Is a Family Settlement Trust an option for your clients?

        This best practice is adhered to by many professionals in the industry, but it is becoming more common for a local authority to challenge a trust on the grounds of ‘deliberate deprivation of assets’ and succeed in getting them overturned. That’s why it’s crucial a trust is set-up with the right intention and the clients is fully clear of their commitments and the impact on surrounding relatives. The primary goal in Estate Planning is to ensure that the solution is right for the individual client and their overall circumstances and planning well in advance to protect and support families is a critical aspect of this. What is a Family Settlement Asset Trust (FSAT)? This is a discretionary trust usually coupled with a life interest used to protect assets such as property, cash, bonds and so on. It is usual for the client (settlor) to reserve the right to use the assets in the trust (to continue to occupy property for example) or have income from them. In these cases, such a right of occupation or right to income is known as a Gift with Reservation of Benefit. When is a FSAT an option? Declining mental capacity  Over 5% of males and 7% of females are diagnosed with dementia/Alzheimer’s. Such illnesses often prevent sufferers from taking decisions due to their incapacity to do so. This means that they cannot make decisions, sign documents, maintain property etc. Property may then fall into disrepair and the individuals wellbeing can be detrimentally impacted as a result of their living conditions. Vulnerable Adults When a spouse dies, the survivor may become vulnerable following the bereavement of their life partner. They may struggle to make decisions alone that previously they would have taken jointly. However, with an FSAT the trustees can take decisions with regard to the property, its maintenance and repairs. The survivor is not alone. The Big Spender A surviving spouse may be reckless with money and indifferent to property up keep. In extreme cases they may get into debt or even bankruptcy and the family’s assets are swallowed up by creditors. With an FSAT, the assets are ring fenced within the Trust. The 2nd Marriage The surviving spouse may be persuaded to make a new Will or may not even get round to making a new Will on re-marriage. This means assets may go to the new spouse without taking into account the interests of the previous family. But with an FSAT, the re-marriage of a surviving spouse is irrelevant, the assets are protected and sideways dis-inheritance is avoided. Care Fees If a surviving spouse ultimately goes into care, the Trustees could opt to rent out the property and utilise the rental income to top up care fees providing more control to the family regarding the standards of care their loved one will receive. This last point is a critical one. The issue is not the avoidance of care fees but the management of care fees contributions, ensuring families remain in control of assets and are able to utilise them in the future should they choose and need to. The advanced preplanning is crucial to ensuring assets pass to the people of the clients choice, most have worked hard over many years and made regular national insurance contributions to ensure they are looked after later in life, so why should they effectively be taxed again! The creation of any Trust requires careful consideration and Trustees should be aware of their duties and obligations regarding the careful, but not necessarily burdensome, administration of the Trust. For more details on the right Trust for your clients just contact BTWC on 01522 789473  

Cohabitation and inheritance rights

        Whilst there is an increase in the number of people who decide to co-habit together, the understanding of what happens to property and assets if one partner dies is still misunderstood. If you have a client who lives with their partner and they have decided they don’t wish to get married or enter into a civil partnership, then the assumption that everything will pass to them is incorrect. If no Will is in place making provision for each partner then there is no automatic right against the estate. If you have a client who is in the position whereby their partner owns most of the assets outright, if that partner were to die then the deceased’s estate would either pass under the terms of their Will, or if they don’t have a Will, the estate will likely pass to their next of kin under the Intestacy Rules. If your client and their partner have joint-ownership over their assets if no Will is made, under the laws of intestacy for unmarried couples, your client would be entitled to their half, but the other half would be shared equally between the deceased’s children (if there are any), so missing the surviving partner. Where there are no children, the estate would be split in the following order: surviving parents, the deceased’s siblings (or their children if the sibling has died), grandparents, aunts/uncles (or their children if they’ve died). This could mean your client may have to share their home with a family member. In the absence of any family members, the deceased’s estate would all pass to the Crown. Therefore making an updated Will to benefit each partner is vital to ensure that further down the line, each is protected and treated as wished, particularly in regards to their property and financial matters. If either partner has made a Will prior to the relationship forming, then it is just as important to get the Will reviewed and updated in order to guarantee the future allocation of assets Trevor Cross, MD, BTWC says, “Making a Will or updating their Will is the only secure way your client can ensure that their wishes for their partner regarding the distribution of property and assets is upheld and legal. As their adviser you have the opportunity to discuss their options with them, and outline the reality of the situation and guide them on the appropriate steps, all of which we can support you with.” For more information just contact us on 01522 500 823 or email us at enquiries@btwc.co.uk

Lasting Power of Attorney – The role of the Attorney

If you are providing a Lasting Power of Attorney (LPA) service to a client (who will be the Donor), then it’s important they and whomever they choose as Attorney(s) fully understand the role. The role of an Attorney could vary greatly and it’s essential that before agreeing, all aspects are carefully considered. It may be that the services of the Attorney are never required as the Donor never has that need, but in the event they do then the Attorney must understand what they are committing to. Being an Attorney is a legal agreement that must be registered with the Office of the Public Guardian (OPG) and be validated. An LPA may appoint two Attorneys, in which case they will need to work together on some decisions, as required in the LPA. Being an Attorney may require difficult decisions to be made for healthcare issues (should the donor be moved into residential care) or financial issues (dealing with taxes and payments on the donors behalf) and although some expense can be claimed, it is an unpaid role. If the chosen Attorney does not feel equipped to do the role or they may not have the capacity (in the event they are needed) then they should state so as soon as possible, as later on things can get complicated if the Donor no longer has the ability to mentally deal with changing Attorneys. As an Attorney, legal responsibilities include: Acting in the donor’s best interests and taking reasonable care when making decisions on their behalf. Acting in accordance with the terms of the LPA (see below). Helping the donor to make their own decisions where possible, rather than simply taking control. More detailed information about Lasting Power of Attorney responsibilities is available in the Mental Capacity Act Code of Practice. The Attorney will be required to sign a statement confirming they understand their legal responsibilities.   The Power of an Attorney does not allow for: Unlimited authority to make decisions on behalf of the donor The changing of the Donor’s Will Ill-treatment or neglect of the Donor To incur losses for the Donor due to poor ability to perform duties   If an Attorney is appointed under a Property and Financial Affairs LPA they cannot make decisions about Health and Welfare and vice versa for a Health and Welfare LPA. There could be further restrictions or wishes placed in an LPA by the Donor and these need to be taken into consideration before any decision is made. The Attorney can take advice o n a decision, such as a Financial Adviser or a medical expert, but decisions cannot be deferred to someone else. If need be the Court of Protection can become involved in the decision-making if the matter becomes complex. Triggering an LPA A Property and Financial Affairs LPA can be triggered whilst the Donor has mental capacity if stated within the LPA, for example if the Donor leaves the country for a long period of time and requires someone to act on their behalf in their absence. But for a Health and Mental LPA then only when the Donor no longer has mental capacity can an Attorney start making decisions. The Mental Capacity Act Code of Practice is a useful resource to point people in the direction of if required. BTWC provide support, training and full guidance on LPAs – just contact us now for more information 01522 500823

Why a Property Protection Trust could be an option for your clients

The priority for most of us when we die, is to ensure that our loved ones inherit from us, and that our assets pass safely to them, without risk of being lost. This may not always be as simple as we would wish. Assets may be ‘lost’ in a number of ways; one of which might be to pay for long-term care of a spouse/partner after our death. If the estate of the first to die is left outright to the surviving partner/spouse then the whole estate of the spouse (their own assets plus those inherited) will automatically be assessed and then potentially used for payment of any long-term care they may need. Alternatively, even where the estate is not left outright to the surviving partner/spouse or where no Will has been made but a property is owned as Joint Tenants, then it will automatically pass to the surviving owner on death and again be assessed for payment of long-term care costs. The outcome of both scenarios is that the assets of the first to die may not be available to be passed onto children or other beneficiaries. How does a Property Protection Trust work? Wills are written including a Property Protection Trust, which leaves the share of the property ‘in Trust’ for the chosen beneficiaries, usually the children. The Trust also protects the interests of the survivor, by allowing them to live in the property until death or, if required, until he/she cohabits or remarries. The rules of the trust also allow the survivor to sell the property and buy another should they so desire. Should the survivor need long-term care the local authority cannot include the share of the property held in trust in their assessment as it is owned by the trustees of the trust. On the death of the survivor the share owned by the trust is passed to the beneficiaries. If the property is own as Joint Tenants then the ownership must be changed to Tenants in Common. Owning your property in this way means that you can “gift” your share to whoever you wish in your Will. A Property Protection Trust would be created in both Wills to handle the ownership of each share of the property. Points to remember: As this is a Will Trust, nothing happens until first death so there is nothing to stop the client selling, renting, raising capital against the property or remortgaging. Another benefit of the trust is that if the survivor goes on to remarry, he/she cannot leave the whole of the property to their new spouse, as a portion is already owned by the Trustees. Where the property is a rental property rather than the principal place of residence then the “life interest” in the property equates to the right to draw the rental income rather than the right of occupancy. Where more than one property is owned it is possible to have different trusts dealing with each property. The trust is “neutral” for Inheritance Tax (IHT) meaning that it shouldn’t be used if the primary concern is inheritance tax mitigation. This means: The value of the share held in trust still forms part of the estate of the survivor for IHT calculations, even though the asset itself doesn’t If the client is unmarried then if the value of the share of the property gifted into trust exceeds the prevailing Nil Rate Band, then IHT will be payable on the gift If the client is married then, as the life tenant is the spouse, the spousal exemption still applies and the surviving spouse will still have twice the prevailing Nil Rate Band available to be claimed on their death If the survivor terminates their life interest and survives for seven years then the share of the property held in trust drops out of their estate for IHT calculations.   To find out more about PPT and other Trusts just call us on 01522 500823.

10 reasons your clients need a Will

        Having a will is arguably one of the most important things your clients can do for themselves and their families. The top ten reasons for your clients to have a will are: Your client decides how their estate will be distributed. It helps give clarity to family members and removes confusion. Your client can clearly state who will take care of their children (if minors). With no will then a court may make the decision instead, appointing either family or a state-appointed guardian. It will speed up the probate process (which happens for all estates) and clearly informs a court how your client would like their estate to be divided. With no will then the court will decide on their behalf. Minimise estate taxes. The value of what is given away could reduce the value of estate taxes that will be due. They can appoint an executor who will ensure all affairs are in order – they just need to ensure it’s someone they trust. It enables the client to clearly state who will inherit and who will not inherit from their estate. With no will, individuals could make claims to the estate against the clients wishes (such as an ex-spouse). A will allows your client to specify gifts or donations to charities or individuals. A will gives clarity and will help to avoid legal challenges of entitlement. Your client can change a will at any time to suit the circumstances in their life. It’s simple and easy to do now to avoid confusion and unhappiness later on.   Providing a will writing and estate planning service to your clients is easy with BTWC. We can work with you in a number of ways to help you meet your client needs and increase your opportunities for income growth. Just call us on 01522 500823 to see how we can help you and your clients.

Is a Family Settlement Asset Trust the Right Solution For You?

Many of you will have seen the recent article from the BBC regarding the use of Trusts for the primary reason of avoiding care fees. This relates to a particular company actively promoting a specific type of trust advertised explicitly for the avoidance of care fees. As experienced and qualified practitioners will advise,  if there is clear evidence that the primary motivation for setting up a trust is for the avoidance of care fees, this would be challenged by a local authority under the grounds of ‘deliberate deprivation of assets’ and in all likelihood be overturned. The primary goal in Estate Planning is to ensure that the solution is right for the individual client and their overall circumstances. It’s also critical to ensure that planning is in place well in advance to protect and support families’ futures. What is a Family Settlement Asset Trust (FSAT)? This is a discretionary trust usually coupled with a life interest used to protect assets which may be property, cash, bonds and so on. It is usual for the settlors to reserve the right to use the assets (for example, occupy property) or have income from them. In these cases, such a right of occupation or right to income is know as a Gift with Reservation of Benefit. Why could an FSAT as a potential option for you and your family? Over 5% of males and 7% of females are diagnosed with dementia/Alzheimer’s These illnesses prevent sufferers from taking decisions. They lose capacity. This means that they cannot make decisions, sign documents, maintain property etc. Property may fall into disrepair and the individuals wellbeing can be detrimentally impacted as a result of their living conditions. Vulnerable Adults When a spouse dies, the survivor may become vulnerable following the bereavement of their life partner. They may struggle to make decisions alone that previously they would have taken jointly. However, with an FSAT the trustees can take decisions with regard to the property, its maintenance and repairs. The survivor is not alone. The Big Spender A surviving spouse may be reckless with money and indifferent to property up keep. In extreme cases they may get into debt or even bankruptcy and the family’s assets are swallowed up by creditors. With an FSAT, the assets are ring fenced within the Trust. The 2nd Marriage The surviving spouse may be persuaded to make a new will or may not even get round to making a new will on re-marriage at all. This means assets may go to the new spouse without taking into account the interests of the previous family. But with an FSAT, the re-marriage of a surviving spouse is irrelevant, the assets are protected and sideways dis-inheritance is avoided. Care Fees If a surviving spouse ultimately goes into care, the Trustees could opt to rent out the property and utilise the rental income to top up care fees providing more control to the family regarding the standards of care their loved one will receive. The last point is a critical one. The issue is not the avoidance of care fees but the management of care fees contributions, ensuring families remain in control of assets and are able to utilise them in the future should they choose and need to. The creation of any Trust requires careful consideration and Trustees should be aware of their duties and obligations regarding the careful, but not necessarily burdensome, administration of the Trust. This type of Trust goes hand in hand with other Estate Planning solutions such as Lasting Powers of Attorney. The FSAT is designed to protect the property during the settlors lifetime. The LPA is designed to protect the individual during their lifetime. Not all Estate Planning takes effect upon death and lifetime planning can have a significant impact on the wellbeing of loved ones lives whilst they’re still with us. If you would like to know more, get in touch enquiries@btwc.co.uk 01522 500823

Illott v Mitson Court Ruling – Upholding Testators Wishes

The widely reported Illott v Mitson case this week reached a final conclusion at the Supreme Court after a 10 year battle between three animal charities and a daughter excluded from her mothers £500,000 will. Heather Illott’s mother Milita Jackson left most of her estate to charities but nothing to her daughter when she died in 2004. When Mrs Illott originally appealed against the will in 2007 she was awarded £50,000 by a district judge. The sum was increased by the Court of Appel in 2015 – £140,000 to buy her housing association property and £20,000 structured to enable her to keep her state benefits. The court ruled that Mrs Ilott would otherwise face a life of poverty because she was on benefits and could not afford to go on holiday or buy clothes for her children. The charities sought to challenge this award and in a unanimous judgement, the Supreme Court allowed their appeal in a decision handed down on 15th March 2017. As reported by the BBC, before her death in 2004, Mrs Jackson wrote in a letter to lawyers: “I can see no reason why my daughter should benefit in any way from my estate. I have made it clear to my daughter… that she can expect no inheritance from me when I die.” She explicitly instructed the executors of her will to fight any claim Mrs Ilott might make after her death. The relationship between mother and daughter worsened when aged 17 Mrs Ilott eloped with a man her mother disapproved of, but who she remains married to. There were failed reconciliation attempts which were blamed on both sides. James Aspden, the solicitor acting for the three animal charities, said the Supreme Court had upheld a “vital principle”. “It reaffirms in a unanimous sense from the highest court in the land that principle that we’re all free to choose who will benefit when we die.” This case highlights the importance of having appropriate plans in place as there may have been a different outcome where the charities’ legacy was concerned if this had not been the case. Some commentators have suggested that this result could provide greater reassurance to testators knowing that their wills are less likely to be challenged. What will certainly be of interest will be how this ruling may influence the outcome of future challenges to wills. What are your thoughts on the Illott v Mitson Case – did the Supreme Court make the correct ruling? Let us know on enquiries@btwc.co.uk

We Live Together but We’re Not Married – What Rights Do We Have?

The 2014 ONS Government Survey calculated that whilst there are 22.5 million people living as a couple and married, there are a further 5.5 million people co-habitating but not married. More and more couples are choosing to live together and the laws for unmarried, cohabiting partners are not the same as those for married couples in that they have no automatic right to their partner’s income or assets upon separation. This means, making adequate provisions for unexpected circumstances during lifetime as well as upon death become more important than ever. What is a Cohabitation Agreement? At present, the only solution for cohabiting couples seeking legal protection is to enter into a Cohabitation Agreement, also known as a “No-Nup”. It is an Agreement which sets out who owns what and in what proportion. A Cohabitation Agreement documents provisions for children, and how you will divide your property and other assets should the relationship break down. It can also be used to clarify the day-to-day management of finances. BTWC has provided many such agreements over recent years and certainly has seen an increase in demand for such arrangements. Do you own a home together? The family home is often the main and most valuable asset of a relationship. Parties can hold a property as joint tenants, tenants in common, or in one party’s sole name. If purchasing the property as joint tenants, each person takes half of the equity upon separation. If one person passes away, the survivor inherits the whole property. If purchasing the property as tenants in common, the property is held jointly but as separate shares. If one person passes away, their share will only pass according to their Will. Where ownership of family property is in the sole name of one party, it is usually a sensible precaution to enter into a written Agreement to define and secure the financial interest of the non-owner who otherwise could be entitled to nothing. Do you have children? If you have children from your current or previous relationships, making adequate plans and provisions for them is paramount. Guardians should be considered along with ensuring any children are not unintentionally disinherited by the surviving partner on remarriage should they simply ‘forget’ to make a new will to take into account their change in circumstances. Pensions Occupational pension schemes often do not recognise cohabiting partners. A pension is only paid to a surviving unmarried partner if they can prove financial dependence on the scheme member. A specific nomination may also be required by the scheme member for the other party to benefit. Cohabiting partners also have no rights over state pensions. If you need further support to plan ahead, please contact enquiries@btwc.co.uk or call 01522 500823   Source: Naim Qureshi mondaq.com

Looking Ahead to 2017 with Beneficial Trust & Will Co

After a fantastic 2016 we’re looking forward to what 2017 has in store and our continuing work with our great network of Financial Advisers and Estate Planning Consultants. We’ve seen all of our partners grow their businesses during the last year and we have a number of exciting updates and initiatives planned for 2017 including; A FREE Spring Seminar providing updates to our members regarding legislative changes, professional updates and new business developments here at BTWC HQ. New Partnership launches will be coming soon to support our advisers to extend their range of services to clients. Updates to our range of Funeral Planning products and a continuation of our generous commission rates. 2017 BTWC Training Dates are now available for the year – you can request the schedule here. Our popular ongoing regular professional updates will continue with new series’ coming up regarding the Residence Nil Rate Band, News from the Courts, Estate Administration & Probate to name a few.   Want to show your clients how they can make a Will to suit their individual requirements? BTWC offers a comprehensive and tailored support service to our new and existing Estate Planning Consultants and Professional Adviser partners, providing sound advice through every step of the client advisory process. We are fully accredited by the Society of Will Writers and Institute of Professional Willwriters and our legal team are approved by the Solicitors Regulatory Authority. Our unique 1 day Estate Planning training has been developed with professionals such as yourself in mind and you can expect to cover aspects such as; The Law of Succession Assessing Mental Capacity Will Trusts & Lifetime Trusts Lasting Powers of Attorney Funeral Planning Estate Administration & Probate These fundamentals will quip you with the desire to support your clients in getting their affairs in order in partnership with Beneficial Trust & Will Co. Our next scheduled training date is: Wednesday 22nd February To find out more about working with Beneficial Trust & Will Co email enquiries@btwc.co.uk

BTWC Christmas Office Hours

  Merry Christmas from the BTWC Team. Take a look at our Christmas Office hours and contact details during the festive period.