Definitions

Definitions

Personal Items

Whatever else is in the estate often it is the personal items that will cause the most arguments. It is sensible to prepare a Letter of Wishes to sit with your Will to clearly identify which personal and sentimental items you wish to pass to a particular individual.

For individuals who died before 1 October 2014 personal items include:

  • carriages, horses, stable furniture
  • cars and accessories
  • items of household or garden ornament
  • domestic pets
  • jewellery
  • musical and scientific equipment
  • but not any items used in a business

For those who died after 1 October 2014 personal items are now defined as tangible moveable property. This includes all items mentioned above but still does not include items used in a business, money or property held as an investment.

Intestacy Rules

If you die without a Will any assets you have on death with be administered under the Rules of Intestacy. These rules have been updated to reflect the changing value of money in the modern world. Different circumstances arise for whether you are married or not.

If you are married with no children your spouse will receive your entire estate. If you have no surviving spouse and no children your assets could pass to your parents or siblings.

If you are married with children your spouse will receive a fixed legacy (an amount set down in law that changes from time to time) and half of the remainder of your estate. The remaining half will pass to your children when they reach eighteen.

Legislation has not gone far enough as co-habiting couples are still not entitled to receive anything from the estate of their partner and would have to apply to the court for provision under the Inheritance (Provision for Family and Dependants) Act 1975 which can be a costly and unrewarding venture.

The Intestacy Provisions do not allow for sensible planning to prevent assets from passing to children at an age at which they cannot manage money, or to accommodate wishes with a second marriage, or prevent assets from passing to parents who already have tax liabilities of their own.

These rules are far from satisfactory but can be avoided by signing a Will and sensible planning.

Give us a ring to discuss your wishes further or email us.

Personal Representatives

A personal representative is a general term for someone who has responsibility for dealing with the administration of another person’s estate following their death. There are two types of personal representatives.

Executors are appointed under the terms of a Will to deal with the administration of an estate in accordance with the terms of a Will. Their power comes from the will but will be confirmed by the Probate Registry when the Will is proved. The executor will be issued with a Grant of Probate to confirm their appointment which is the legal order authorising them to act.

An administrator is an individual who chooses to act in connection with the administration of an estate where there is no Will or, in some circumstances there is a Will but there is a problem with the appointment of executors contained in it. There is a prescribed list of potential administrators set down in the Intestacy Provisions and the first person on the list has the first entitlement to act.

If you act as a personal representative this is a personal appointment so you cannot delegate your decision making power to another. It also lasts your lifetime.

If you have been appointed as an executor or are thinking about taking on the role of administrator give us a call to discuss the duties and responsibilities that will be placed on your shoulders before you act. Our PR support and advice service could provide valuable support to ensure you act correctly at all times.

Trustees

A trustee is an individual who is appointed to hold something for another until such time as an event or a condition is fulfilled. Trustees are commonly appointed to look after money or assets to be held for the benefit of other individuals. A trustee usually has clear rules and regulations that must be followed which are set down in a trust document created during the lifetime of another or upon their death. There are circumstances when you can unwittingly find yourself a trustee of assets without really knowing.

Executors can become trustees once they have dealt with the administration of an estate if a trust is established by the Will.

Unlike an appointment as a personal representative of an estate a trustee appointment does not have to last your lifetime as you can retire if you do not wish to act. It is however a personal appointment so you could be held responsible for decisions made by the beneficiaries who will ultimately receive the assets you have been trusted to look after.

Argo have a trustee advice and support service which can guide you through the maze of administration. We also are able to act as trustee for our clients. Why not give us a ring for further information.

Bare Trusts

A bare trust is the simplest form of trust that can be created. Any amount of money or assets can be placed into a bare trust for another and individuals often settle Personal Injury Awards into bare trusts for protection.

These are tax neutral and any income generated or capital gains incurred will be reportable in the tax affairs of the beneficiary and will be added to their estate for Inheritance Tax purposes.

Life Interest Trust

A life interest trust has two sets of beneficiaries:

  • a life tenant (or income beneficiary): this beneficiary has the right to the income of the trust assets. This could be: interest on invested trust monies; the right to receive rental income; or the right to enjoy the benefit of using the asset for their lifetime
  • remaindermen (or capital beneficiaries): these beneficiaries are entitled to the capital of the trust funds when the interest of the life tenant comes to an end

Special rules apply to life interest trusts for income, capital gains and Inheritance Tax according to when the trust was set up and whether it was created during a person’s lifetime or upon a death. Seeking advice is important to ensure the tax compliance is correct from the very first day.

Discretionary Trust

These trusts are the most flexible trusts you can create. Lifetime discretionary trusts should be restricted to the prevailing Inheritance Tax threshold to prevent an immediate tax charge. Discretionary trusts established in a Will can also be restricted or they can contain the entire estate.

Discretionary trusts have a unique Income Tax rate and a basic rate of Capital Gains Tax. They are subject to a valuation every ten years by HM Revenue & Customs at which point Inheritance Tax could be payable.

Trustees who look after the assets within the trust have a group of potential beneficiaries that can request funding and support. It is the job of the trustees to balance the competing interests of the beneficiaries in deciding whether they receive any assistance from the trust, whether they receive income or capital distributions, when funds are paid and how much is paid, if at all.

Simply because someone is named as a beneficiary of the trust they do not have a right to the trust assets. The preparation of Letters of Wishes to sit alongside the trust and provide guidance to the trustees are essential.

Assets within the trust are separate to the estates of the potential beneficiaries. Therefore discretionary trusts provide a good way of protecting assets for vulnerable beneficiaries, passing assets to younger generations and protecting assets for care fee purposes.

Disabled Person Trusts

These are a special type of trust created to provide protection to vulnerable adults and children to help with long term planning for their future.

These trusts are not straightforward and can only be created in certain circumstances if specific criteria are met by the beneficiary of the trust.

If this criteria is satisfied then the trust will benefit from favourable Inheritance Tax, capital gains tax and income tax rates. During the administration period specific rules apply to the distribution of capital and income.

Advice should be sought if you wish to create a disabled person trust or have been appointed to act as a trustee. Let us help with this advice. Give us a call.

Court of Protection

The Court of Protection is a special court established to protect the vulnerable individuals within our community. The administrative arm of the Court of Protection, the Office of the Public Guardian, deal with the registration of Powers of Attorney, monitoring of deputies and attorneys through supervision and will bring cases before the court if they feel that an attorney or deputy has behaved inappropriately.

The Court of Protection:

  • makes decisions on the appointment of deputies for both property and affairs and health and welfare needs;
  • makes rulings on continuing appointments in the face of adverse information; and
  • deals with disputes relating to health and welfare or property and affairs for those lacking capacity, which cannot be resolved outside a court room.

If an individual lacks capacity it is the Court of Protection that decides whether the appointment of a deputy is necessary. They also oversee putting in place a Will for someone lacking capacity and make rulings on estate planning and gifting for those who cannot make decisions for themselves.

Deputyship Orders

Deputyship orders/Court of Protection orders
A Deputyship Order is needed when someone who lacks capacity requires assistance to deal with the ongoing administration of their property and financial affairs or their health and welfare needs.

A Deputyship Order can be issued to an individual on their own or to more than one person jointly (which means they have to act together) or jointly and severally (which means they can act together or independently of each other). Once granted the Deputyship Order provides authority to make decisions and exercise the powers contained in the order. Every Deputyship Order is different according to the circumstances of the individual.

Deputyship Orders relating to property and affairs are common. Many applications are made to the Court of Protection each year. These orders usually enable the management of bank and building society accounts, investments, and property portfolios. They also authorise the collection of pensions, rental income, and investment income. It enables a deputy to sign tax returns and any paperwork required to put into effect actions that need to be taken by them. Often the court will place restrictions and conditions on the purchase and sale of property.

Deputyship Orders relating to health and welfare needs are in comparison quite rare. Only a few have been granted and these were in complex situations where there were frequently changing health and welfare needs. The Court of Protection anticipates that most health and welfare decisions will be made by best interest decision making and expects applications to be made as a last resort.

Deputies

A deputy is someone appointed by the Court of Protection to act in relation to the property and affairs or health and welfare needs of an individual who lacks capacity.

They must act under the terms of the court order and not exceed their scope of powers. If a deputy wishes to do something which is not authorised by the court order they will need to make a separate application for permission to the Court of Protection.

Attorneys

Attorneys are appointed to act for you under a Lasting Power of Attorney or an Enduring Power of Attorney. Their authority originates from the power of attorney document itself and is governed by legislation which can be broadened or restricted by restrictions and conditions in the power itself.

It is important for attorneys to understand the boundaries within which they must act. If they wish to do something outside the scope of their power then they must apply to the Court of Protection for permission to act.

Attorneys must:

  • always act in your best interest. They need to be careful of finding themselves in a position of conflict with the person for whom they are acting.
  • follow the five principles set down in the Mental Capacity Act 2005 and
  • have regard to the Code of Practice when making decisions.

An attorney can act for you:

  • if appointed by a Lasting Powers of Attorney for Property and Affairs once it has been registered with the Office of the Public Guardian;
  • if appointed by a Health and Welfare Lasting Power when you do not have capacity to make the decision at hand;
  • under an Enduring Power of Attorney from when the document was completed (subject to any restrictions) providing it was completed properly – they must register the power when they suspect that you are beginning to lose your capacity;
  • under a General Power of Attorney once the document is completed (subject to any restrictions) but they cannot act for you once you lose capacity.

Attorneys are subject to supervision by the Court of Protection and must always be aware that they could be asked to provide financial accounts and report for their actions at any time.

Benefits

Personal Independence Payment, Universal Credit, Employment Support Allowance are all new names for benefits that have been about for many years. Assessment processes are changing. It is becoming harder to claim benefits and benefits are being stopped incorrectly.

Argo provide advice on benefit entitlements to ensure you are receiving all that you rightly deserve to help you afford the care and support that you need.