About 50% of my practice is helping clients with their estate planning. This invariably concludes with their writing a will. In addition, it may involve lifetime gifts (perhaps into trust) and writing a finance and/or health lasting power and perhaps a living will. Sometimes it requires liaising with lawyers offshore if the client has a foreign citizenship and/or if s/he owns assets outside the UK.
Putting these pieces of paper in place in a way that works for the client and his/her heirs is something s/he cannot delegate. It is for this reason I describe the exercise as a communication of love. I want in this note to explain this sentiment and give some examples.
Writing a will is like playing a what if game. Let us assume the client is married/in a civil partnership and has children. A typical scenario is on the client’s death their will provides:
- All to my surviving spouse/civil partner;
- If s/he has died – all to my children in equal shares at [18];
- If a child predeceases their surviving parent and has children who survive the 2nd parent to die (‘X’); the dead child’s share goes equally to his/her children on their attaining [18];
- If no children/grandchildren survive X, their estate passes to … ; and
- If no named beneficiary is alive to inherit X’s estate, it passes to one or more named charities.
Prior to anyone inheriting the deceased’s assets, their financial affairs need to be brought to a conclusion. This is the job of the executor(s). If the deceased was an owner manager of a business it may be different executors need to be appointed to ‘manage’ the business for the estate to those executors appointed to manage the other assets of the deceased. This is particularly true if the deceased was an owner of a regulated business such as a solicitor.
Should the client have children below the age of 18 additional matters need to be addressed. These include:
- who the client appoints as guardian(s) for his/her children should both parents die prematurely; and
- thinking how in these circumstances the guardian(s) can be compensated for the inevitable disruption in their life.
The assets of the deceased can be used for the education, maintenance and welfare of the deceased’s children. They cannot (unless other steps are taken) be used e.g. to pay for a loft conversion at the home of the guardian(s) to accommodate the deceased’s children.
A question I ask clients is if they care if their surviving spouse/civil partner re-marries and potentially leaves assets inherited from the deceased to persons other than their children. In my experience the older the client the less relaxed they are.
The Inheritance Tax Act 1984 (‘IHT’) covers this scenario by saying that the IHT spouse exemption is available where assets are left on trust to a surviving spouse for life and on their death whatever remains by way of capital is to pass e.g. to the children of the first spouse/civil partner to die.
This structure has advantages when it comes to assessing the capital of the surviving spouse available to meet care costs as the assets in the will trust are presently left out of account in calculating the available assets of the surviving spouse/civil partner.
I wrote a will for a client (‘C’) who had children from a prior marriage. C chose to put in place such a life interest trust for the surviving spouse (‘S’.) After C’s death, S found it undignified that the trustees included one or more of C’s children. The issue being if S wanted any capital from the trust (in addition to its income) the trustees needed to agree. Today – especially in a second marriage scenario – if clients want such a will trust structure I explore with them their leaving their surviving spouse/civil partner some capital outright so their need to access the trust for capital is reduced.
The difference between a will and a lasting power of attorney (‘LPA’) finance
The contrast is that a will has no affect during the lifetime of the person who wrote it and a finance LPA has no affect after death.
A finance LPA allows the donor to
- nominate who s/he wants to manage their financial affairs if the donor ceases to have capacity; and is
- much cheaper and easier to put in place than the family needing to apply to the court for a deputy to be appointed to perform the same function if no finance LPA exists and x has ceased to have capacity.
A health LPA allows you to appoint who you want to liaise with ‘authority’ on issues concerning your care; medical wellbeing and receipt or not of life sustaining treatment.
I sincerely believe that doing the required thinking to put in place the pieces of paper I describe above, so they truly work when the time comes for you and your family/nearest and dearest, is only a job you can do. I do my best to make it an exercise you enjoy and complete feeling ‘it fits-it works’.
If you think I can be of help-please get in touch.
Robert Schon
ROBERT SCHON PLANNING AND TAX ADVICE 