YOUR

LEGACY

Bringing quality to decisions that will affect your future

Your Guide to Will Writing and Estate Planning

By

Derek Williamson

FAIA, FFA, FIPA, CME


CONTENTS

       Page

Why should I make a Will?                                                                1

Laws of Intestacy                                                                               3                                     

Are Wills complicated?                                                                      5

Inheritance Tax – An Overview                                                         7

Inheritance Tax calculator                                                                14

How to reduce or avoid Inheritance Tax                                         16

Common IHT Myths                                                                       18

Enduring Power of Attorney                                                          20

Advance Directive (Living Will) & Residential Care                    22

Guardians                                                                                         25

Parental Responsibility                                                                   27

Business Wills – Partnership Agreements                                      30

Jargon Buster                                                                                   33

What to do next                                                                               36

“I’ve loads of time to sort out my affairs and write a Will…….” are you sure? …. Read on!


Why Should I Make A Will?

Because everyone wants peace of mind.

Having a valid Will is something everyone needs and means that your wishes will be carried out exactly as you want them to be.

A Will allows your financial affairs to be dealt with quickly preventing unnecessary financial hardship for your partner and family.

Every day about 2,000 people die in the UK, but most of them leave their families with financial problems because they had not made a Will.  Most people assume that when they die, all their possessions will automatically pass to their surviving spouse.

However, many families have to face immediate financial hardship and under some circumstances they may even have to sell their home.

If you die without a valid Will then the Law lays down strict rules about who will receive your money and possessions - your ‘estate’.  These rules, the Law of Intestacy, are unlikely to agree with what you want to happen when you die.

It is just as important to have a Will if you are unmarried, or in a single sex relationship. If a partner dies without a Will then their estate automatically passes to their blood relatives, not to their partner.

 

Summary:

 

Not having a Will means:

You will have no say about how your money and possessions are divided when you die.

Your partner or family may suffer unnecessary financial hardship at a time of emotional             distress.

There may be Inheritance Tax to pay that could have been reduced or avoided.

You will not be able to leave particular family heirlooms to those you wish to have          them.

You will have no say about who would look after any young children.

Someone you have never met will deal with your affairs rather than trusted friends,             relatives or other chosen Executors.

You will not be able to give any special instructions or wishes about your funeral,            burial or cremation.

Any partners or family may not be able to carry on your business, and it could collapse.

Laws of Intestacy

The following is a brief guide of the Laws of Intestacy for England & Wales:

No

 

Do you have children?

 

Your spouse inherits the first £250,000 plus personal chattels and a life interest (income only) in half what’s left.  The remaining half is divided equally between the children when they reach 18 or if they marry before then.  Children also inherit what’s left of the estate when the surviving parent dies.

 

Yes

 

Is your estate worth more than £250,000?

 

Yes

 

Spouse gets everything

 

No

 

Yes

 

Are you married?

 

Yes

 

Yes

 

Are your parents still alive?

 

Your spouse inherits the first £200,000 plus personal chattels and half what’s left. The rest goes to surviving parents, otherwise, to your brothers and sisters (if not alive then to nephews/nieces)

 

No

 

Your estate is shared equally between your children or grandchildren if your children have already died.

 

Do you have children?

 

No

 

Your estate is shared equally between your parents

 

No

 

Your estate is shared equally between your brothers and sisters.  If these siblings have already died then nephews and nieces take their place in the distribution.

 

Do you have any brothers, sisters, nephews or nieces living?

 

Yes

 

Do you have any parents, brothers, sisters, nephews or nieces living?

 

Yes

 

No

 

Are any of your grandparents still alive?

 

Your estate is shared equally between your grandparents.

 

No

 

Yes

 

Your spouse inherits everything.

 

No

 

Your estate is shared equally between your aunts and uncles.  If they have already died, cousins will benefit.

 

Do you have uncles, aunts or cousins?

 

Yes

 

No

 

The Crown takes everything

 

Notes on flow chart above:

The chart is based on our understanding of the current law.

Although the Laws of Intestacy covers half-blood relationships, these are not included in this simplified chart.

The term ‘children’ includes illegitimate and adopted children, but not stepchildren unless they are legally adopted.

‘Chattels’ is defined as personal items such as jewellery, household items and cars.

Jointly owned property usually passes to the surviving joint holder, independently of the rules of intestacy.  However this is not always the case.

Are Wills Complicated?

 

A valid Will is a binding legal document, which often uses legal language, but in the majority of cases a Will is a straightforward expression of what you want to happen to your money and other assets after your death.  Even if your circumstances are more complicated, a professional Will writer can make sure your wishes are expressed in such a way as to leave no room for any misunderstanding.

However, because it is a binding legal document it needs to be clear and concise in what is says.  Because of this, it is not something you should attempt to do on a DIY basis.  The very worst thing would be having a Will that fails because your wishes are not clear and legally acceptable.

There are simple steps you need to take to make sure you do have a valid, clear and legally binding Will.

We will guide you through the important legal formalities such as signing and witnessing your Will.  We can also advise you on appointing Executors and Trustees who will handle your affairs after your death.  In most cases, a relative or friend can act as Executors instead of a Bank or solicitor, which can save you thousands of pounds in fees.  Where a professional is required, we can act as Executors with a modest fee payable for their services.

However, writing your Will is not the only important step you need to take.  You also need to make sure your Will is in a safe and easily accessible place and we can provide this service for you.

It is also vitally important that you keep your Will up to date, so we also provide a service to simply update your Will or add additional requests to it known as a codicil.  If your Will is stored with us there is no additional fee for this service.

Depending on your circumstances it may be wise to make use of various Trusts or you may require an Enduring Power of Attorney or the use of an Advance Directive.  Whatever your needs, we are able to professionally take care of your affairs.  These subjects are explained later in this guide.

Once you have read this guide the next step is simple, turn to the end of the guide and request the further help and services we can offer.

 

 

THE MOST IMPORTANT THING IS THAT YOU DO SOMETHING ABOUT WRITING YOUR WILL RIGHT NOW.

Inheritance Tax – An Overview

Many people believe that Inheritance Tax is only for the rich.  It is true that no liability arises if the Estate on death is less than the nil-rate tax band or where the Estate is left to all exempt beneficiaries such as a surviving spouse or charity.  Below is an overview of IHT, more information is provided in greater detail within this brochure.

IHT is levied at 40% on all assets over the nil-rate band.

Who pays IHT?

Anyone domiciled or deemed domiciled in the UK.  IHT is levied on worldwide assets.  Non-domiciled individuals will be taxed on their UK assets only.

Domicile

It is considered that you are domiciled in the country where you have your permanent home.  Domicile is not the same as nationality or residence.  You can only have one domicile at a given time.  Rules for determining domicile can be complex, especially for married people of different domicile.

Minimising or avoiding IHT

Fortunately there are ways of reducing the potential liability for inheritance tax.  The most effective ways would normally require forward planning, more information is provided on page 9 – ‘How to reduce or avoid IHT’.

Gifts

Lifetime Gifts

Gifts can be given during one’s lifetime.  If they are not exempt, they are referred to as Potentially Exempt Transfers (PETs) as they leave your Estate for IHT purposes if you live for seven years after the gift.  Taper relief is available for transfers made more than 3 years before the date of death provided the gift would be all or partly subject to IHT.  For a gift to be effective the donor must not be seen to have reserved a benefit (gifts with reservation).

Tax Free Gifts

Transfers between spouses.  Donations to UK charities, political parties or certain national institutions.

Annual Exempt Gifts

Annual gift of up to £3,000 to anyone.  If you miss making the £3,000 gift last year, you could gift £6,000 this year.  Husband and Wives have their own allowances.

Small Gifts of up to £250 per person

Normal expenditure out of income

There is no limit on how much can be given as long as the gifts meet three conditions.  First, it must be paid out of income not capital.  Second, the gift must not affect your normal standard of living.  Third, the gifts must be regular – at least once a year.  HMRC may require evidence that you meet these conditions.

Marriage Gifts

You can give up to £5,000 to your own child on marriage, grandparents can give £2,500 to a grandchild and £1,000 can be given to anyone else.  The gift must be conditional on the marriage actually taking place.

Maintenance gifts spent on education or training your child under 18 and in full time education.  Also reasonable amounts to support dependent relatives are exempt.

Reliefs

 

Business Assets

If you are a partner in a business or sole trader, no inheritance tax would normally be payable if you give away your interest.  This may not apply to cash held in business.  Controlling interest in an unincorporated business, or share in a partnership, or a shareholding in unlisted companies such as those quoted on the Alternative Investment Market attract 100% relief, provided that you have held the shares for at least two years.  50% relief can be obtained on land or equipment which is used for a qualifying businesses are those carried on for profit, ones which deal mainly in securities, land or buildings do not normally qualify.

Agricultural Land

This may attract 100% or 50% relief.  Owning woodlands can effectively postpone paying IHT until the timber is cut or sold (Woodland Relief).

Armed Forces

With regards to servicemen or women who die as a result of a wound inflicted, illness contracted or accident on active service are exempt from IHT, even if the death does not occur immediately.

Pensions

Company and Occupational pensions often provide death-in-service benefits of up to four times your annual salary.  On death, before taking the benefits the money would normally be passed to the member’s spouse, thus increasing his or her potential liability for IHT.

The pension Trustees could pay out to others, say, his or her children, if the member informs the Trustees of his wishes.  A discretionary or flexible Trust could receive the money with the surviving spouse being only one of the beneficiaries.  The same kind of procedure can be used to exclude your pension fund from your Estate for personal and Stakeholder pensions.

Life Assurance Policies

Term assurance can be purchased to cover Potentially Exempt Transfers against the event of the donor dying within seven years of the gift.  A seven-year term assurance policy in Trust would provide funds to pay the tax bill on death.

Whole of life policies in Trust can be used to cover all or part of the tax liability on death.

Annuities can be used to provide incomes to pay for whole of life policies in Trust.  The purchase price of the annuity would leave your estate immediately.  The sum assured of the whole of life policy is outside your Estate as it is in Trust.  Should you buy a Long Term Care, Immediate or Future Care Plan for a single premium, this will leave your Estate immediately.

Trusts and Wills

A Trust is set up by someone (the Settlor) gifting assets to Trustees who now legally own the assets and which they hold on behalf of persons who the Settlor wants to benefit (the Beneficiaries).  The Trustees must always act in the best interests of the Beneficiaries and are controlled by the terms of the Trust.

There are several classes of Trust, each class being taxed differently.  Trusts offer the opportunity to reduce the potential liability to Inheritance Tax.  They can be created during your lifetime or on death using your Will.

There are a number of advantages in using Trusts.  A Trust could do some or all of the following for you:

Any increase in capital within the Trust would be outside your Estate for IHT purposes provided that you (the Settlor) are specifically excluded from benefiting from the Trust.

Some Trusts allow the Settlor to enjoy an income from the Trust.

After seven years all the original investments into the Trust could be outside your Estate for IHT purposes.

Some Trusts have the effect of removing some capital immediately from the Settlor’s Estate.

Trust assets can be paid out to the Trustees before Probate is granted.

Foreigners owning offshore assets can set up Trusts to protect them from being liable to IHT.

Through a Trust you can control who receives the capital and income and when it is received.

Trusts are often regarded as being more certain than Wills if the Trustees are chosen carefully, as Wills are more likely to be challenged or could be changed by using a Deed of Variation.

 

Wills

It is advisable for each individual to make a Will in order to utilise their nil-rate band effectively.  For married couples, it is worth considering bequeathing up to the nil-rate band to children/grandchildren rather than to each other.  This can have potential tax saving of £110,000.

Deed of Variation

Currently, it is possible to alter Wills after death by mean of Deed of Variation.

This can be used for IHT purposes.  For example, a parent inheriting assets might wish them to go to the children directly or a rich son might want his less well off sister to have his inheritance.  The Deed can work even if someone dies without having made a Will (Intestate).

The Deed has to be effected within two years of death.  If the Deed is done for tax purposes the HMRC Capital Taxes Office must be informed within six months of the Deed being set up.  You cannot always set up a Deed of Variation and it may be that legislation restricts the use of Deeds of Variation in the future.

Gifting Your Home

This will not work for IHT purposes, if you continue to live there, as it would be regarded as a ‘gift with reservation’.  However, Equity Release Schemes could offer scope to reduce the IHT problem.

Other Matters

 

Each individual has his or her nil-rate band allowance.  Thus between them a Husband and Wife could enjoy two nil-rate bands, currently a total of £650,000, with careful planning.

You do not pay Capital Gains on your assets when you die.


Inheritance Tax - how much?

Estate

Tax

£325,000

NIL

£400,000

£30,000

£450,000

£50,000

£500,000

£70,000

£550,000

£90,000

£600,000

£110,000

£650,000

£130,000

£700,000

£150,000

£750,000

£160,000

£800,000

£180,000

£850,000

£210,000

£900,000

£230,000

£950,000

£260,000

£1,000,000

£280,000

The information contained within this sheet is based on our understanding of current tax legislation, which may change in the future.  No responsibility can be accepted for action taken based on this information.

Inheritance Tax Calculator

By entering the approximate values in the boxes below, you can calculate how much Inheritance Tax (IHT) could be deducted from your estate.  If you are married, enter the total value of all joint assets.

Do not include any assets under Trust, unless your Spouse is the beneficiary of that Trust, or any amounts you are leaving to charity.

Your current assets

Property

£

Other residential property in UK or abroad

£

 

 

 

Personal Items

 

House contents and other valuables

£

Cars, caravans, boats & other valuables

£

Gifts made within the last 7 years

£

 

Investments

TESSA/Cash ISAs

£

Bank & Building Society accounts

£

National Savings

£

PEPs & ISAs

£

Equities & Gilts

£

Investment Trusts & Unit Trusts

£

Investment Bonds

£

Life Assurance Policies – Sum Assured

£

Death in Service Benefit

£

TOTAL A

£

Your Current Liabilities

Mortgages

£

Credit Cards

£

Others (e.g. loans)

£

TOTAL B

£

Calculating your Estate

Take the total A and deduct from it the total B =

£

Deduct the nil rate band (currently £325,000) =

£

Multiply the resulting figure by 40% =

£

Basic rules of IHT:

There is no IHT on gifts between spouses or transfers of assets on death.

There is no IHT on the first £325,000 of the value of an estate for each person.

IHT is always payable out of the residuary estate unless the Will states that a gift

     should bear its own tax.

When calculating the value of an estate for Inheritance Tax, you must add on the value of all gifts over £3,000 per year made by the deceased in the last seven years.

How to Reduce or Avoid Inheritance Tax

It has been said that Inheritance Tax (IHT) is a ‘voluntary tax’ meaning that by taking some simple steps you can reduce or even avoid paying IHT.

Because there is no IHT payable on transfers after death between spouses, many people arrange their affairs so that everything passes from the deceased spouse to the surviving spouse with no IHT to pay.  This sounds very simple but there is a serious drawback.  What really happens is that the value of the surviving spouse’s estate increases by the full amount passed on, so that when the surviving spouse dies, the whole IHT burden fall onto their estate.

A much more effective way to reduce or avoid IHT is for the value of the combined estate to be shared out between the spouses before death.  Next, all or as much of the IHT-free amount of £325,000 (available to each person) as possible can be passed to children (or other beneficiaries) on the death of the first spouse.  This reduces the value of what is passed onto the surviving spouse and therefore the IHT that is payable on their death.

Making use of IHT exempt lifetime gifts and Potentially Exempt Transfers (PET) is another effective way of reducing IHT.  Each person has an annual exemption of £3,000 which will not attract IHT when they die.  Other small gifts of £250 are also allowed as well as special wedding gifts from parents, grandparents and other people.  However, you are also allowed to make other transfers called PETs.  As long as you live at least 7 years* after the transfer then you won’t have any IHT to pay on these transfers either.

(*there is a sliding scale of IHT payable on these PETs if you die within 7 years)

Years between

 PET and death

% of PET

 liable to IHT

0 – 3

100

4

80

5

60

6

40

7

20

It is also possible to use Discretionary Trusts as part of your Will to effectively give away your wealth on death, use up the £325,000 nil-rate band and still allow your surviving spouse access to the money if they need it.  This type of arrangement is often called a Will Trust.  A Gift & Loan Trust would be more suitable for a single person.

In summary a Will Trust will allow you to:

Retain full control of your assets whilst you are still alive.

Use up to the full £325,000 nil-rate band for each spouse to maximise the tax efficiency for the married couples.

Following the first spouse’s death the surviving spouse can benefit from receiving amounts of capital from the Trustees of the Will Trust.

Alternatively, the surviving spouse can ask the Trustees to make loans or advances from the Will Trust.

Common IHT Myths

Myth

‘You can give away your private residence (which you continue to live in) to your children and, provided you survive 7 years, it will be outside your estate for IHT purposes’.

Wrong

If you continue to live in the house then, generally, it will be treated as a Gift with Reservation (GWR) and so continue to be treated as being in your estate for IHT.  It could be an effective gift if the donor pays a market rent for the gift.  However, this could be substantial and would also be assessable to income tax on the recipient.  In addition, because the recipient now owns a house that is not their principle private residence, all capital gains in the value of the house from the time of the gift will be assessable to capital gains tax (CGT) – although taper relief will help to mitigate the tax. The worst scenario is that the above is done and then the donor dies within 7 years of the gift, so in addition, the donee could die, in which case the value of the house could be assessable to IHT again.

Myth

‘You don’t need to put your pension policy in Trust as any lump sum death benefit payable will generally be outside your estate for IHT purposes’.

Wrong

Some pension policies are treated as owned by the policyholder and so any lump sum death benefit will be included in his or her estate on death.  The principle policies that fall into this category are: Retirement Annuities (pre 1 July 1988 Personal Pension policies); Buy-Out policies (sometimes call Section 32 policies) and policies assigned to individuals from occupational schemes.

However, even policies that are under a master Trust, such as post-30 June 1988, personal pensions could cause a problem for IHT.  Many policyholders nominate that any death benefits paid out before they take their pension benefits are paid to the surviving spouse or partner.  This is not an immediate IHT problem but could cause a problem for IHT on the surviving spouse’s/partner’s death.

Unless he or she spends the money or gifts it (and then survives 7 years), the money will be in the estate on second death.  It would generally be beneficial to consider writing the policy in a Trust which includes the surviving spouse or partner as a possible beneficiary, ensuring that the Trust has a long perpetuity period and that the Trustees have the power to make loans.  Loans to the surviving spouse or partner can be very IHT effective way to allow the spouse/partner to benefit, as any outstanding loan will be a debt against the estate on second death, further reducing the estate for IHT.

Myth

‘There is no point in writing Mortgage Protection term assurance policies in Trust’.

Wrong

When I was young (now some time ago), all mortgage protection policies were assigned to the Bank or Building Society who lent you money.  If that is the case, the policy cannot be written in Trust.

Not any more.  As a general rule, these lenders do not insist on policies being assigned to them.  It is therefore possible to write these policies in Trust.  Best advice does therefore say that the client should at least consider writing the policy under a flexible Gift Trust.

The recipient of the house and mortgage under the Will should, of course, always be a possible beneficiary of the Trust, it should have a long perpetuity period and the Trustees should the power to make loans.  Not every client will want to go down this road but perhaps it should always be discussed.

Even couples could consider this strategy where the mortgage is covered by single applicant, single life policies.

There are many more myths and legends about as regards IHT.  Be careful.

Enduring Power of Attorney

As we grow older, many of us worry about our financial affairs, and how we can manage them if we become too old, or become incapacitated due to illness or an accident.  Therefore, it is just as important to make arrangements to take care of this situation if it arises.

Just like a Will this can easily be done by using a legal document called an Enduring Power of Attorney (EPA).  However, this must be done whilst you are still fit and healthy, so it makes sense to arrange for this to be done at the same time as you make your Will.

An Enduring Power of Attorney:

Is used to appoint and authorise a person, or persons (an Attorney), of your choice to        deal with your affairs on your behalf.

Usually comes into force if and when you are unable to direct your own affairs.

Can cover just about all your affairs or it can be restricted to certain things only.

Like a Will it can be updated, amended or revoked at any time before it is registered         with the Court of Protection.

Can appoint a husband or wife so that, if one becomes incapable, the other then has             complete authority to organise their joint affairs.

Because you are giving full control of your affairs to someone else, it is very important to choose your Attorney carefully.  You must have complete trust in them to act in your best interests.

 

 

 

 

 

 

 

 

What can an appointed Attorney do?

It is up to you whether you give your Attorney full or restricted powers.  If you give then full powers they can do basically anything you could have done yourself.

This could include;

Filing a Tax Return;

Signing cheques or documents;

Having access to your saving and investments;

Buying things on your behalf;

Giving birthday presents or other gifts.

 

What happens if I do not make an EPA?

 

It would be necessary for someone to make an application for receivership to the Court of Protection causing delays and which will cost an annual fee payable to the Court.

Just like a Will, an EPA is a valuable legal document which must be written properly for it to valid. 

Living Wills or Advance Directives

 

It may be a concern that in old age, or following a serious illness or accident you may be kept alive at a time when you have lost your mental capacity.  An Advance Directive or Living Will expresses your wishes to your doctor in such an event.

This usually means that under certain circumstances you do not want your life prolonged by medical treatment, but you do want to be kept comfortable with pain relief, even with the consequence of shortening your life.

Advance Directives are endorsed by the British Medical Association and are increasingly held to be legally binding on doctors.

 

What to do:

 

We can assist in the preparation of an Advanced Directive.  A form needs to be drawn up, expressing your wishes, signed by you and witnessed at the same time by two persons who are not relatives and who do not expect to benefit from your estate.  If necessary, the witnesses could also give evidence that you were of sound mind when you signed the form.

 

It is essential that you discuss your feelings about this with your doctor and make them aware of the Advance Directive.  One copy of the form should be given to your doctor with a request that it be placed with your medical records.  You should keep a second copy and you may wish to place a third copy in a safe place such as a bank deposit box.  It should not be incorporated in your Will but should be a separate document.  Close relatives should be informed of the Advance Directive and where it is kept.

It is wise to update your Advance Directive every few years, the British Medical Association suggests every five years.  This can be done by updating the form and signing where the amendments are made.

Residential Care

 

Did you know…. although you may have worked hard to buy your house or to build up an estate to pass onto your children, under the terms of the National Health Service and Community Care Act 1990, your property may be sold to pay for your care if you have to go into a Nursing Home.

With average annual fees of residential care in the UK running at £23,660 (Laing & Buisson 2003) people like you are being forced to sell their homes to pay for these fees.

If you want to pass the bulk of the value of your house to your children rather than have to sell it to pay for residential care then you have two basic options:

1.Take out a Long Term Care policy. 

AND/OR

 

2.Add a Property Trust to your Will to ensure at least 50% of the value of you house             passes to your beneficiaries and not to the Local Health Authority.

 

We can advise you fully on this area of Law and potentially save your family thousands of pounds.  A professionally prepared Will with the correct Trust clause can put your mind at rest.  Just request this service at the end of this guide.

 

 

 

 

 

 

 

Guardians

 

Protecting your children and meeting their needs is a fundamental part of being a parent.  However, it is also necessary for parents to think the unthinkable and consider what would happen if both parents died, or due to separation, divorce or the inability of a surviving parent to fully perform their role, a Guardian may be required.

The role of a Guardian is an important one.  The harsh facts are that should you die without making a Will, or if Guardians are not appointed in your Will, your children could be placed in care until the Court appoints official Guardians.  This could take some time, and in the meantime is likely to be a very upsetting period for your children and other close relatives.  In addition, these appointed Guardians may not be those you would have chosen.  All this upset and upheaval can be avoided by you appointing Guardians in your Will.

Guardians need to be appointed for children under the age of 18.  It is usual for relatives or close friends to be appointed.  Your choice should be based on who you believe will care well for your children should you die.  However, it is important you ask people first so they agree to act and are aware of this responsibility.

It is possible for each parent to appoint different Guardians, or for different Guardians to be appointed for different children.  However, before deciding to take either of these decisions you need to consider the effect on your children’s future.  In most cases both parents will appoint the same Guardians for all their children.  This avoids complications, especially the possibility of having the children split up.

The role of Guardian is a very responsible one.  There will be financial and emotional responsibilities, so these matters need to be discussed in detail before Guardians are named in your Will.  These discussions should include any financial support the parents plan to leave their children in the event of their death.  Guardians may also be able to claim Child Benefit and receive a Guardian’s allowance when both parents are deceased.

There may be situations when a Guardian may be needed when only one parent dies.

These could include cases where:

A surviving parent is unable to fully perform their responsibilities because they may be abroad, serving in the armed forces, in prison, mentally incapacitated or disabled in some other way.  In rare cases a surviving parent may choose not to accept their responsibilities.

Parents are separated or divorced and one parent dies.  Here a Guardian may be called upon to act with the surviving parent in cases where a dispute may have to be settled by the Court, or in particular if there is a Residency Order in force.

It is important to understand that unmarried fathers will not necessarily become their child’s Guardian should the mother die, and unless they have been given parental responsibility by the mother in a Parental responsibility Agreement or Court Order, they cannot name the Guardians themselves.  However, in the case of unmarried couples with minor children, the mother can consider naming the child’s father as first Guardian in her Will (see page 18 on Parental responsibility).

Parental Responsibility

 

The Children Act 1989 takes the view that the best place for children to live is usually with their families, where both parents take equal responsibility for their upbringing.  The Act deals with the principles of ‘Parental Responsibility’ which include the rights of parents but also emphasises their duties towards a child.

 

Who has Parental Responsibility?

 

This is an area that is all too often misunderstood.  In law, a mother has automatic parental responsibility.  A father also has parental responsibility if the child’s parents were married to each other at the time of the child’s birth.  An unmarried father can obtain parental responsibility by means of:

Marrying the mother.

Applying for a Parental Responsibility Order issued by the Court (however, stepfathers cannot apply for Parental Responsibility).

A written agreement with the child’s mother, called a Parental Responsibility Agreement. This is a legal document signed by both parents and witnessed by an Officer of the Court or Magistrate. This agreement is then sent to the Principal Registry of the High Court.

Parental Responsibility is not lost because of divorce or separation, nor in cases where children are subject to a Court Order.   In these sorts of cases it is possible for other people to share Parental Responsibility for a child, and this can include a Local Authority.

 

 

 

What does Parental Responsibility mean?

 

In legal jargon it is defined as;

‘All the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his/her property’.

In plain English this means that you have the right to be kept informed of, and make decisions about such important issues as your child’s education, health and overall welfare.

 

In situations where one parent has been given the right to look after the child, usually by the issue of a Residency Order, this parent will take the day to day decisions about the care of the child.  However, they must always keep the other parent informed and discuss important decisions with them.

 

Does Parental Responsibility end?

 

As most parents have learnt, being a parent is a lifetime responsibility.  However, in the sight of the law Parental Responsibility can end:

When a child reaches 18 years of age.

If a child dies.

  •  

If a child is legally adopted.

  •  

By means of a formal discharge from the Guardian.

  •  

By use of a Court Order (this includes removing Parental Responsibility from a non-            parent i.e. a Local Authority).

Please note, the provisions of The Children Act 1989 are much more detailed than these notes.  Always seek legal advice before taking any action.

Business Wills - Partnership Agreements

People in partnership often ask whether it is really necessary to have a formal partnership agreement or Business Will.

The answer is definitely 'Yes'.

Basically, the agreement should set out the rules governing how the partnership operates, and should cover the main ‘What happens if ...’ situations.  If there is no agreement, there will be a large element of uncertainty, and applying the underlying law, such as the Partnership Act 1890, may well lead to unwanted results.

It is usually best to have a partnership agreement drawn up but before you reach that stage you should think about exactly what you want the agreement to cover. In particular, you should consider:

Running the business

partners duties;

working hours and holidays;

decision-making procedures;

business premises;

cars.

Financial matters

profit-sharing arrangements, and drawings on account;

partnership capital (and interest arrangements);

banking and financial arrangements;

accounting arrangements;

making provision for tax payments.

Special circumstances

partner retirement procedures;

death of a partner;

providing for partners' retirement and dependants;

disability of a partner;

establishing the right to expel a partner;

arbitration for unresolved disputes.

We would be happy to discuss your questions relating to Business Wills or Partnership Agreements, just request this service via our Request Form at the end of this guide.


Jargon Buster

 

Administrator

Has the same responsibilities as an Executor but is appointed by the Court with an associated cost to the estate when:

There is no Will.

The Will does not name the Executor.

A named Executor is unable or unwilling to act.

Beneficiary

A person, or an organisation, that benefits from a Will or Trust.

 

Codicil

A document or amendment that alters the terms of an existing Will.

 

Enduring Power of Attorney (EPA)

When a person gives lawful power to someone else to run their financial affairs if the person giving the power loses their mental capacity.

 

Estate

The money, possessions and other assets that you own which can be left under your Will.

 

Executor

A person or company named in your Will who will be responsible for carrying out your wishes set out in your Will and paying any taxes or debts.

 

Grant of Probate

A document issued by the Courts confirming the validity of a Will and allowing the Executor to administer the estate.

 

Guardians

People who are given responsibility to look after your children if they are under 18.  Guardians do not usually become necessary until the death of the surviving parent.

 

Inheritance Tax

A tax payable on death on the value of an estate over £300,000 (as of April 2007).  The current rate of tax is 40%.

 

 

Intestacy

Where the law decides who inherits money and possessions because there is no valid Will.

Intestate

Dying without having made a Will or not having a valid Will.

 

Issue

Your children, their children etc. down the family tree.

Joint Property (under English Law)

There are two ways of jointly owning property;

Under joint tenancy their entire property passes to the survivor(s) following a death.

Under tenancy-in-common a person’s share of the property passes to others under the             terms of the Will or according to the rules of intestacy.

Legacy

A gift you wish to give to a person or organisation following your death.  This will usually either be an amount of money or specific item (s).  If an item, take care to be very clear about describing it to avoid confusion.

 

Letters if Administration

Issued by the Courts to an administrator instead of a grant of probate for the same reasons as explained under ‘Administrator’.

 

Mirror Will

A Will that contains almost identical terms to your own Will.  Usually used for husbands and wives or partners where the beneficiaries are the same.

 

Property Trust

A Trust added to a Will that protects all or part of the value of a property for named beneficiaries.

 

 

Testate

Dying with a valid Will.

Testator/Testatrix

A person who makes a valid Will.

 

Trust

A written agreement where a named Trustee is made responsible for money or other assets for the benefit of people or organisations named in the deed which created the Trust.

 

Trustee

Individuals or an organisation named in a Trust deed to take responsibility for the Trust assets and manage them.

 

Will

A Will is a list of instructions telling your Executors what to do with your money and possessions when you die.

(Please note that these are simplified explanations and should not be taken as legal definitions.)

“Inheritance tax is, broadly speaking, a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”

Lord Jenkins

 

What to do next

This guide is designed to explain the main principles and importance of making a Will, and other legal documents, to secure your financial affairs for you and your family.  We are happy to answer any further questions you may have or to discuss with you the services we offer.

THE MOST IMPORTANT THING IS THAT YOU DO SOMETHING ABOUT WRITING YOUR WILL RIGHT NOW.

Our Will writing service offers the benefit of the expertise of a fully qualified Member of The Society of Will Writers and Institute of Professional Will Writers.

WE CAN SAVE YOU UP TO £220,000 OF INHERITANCE TAX.

If you would like to see a presentation on this unique product or if would like to arrange for an adviser to contact you on a no obligation basis, please complete and return the request form below to:

Will Writing Request Form

Please arrange an advisor to call me to discuss the following services:

(tick as required)

cWill Writing

cSingle Will

cMirror Wills (Husband & Wife Partners

cProperty Trust

cTrust Planning

cEnduring Power of Attorney

cBusiness Wills – Partnership Agreement

cAdvance Directive

(Living Wills)

cInheritance Tax Planning

Name:_______________________________________________________

Address:_____________________________________________________

____________________________________________________________

Post Code_______________ Telephone Number_____________________

For further information about Goddards Accountants, please call us at our offices:

Brixton Office
		

		
c/o Technoestates
		
102 Acre Lane
		
Brixton

                

                

                

                
Your Legacy.pdf