked hard to build up their estate and are keen that their son should receive the property, when the second of them passes. In particular, both wish to prevent their son’s losing out, in the event the surviving spouse should re-marry or be required to part or wholly fund their care in later life.

With this in mind, their will is drafted such that, instead of passing their respective interests in the family home to one another on first death, they instead pass them to a life interest trust (sometimes known as a Protective Property Trust, when it relates to a home).

To illustrate the usefulness of such a trust, let us consider the two situations feared by the couple described, and compare what might happen in the presence and absence of a life interest trust.

  1. Remarriage. Mr passes away, in the absence of a Protective Property Trust, his interest in the family home passes to Mrs. After a period of grieving, Mrs remarries. Mrs passes away soon afterwards, without having made a new will.

In this situation, Mrs, has died ‘intestate’. Her original will was revoked in law when she remarried. Under intestacy rules her entire house may now pass to her new husband. This situation, which is not only common, but which often arises without intent on the part of the deceased, is called ‘sideways disinheritance’. Had Mr used a Protective Property Trust in his will, his half of the house would have passed to the trust on his passing and from there to his son on the death of Mrs.

  1. Residential care. Mr passes away, Mrs is placed in residential care. Local authorities seek to fund her care through the sale of her assets. Where no Protective Property Trust has been used in either will, Mrs will take ownership of Mr’s interest in their family home, on his death. As such the entire property is exposed to an erosion in value by virtue of Mrs’s care home fees.

Had Mr used a Protective Property Trust in his will, his half of the house would have entered the trust on his passing, shielding it from charges. In practice, a much more significant portion of the estate’s value may be protected because ‘half a property’ lacks financial value.

It is crucial that arrangements such as those described, are properly established by a licensed and insured firm. Confidence Wills offer a high quality and affordable service, if you’d like any more information, please get in touch now at info@confidencewills.co.uk or visit our website at www.confidencewills.co.uk.

What power does an executor of a will have in the UK?

What power does an executor of a will have in the UK
  • Executors have a wide range of powers and responsibilities.
  • They owe a duty of care to beneficiaries.
  • Under limited circumstances, they may vary or withhold gifts.

 

An executor can only be appointed by a will (otherwise an ‘administrator’ is installed by the courts).

The responsibilities of the executor are quite wide-ranging, and the powers conferred on them commensurately so too. It’s recommended that someone trusted and willing is appointed to the role as the workload might be significant.

The chief tasks which the executor must complete are (non-exhaustively):

  • Registration of death and attainment of Grant of Probate.
  • Identification of those named in the will.
  • Identification and securing of the deceased’s assets.
  • The organisation of funeral.
  • Notification of institutions such as HMRC, banks, mortgage providers etc.
  • Valuation of the estate and associated accounting.
  • Calculation and payment of inheritance taxes.
  • Distribution of assets in line with the will.
  • Locating creditors and settling debts.

 

Significant powers are required to carry out the above tasks. The wording of the will has material bearing on powers conferred on executors, however, those commonly seen include:

  • Manage the deceased’s assets over the course of distribution to beneficiaries.
  • Powers to access the deceased’s bank accounts and other financial documents.
  • Power to calculate and settle debts.
  • Powers to hold assets on trust for minors until they come of age.
  • Power and responsibility for the application of capital to the maintenance of any for whom money is held on trust.

 

Two of the lesser-known powers that executors may exert are:

  1. The ability to change a will’s contents and
  2. The power to withhold gifts from a beneficiary.

 

Each of the above may only be applied in a very specific set of circumstances. With respect to ‘1’, a will may be varied only with the consent of beneficiaries. It is not vanishingly rare for this to take place and the most common reason for the variation in the management and reduction of tax payable e.g. inheritance tax.

The scenarios in which money might be withheld from beneficiaries are limited but include:

  1. Situations in which unspecified debtors come forward. In such cases, settlement of the will may be delayed by up to 6 months as this situation is resolved.

 

  1. Where there are safety concerns. In the case of a child, these are likely to be around parental issues, in which case settlement may be withheld until the child reaches 18. In the case of an adult, concerns over issues such as addiction or mental capacity may lead to a beneficiary’s gift passing into a trust established for their protection.

The above powers are significant but so is the potential liability of the executor. Probate may take 9-12 months to complete, during this time, executors owe a statutory duty (2000 Trustee Act) to carry out their duties with due skill and care. They are required to act in the best interests of the beneficiaries of the will and to not harm the estate in any way. Executors must keep detailed records of all transactions relating to their function and be prepared to produce them if challenged.

Crucially, the executor’s duty of care does not disappear once probate is complete, should a creditor, for example, challenge or bring a claim against the estate after it has been distributed, the executor may be found liable and be required to settle damages from their own resources.

 

If you wish to discuss any of the issues raised or to find out more, call Confidence Wills now on 0121 202 4714 or visit us at www.confidencewills.co.uk.

 

WHO CAN BE AN EXECUTOR OF A WILL?

WHO CAN BE AN EXECUTOR OF A WILL
  • Anyone over the age of 18 and of sound mind can act as an executor
  • Executors are often beneficiaries of a will
  • Many opt for a professional executor, although costs vary

 

An Executor is the person named in your will who, will be responsible for ensuring that your estate is organised and distributed in accordance with the document.

Any one over the age of 18 and of sound mind can be an Executor.  Executors can also be beneficiaries. An Executor can be a witness of your will as long as neither they nor their spouse are also a beneficiary.

Many people choose their spouse, partner or adult children to be their executors, these being people who are familiar with your affairs. This of course isn’t always possible or even desirable, in which case, you may select a close friend or relative whom you think suitable. When appointing one from outside your immediate circle, a small monetary gift, contingent on their performing the role, is sometimes given.

Some choose a professional executor such as a Solicitor or Accountant etc. who would normally charge a fee. It is important to enquire as to their terms of engagement and fees, in advance of instructing them, to make sure they are acceptable to you.

The Executors you choose don’t have to be professionally qualified, if they need professional help with financial or legal aspects of the work, they can always seek this at the time.

There can be quite a lot of work involved in executing a will and it is worth asking potential Executors if they would be prepared to undertake the task. Consider discussing your estate’s complexity with them so that they can decide if they are prepared to act for you, when the time comes.

Tasks which fall to executors include (non-exhaustively):

  • Obtaining proof of all your assets such as bank accounts, insurance policies and property ownership. If you own a property overseas, for instance, this may involve significant extra work.
  • Obtaining valuations of all your personal assets such as heirlooms, jewellery, cars, caravans, boats and property etc.
  • If you are a property owner in the UK and/or overseas, instructing agents to sell the property after having obtained several valuations (always a good idea to get more than one!) is required.
  • Dealing with your financial affairs, such as outstanding debts, mortgages etc.
  • Liaising with the HMRC to ensure correct calculation of Inheritance tax Liabilities (this can be particularly onerous in the case of larger estates).

 

 

These are just some aspects of the job, it is important to choose someone you can rely on to execute your will in an efficient and sensitive manner and most of all who you can trust.

You can have up to four Executors but it’s worth remembering that they must work jointly and the more you have, the more difficult it may be for them all to co-ordinate and agree. Many choose to have one or two executors, so as to minimise logistical challenges. You can appoint ‘reserve executors’ to act in the event that one or more of those you appoint cannot fulfil their role.

 

If you’d like help with any aspect of probate or will writing, contact Confidence Wills now on 0121 202 4714 or visit us at www.confidencewills.co.uk and book a free consultation.