Wills for Same Sex Couples

I want to begin this article by stating that I consider myself apolitical. The processes around politics seem to me a negative-sum game for the incompetent, the punchable and the lost. I vote with pragmatism and disloyalty.

Notwithstanding, some of you may remember old Etonians, David Cameron and George Osbourne. What you probably recall about this pair, is the joie da vivre with which they de-funded the NHS, and got us kicked out of the EU (by way of an update their good works continue in the private sector – for Greensill Capital in the case of David C and for Russian Oligarch, Evgeny Lebedev, in the case of George O).

What you may not recall, is that Osbourne, in a characteristic flight of ‘who’s side are you actually on … ery’ – managed to introduce the Resident’s Nil Rate Band. A piece of Inheritance Tax law that one might generously describe as: ‘superficially not homophobic’. In this article we’re going to talk about Wills for same sex couples and what this change meant.

Here’s how it works. As of 2015, if you own a house and you leave it to a direct descendent i.e. a child, you can attain a boost of up to approx. £175,000 to your (de-facto) inheritance tax ‘exemptions’ (known as your Nil Rate Band). This can take your individual Nil Rate Band up to a maximum of approx. £500,000, i.e. you pay no inheritance tax until you gift more than this amount by your will. If you are married, when you die, this exemption may be transferred to your spouse giving them a total (de-facto) exemption of up to £1,000,000. 

So why is this rule unfair to same sex couples? Using census data, such as that available to Cameron & Osbourne during formulation, discrepancies begin to appear. 

  1. Only 15% of same sex couples have children (remember you need these to access RNRB), compared to 38% in opposite sex relationships. 
  2. Only 58% of same sex couples are married versus 88% of opposite sex couples (that exemption passes between married couples).
  3. Same sex couples tend to make more money than opposite sex. UK data on this is sparse, Forbes have an approximately 12% difference in house hold incomes. 

I don’t want to bore you with calculations, but when you adjust for all of the above and work out (weighted average) inheritance tax bills for two cohorts of couples (same and opposite sex respectively), with estates of around £1 million and houses of more than the RNRB. The inheritance tax bill across both deaths for opposite sex couples comes in at around £110,00 and that for same sex around £240,000. 

So, what can you do about it? Well, if you’re unmarried, you can look at including an instrument called a ‘Nil Rate Band’ trust in your will. Essentially you set up a discretionary trust naming your partner as a beneficiary, you also name any others you wish to benefit. The effect of this is to keep gifts on first death out of your partner’s estate, for tax purposes, on their own death. 

Over and above this there are various other routes open to you for IHT planning. Structurally these cluster around gifting in various forms and the use of business property reliefs. 

Crucially, there are time limits associated with certain of these approaches, i.e. periods of time that must pass before they take effect, so I urge you to start looking at this now.

If you’d like to discuss any of the issues raised, please speak to our client advice team on 0121 202 4714 or click here and we’ll call you. Don’t wait until it’s too late!

Some facts and figures about Wills

For the analytically inclined, I’d like this week to lay out, in numbers, a picture of Britain’s comparative ‘unpreparedness’ with respect to end of life by demonstrating some facts about Wills.

  • You probably haven’t got an up to date will. 

31 million people in the UK have no will, 84% of those under 35 have no will and 60% overall, lack an up to date will. 

  • You probably won’t correct this until something horrible happens. 

The number of people without a will is actually rising (around 6% per year). Of our client base, less than 15% are simply ‘getting around to it’, when making a will. The three most common triggers for will creation are: diagnosis of illness; death of a family member and terrorist action/pandemic.  

  • You probably think you don’t need a will right now. 

You probably won’t get his by a bus tomorrow. It’s true, take comfort in the fact that, actuarily, you’re around two million to one on, to avoid fatal bus impact all year! Less, fun are the odds of ultimately dying from cancer (20%) or cardiovascular issues (40%). Nobody needs a will until they absolutely need it, at which time its absence may prove catastrophic.

For completeness, death by coconut is visited upon one in 250 million of we poor, benighted islanders!

  • The consequences of lacking a will may be far reaching for those you leave.

Even setting aside the risk of your loved one’s struggling financially on your death; I tell my clients that around half of a will’s function is conflict mitigation. Arguments around bereavement tend to be explosive. Not only can they fracture families, their financial impact can destroy estates. There were around 10,000 attempts to block wills last year. 25% of people report willingness to challenge a will if they feel treated unfairly. The mean cost of a court challenge to a will is £150,000. Even more concerningly, the pre-court costs of conflict are estimated to be £20,000. Court cases rose by 60% prior to Covid.

  • It’s later than you think. 

If you plan to make a will, you need to do it: 1. Before you die and 2. Before you lose mental capacity. As a population we expect to live to around 80. But such statistics are poorly understood, and fail to speak to the fate of the individual, for whom death is binary. Few realise that their chance of dying within 10-years nudges 10% at only around 55. These are not ‘national lottery’ odds and loss is total. These numbers don’t even capture those who will lose mental capacity. One person a minute in the UK suffers TBI, dementia diagnosis or stroke.  

The cost in time and money of making a robust will, is tiny in comparison to the costs of not having one. Nobody likes to think about this. The very best advice I can give you is ‘begin’, a good professional will guide you and ensure you reach the end of the process.

Speak to our client advice team now on 0121 202 4714 or click here and we’ll call you.

Expect the unexpected. Addressing estate planning and mortality.

Life is comic in texture and tragic in structure. Nobody likes to think about the certainty of our own demise. Nobody likes to think about estate planning and mortality. It goes against millions of years of evolution to consider not being around. In truth, however, as social beings, our worlds extend beyond ourselves. Those we care about, form a part of our world that persists after we die. 

Ask yourself, which is more a part of you, your loved ones or your little finger, then ask yourself which would you rather lose. 

In planning for end of life, you are taking an altruistic step for those you care about. I want here to consider some of the matters that you might open up for discussion. 

  1. Wills. In the absence of a well drafted will, there’s: i) a high chance of confusion and insecurity amongst those you love; ii) a decent chance of your estate’s ultimately being lost to care fees or a future spouse of your current partner and iii) a material chance of catastrophic intra-familial conflict.
  2. Funerals. The one people hate to think about. Where no discussion on how your funeral might be conducted, has taken place, those you love will be faced with a significant organisational burden, under real time pressure, whilst newly bereaved. They are likely to seek outlet for their feelings of loss ,in ceremony and over spend around the funeral.
  3. Lasting power of attorney. Documents which appoint those you trust to manage your affairs should you lose mental capacity. Only 2% of people have them. Those that don’t risk a freezing of shared assets; lengthy and hugely costly pursuit of court orders; inability to consent or reject medical treatments and loss of decision-making power around residential care. 
  4. Insurances. Life, critical illness, mortgage cover. In a sense, the only reason anyone works is to provide some certainty in the future for those they love. Catastrophic loss can be protected against, and I urge you to take seriously the notion of having enough insurance in place. 

 

I don’t want to quote actuarial statistics in this article, though as one in the will industry, I will say that I ask every client that I engage the question: “does any medical reason make preparation of the will urgent in the order of 14 days?”. Those who answer yes to this, number less than 2%. Notwithstanding, I find myself attending hospital beds (more recently car parks) to obtain signatures, with frightening regularity. 

Act now, it’s later than you think!

You don’t need to do anything more at this point, than make an enquiry, have the initial conversation, begin! Speak to our client advice team on 0121 202 4714 or click here and we’ll call you.

Lasting Powers of Attorney

When should I make Lasting Powers of Attorney?

Subject to certain caveats, that I’ll come back to, you need to do this now. Here, I’m going to explain why. 

Firstly, and for absolute clarity, lasting powers of attorney (“LPAs”) allow you to appoint those you trust to act in your place, on critical financial and health matters, in the event you lose the ability (the mental capacity) to do so yourself. 

So why make Lasting Powers of Attorney now?

  1. LPAs can only be made while you have mental capacity. They can’t be made after ‘they are needed’. It may be too late by the time you receive a diagnosis. 
  2. They take a long time to put in place. You have to register these with the Office of the Public Guardian (OPG) before you can use them. This may take more than 6 months. This is more than enough time to lose mental capacity following a dementia diagnosis so best to start the process now.

 

  1. There is no ‘next of kin’ in law. In the absence of Lasting Powers of Attorney (LPAs), authority to make key decisions on your behalf may pass to local authorities. This includes decision such as whether you are to go into residential care and where that is to be in the country. 
  2. The alternative is slow and expensive. If you don’t have Lasting Powers of Attorney, and have lost mental capacity. Your loved ones may apply, through the courts for a deputyship. This application, which may take between 1-2 years, is estimated to cost 10-15 times more than implementation of Lasting Powers of Attorney. 
  3. Don’t underestimate the impact of ‘limbo’. While there is no deputyship or Lasting Powers of Attorney in place, financial operations, on your behalf, cease. Payments to third parties will continue to flow from your bank whether appropriate or not. Local authorities occasionally pick up admin tasks and may charge exorbitantly for it. Shared assets may be locked, making life difficult for loved ones. Consents for treatment may also be difficult to give. 
  4. The likelihood of capacity loss is probably greater than you think. Mixed dementias present in 22% of the elderly. Alzheimer’s disease prevalence rises from around 7% at 65 to 20% at 80.  Vascular dementia is seen in 4.2% of those over 65. 23-29% of people over 25 will have a stroke and annual traumatic brain injury admissions affect 0.5% of people. 

Serious thought should be given to who is appointed as your attorney. They are not policed and should be someone that you trust absolutely. 

 

When you are ready to make your Lasting Powers of Attorney, speak to us and have Confidence in our service and advice. For more information visit our page on LPAs: https://confidencewills.co.uk/lpa/.

Upsells and Wills, what to watch out for.

A number of clients contact us, having been upset by requests for payment of much greater sums than anticipated (known as an upsell), by a supplier engaged to make their Will. In this article I want to look at situations in which pricing opacity and disparity prove problematic. 

Before I begin, I should make clear that a majority (around two thirds) of clients, are perfectly happy with the firm they appoint to create their Will (there’s no statistical difference between solicitors and Will writers in this regard, though DIY/online users fare less well). Only around 5% feel forced to spend more than anticipated because of an upsell (albeit this is far too many), though around a quarter report spending more than they wish. 

I shall present three (non-exhaustive, though representative) examples of experiences of Confidence Wills’ clients as they were reported to us, and allow you to draw your own conclusions but under no circumstances will we draw you in with a ‘cheap Will’ only to sell you something you don’t need – aggressive upselling.

The first case is that of a couple who engaged a firm in the midlands to draft their will at a rate of £185. In the event, the will writer in question visited the client’s home and sought to offer the clients a will, with a property trust for ~£4,000 (7-1,000% the going rate). On being refused, left muttering of how he’d ‘failed miserably’(audibly)! Two weeks later the clients had no Will and didn’t know which way to turn. 

The payment requested was ridiculous, there was no trust between client and professional. Worse, there was no chance of the professional doing anything other than pushing that high value service for all it’s worth. No-one was listened to, or got what they wanted, even the optimistic salesman ended up £185 down on the day. 

The second case, is perhaps the most common configuration which we encounter. Our client, another couple, based in Manchester, took up a firm on their offer to make a will at a rate of £20 (on a discount app). They were subsequently offered a will with a trust in it for around £800. This is a fairly common marketing strategy employed by some firms. The Will Writing industry is pretty efficient economically and you can bet that those approaching you with very low fees up front make it up somewhere. As mentioned, this is known as an upsell. There is a distinct difference between offering something someone needs and drawing someone in with a price that you know client’s  won’t be paying.

The model involves taking up a lot of clients’ time, information gathering, on the basis of a very low-priced offering, building inertia and offering inflated services later. We have had clients approach us and ask us to unravel these documents without starting from scratch, of course we can’t. Don’t be fooled, if it looks too good to be true it probably is.  If you’re in this position, before you pay, speak to us and get some advice.

Finally, I want to report the case of a lady in Maidenhead. Her case is unusual; however, the consequences potentially extreme. She appointed a firm of solicitors to make her Will. They quoted around £200 for the service. On the day the professional requested £1,800 to put the lady’s home into a lifetime trust (to ‘protect it from care fees’). From a cost perspective, the price isn’t extreme, these arrangements do run into the low thousands. The problem is the product itself. Not only do lifetime trusts like this cause unnecessary paperwork, THEY DO NOT WORK! This arrangement creates a ‘reservation of benefit’. They shouldn’t be offered. There are still firms (of solicitors) presenting these to clients. Steer well clear, this presents a potentially catastrophic risk to those left behind. If encountered, you should contact the law society or the Society of Will Writers to report it. 

If you’re considering these issues, I urge you to act now, speak to our client advice team on 0121 202 4714 or click here and we’ll call you.

 

7 Reason to Write Your Will in 2022

The Estate Planning industry struggles with the somewhat unenviable notion that the services we perform require our clients to reflect on a time when they are not around. Nobody likes doing this, and we find that it is almost always an external event that gives someone pause to reflect and get their affairs in order. In any case, making a Will is a very important job and we have listed 7 reasons to write your Will this year.

 

  1. You’ve considered making a Will. This sounds trivial and implied, however, if you’re even faintly considering dealing with this ugly matter, I encourage you to guard that momentum jealously. Failure to make a Will can be catastrophic and all too often only enters consciousness when time is short, or there’s a disaster that affects you directly, when and it may be too late!
  2. We’re still in a global pandemic. Without wishing to appear pessimistic, the threat of Covid has far from passed. Restriction lifting presents a high watermark for near term risk from the disease, moreover, health services (including emergency care) are impaired (to a ‘multi-decade’ degree). Our firm has spent all together too much time meeting clients in hospital carparks!
  3. Changes to the law. Succession and in particular inheritance tax law, are in a state of perpetual evolution. The manner in which tax exemptions are applied, in particular, has far-reaching consequences for many will. Tax policies may tighten further as we seek to repay debts incurred during lockdown. By way of example, it is surprisingly common to see older wills with elements like ‘survivorship clauses’ in wills e.g. ‘if X survives me by 30 days’, such clauses have potentially serious tax implications. That’s why it’s crucial to get expert advice when making a Will.
  4. A loved one has fallen ill over the pandemic. Many of us have suffered loss over the course of pandemic. Perhaps not as a direct result. Nonetheless, this my have brought the importance of forward planning into sharp relief. It may even have resulted in an inheritance for which planning should be considered. 
  5. A major life event is in the offing or has taken place. We have seen a surge in those marrying, having children and moving house post lockdown. This may be linked to the reopening of services, rising asset prices, or pent-up demand further to government agency shutdown. You should always make a new will or review your existing one, when your circumstances change significantly and the ’20-’21 have represented pivot points for many.
  6. Following on from ‘4’ we have all gone through a period of reflection and reorganisation, if you are in a new job, a new home or other life configuration that feels unfamiliar, now may be the time to act. Once established in the day-to-day fury of a new job or family, you are unlikely to step back and deal with issues as far reaching as estate planning. Act now if able!
  7. You are able to make a will, and everyone else is! Lockdown restricted our ability to help many in need of Wills. Access to those, for example, in care homes, was limited. Face to face meetings are arguably the only way to create a robust document, albeit (untested) emergency law was implemented. Demand for Wills rose by 300% and remained high. The current period of relative normality may represent a good time to manage affairs. 

If you’re considering these issues and are thinking about making a Will, I urge you to act now, speak to our client advice team on 0121 202 4714 or click here and we’ll support you.

7 things to avoid with your Will

Will Non-exhaustively!

  1. Putting it off. People hate doing it and making a will usually enters our consciousness at a moment of existential horror. It goes against all of our hopes an instincts. If it’s on your radar, and you’ve some momentum, guard it jealously and keep going!

 

  1. ‘Sideways disinheritance’ is all too common. Mr A and Mrs A are married and have one child ‘Sophie’. Mr A and Mrs A are responsible parents and create mirror wills leaving everything to each other and then to Sophie. Mrs A dies suddenly. Mr A eventually re-marries a lady who has two children from a previous relationship. Sadly, Mr A passes away soon after remarriage, without making a new will. Marriage having revoked Mr A’s will, his entire estate passes to his new wife and Sophie is left with nothing. There is no malintent on the part of Mr A only poor luck. This situation could have been avoided with proper drafting of his original document.

 

  1. Putting gifts together in the wrong order. Possibly the most common structural problem we see with DIY wills. There is a hierarchy by which gifts are distributed. If you want to leave your house to someone, so that they can actually live in it, you need to make sure the £5,000 gift you’ve left to the dogs’ home doesn’t trigger its forced sale by executors!

 

  1. Loss of property to care fees. Local authorities are more or less destitute. Delineation of social and health-based care needs is arbitrary and political. A properly drafted will can be used to protect gifts by your will from attack by cash strapped local authorities, should someone therein need late life care. 

 

  1. Losing your Residents Nil Rate Band (RNRB). Apologies for jargon, RNRB describes £175-£350k of inheritance tax exemption, losing it can cost your beneficiaries up to £140k. You only receive this exemption to the extent an appropriately valued property is left to descendants. Failure to achieve this can occur accidentally e.g. through poorly organised gifts e.g. see ‘3’ or a misworded trust. 

 

  1. Losing your ‘transferable nil rate band’. This describes the inheritance tax relief that passes between spouses. The risk of its loss speaks to a wider point about inheritance tax exemptions, they are not automatically applied. Clear paper trails must be established for each of a couple’s deaths and exemptions applied for by executors. 

 

  1. Gifting to pets.  Not in England or Wales, in any case. You can’t give to a pet in your will. A pet is a piece of property here (unlike Singapore, where gifting to animals supports an entire area of niche tax law!)

 

If you’re considering these issues, I urge you to act now, speak to our client advice team on 0121 202 4714 or click here and we’ll call you