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Legal Services Guides

Wills

Making a Will ensures your property and assets are left to the people you want them to go to, helping to prevent conflict between loved ones as you will have planned all the detail. A Will can help prevent unnecessary taxes that could be avoided. A Will is the only way to appoint guardians for minor children. Without one a surviving spouse will not necessarily inherit everything, whilst an unmarried partner has no entitlement. The family home may need to be sold and children may be unintentionally dis-inherited. Therefore we recommend you seek advice from a solicitor and put a Will in place.

We recommend that you review your Will regularly, at least every 5 years, or immediately if your circumstances change. Further we recommend that your Will is produced by a solicitor.

Will review

If your circumstances have not changed and you do not wish to change any of the provisions you made, your Will may be fine. However, as it was not prepared by a Solicitor it may not cover you appropriately in which case there could be issues upon your death. Therefore, we recommend you seek advice from a solicitor and get your Will reviewed. We recommend you review your Will regularly and at least every 5 years or immediately if your circumstances change.

Further we recommend that your Will is produced by a solicitor.

Power of Attorney

If you lose mental capacity, for example in an accident, your loved ones will need to apply through court to become a “deputy”, to have the authority to manage your affairs. This can be a long and lengthy process. You can avoid this situation by putting in place a Lasting Power of Attorney (LPA) which is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf. This gives you more control over what happens to you if you have an accident or an illness and can’t make your own decisions (you ‘lack mental capacity’). You must be 18 or over and have mental capacity (the ability to make your own decisions) when you make your LPA.

There are 2 types of LPA:

  • health and welfare
  • property and financial affairs 

You can choose to make one type or both.

Health and welfare lasting power of attorney. 

You can use this LPA to give an attorney the power to make decisions about things like:

  • your daily routine, for example washing, dressing, eating
  • medical care 
  • moving into a care home
  • life-sustaining treatment 

 It can only be used when you’re unable to make your own decisions. 

Property and financial affairs lasting power of attorney 

You can use this LPA to give an attorney the power to make decisions about money and property for you, for example: 

  • managing a bank or building society account 
  • paying bills • collecting benefits or a pension 
  • selling your home

It can be used as soon as it’s registered, with your permission. We recommend that you get advice with an inheritance tax planning expert to help you structure and organise your estate in the most tax efficient manner.

Cohabitation agreements
A cohabitation agreement is a form of legal agreement reached between a couple who have chosen to live together. In some ways, such a couple may be treated like a married couple, such as when applying for a mortgage or working out child support. However, in some other areas, such as property rights, pensions and inheritance, they are treated differently.
A cohabitation agreement contains documentation for a couple who want to live together in order to protect themselves from unnecessary cost and litigation should their cohabitation break down. They can clearly regulate their property rights and what arrangements might be made for mutual financial support, dealing with debt, caring for children, etc. The agreement also, much like a prenuptial agreement, allows the individuals concerned to determine in advance who will keep specific assets and what will happen to assets that have been purchased jointly if they separate. This agreement is intended to bind both parties.    
Pre Nuptial agreements
A pre-nuptial agreement, commonly abbreviated to prenup, is a contract entered into prior to marriage, civil union or any other agreement prior to the main agreement by the people intending to marry or enter a civil partnership.
The content of a prenuptial agreement can vary widely, but commonly includes provisions for division of property and spousal support in the event of divorce or breakup of marriage. A prenuptial agreement can protect each spouse’s premarital assets from a claim by the other spouse in the event of death or divorce. A prenup can also protect income and assets acquired during the marriage.
Property trusts

For couples living in England and Wales, there is a way to protect at least half the value of the family home and keep it for the children. This is achieved by writing your Will in such a way that it puts half the family home into a type of Trust when the first spouse or civil partner dies. The terms of the Trust also mean that the surviving spouse or civil partner can continue to live in the property held within the Trust. These are called Property Trust Wills.

By preparing a Property Trust Will in the right way, the value of half the home is ring-fenced by the Trust so that it isn’t taken into account if the surviving spouse is financially assessed for residential care home fees. The reason is because half of it is owned by the Trust and the other half is owned by the surviving spouse or civil partner.

Life policies in Trust
There are two main benefits of putting a life policy in trust, but only a very small percentage of life insurance policies in the UK are set up this way.
Firstly, the provider will be able to pay a claim more quickly as they will just require a death certificate before paying out which means there is no wait for probate. If someone dies and their plan is not in trust, their representatives will have to obtain a grant of representation before they can deal with the policy.
Secondly, the policy may be free of inheritance tax (IHT) which is payable at 40% on any part of an estate valued over £325,000. The gifted benefits would no longer be a part of your estate and would not therefore be subject to inheritance tax.
Guardians

A legal guardian is appointed to care for a child in case both parents die before the child reaches the age of 18. You should appoint a guardian(s) for your children in your Will or the courts will do it for you if the worst happens. The guardian(s) will make important decisions about your children’s life in areas such as medical treatment and education and will directly affect how your children are schooled, how they are taught the difference between right and wrong and how they are supervised during their lives up to adulthood.

What to consider when deciding who to appoint. 

     • Who is most able to take on the responsibility of caring for a child – emotionally, financially and physically?
     • Whom do your children feel comfortable with already?
     • Whose parenting style, values and religious beliefs most closely match your own?
     • Would the person have enough time and energy to devote to your children? 
     • Would your children have to move far away and would that pose a problem?  
     • Does the person you are considering have any other children? If so, would your children fit in or get lost in the shuffle?     

Finally, ask yourself ‘can I live with that person taking care of my child’. If your inner voice says no – keep thinking.
Do discuss the appointment with the person you choose and find out if they feel they can take on this responsibility. 

How will the guardians manage for money?                                                                                       
A guardian has no obligation to support your child from their own resources. There are a few different ways to approach this issue when making a Will. Following the death of both parents, Most Wills leave the residual estate on trust for the children. The executors, as trustees, usually have powers to use money held on trust for the benefit of the children or to pay it to the guardian(s) to be used for the children’s benefit. 

     • Parents may include in their Will a power for the trustees to loan money to the guardians.
     • Parents may wish to leave a cash gift to the guardian(s) that is conditional on the acceptance of the appointment as a simple thank you, or the cash gift may be intended to enable the guardians to improve their home to accommodate the children.
     • The parents can write a letter of wishes making clear how they would like the trustees of their Wills to use their powers to provide financial support for the children.

Care home costs

You may need to consider future care home costs as they can readily exceed £1000 per week and your ability to pay will be determined by a means test called Care Needs Assessment.

The weekly cost of care home charges 
The weekly cost will depend on the facilities offered by the care home and whether you also need nursing care. Costs can range from £250 per week to over £1000. If nursing care is needed the cost is approximately 20%-25% higher.  

Location of care home
Where you are located in the country will have an impact on your nursing home costs. In England, the costs are higher in the south east compared with the north west for example. Typically, the average is between £2000 and £3000 per month.  

Financial support
Going into a care home can be very expensive and if you have financial assets greater than £23,500 you may not be entitled to financial help. Your property may not be included if your care and support is at home and may not be included if you live with a partner, child or a relative who is disabled or over 60 years of age. However, if you own your own home and are the sole inhabitant, it is very likely to be included which would mean you will easily exceed the £23,500 cut off and have to pay your own care fees. If you capital and income is under £23,500 you might get some help from your local authority but you may still need to make some contribution. 

Inheritance tax advice

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

   • the value of your estate is below the £325,000 threshold
   • you leave everything to your spouse or civil partner, a charity or a community amateur sports club.

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £425,000. If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £850,000.

Inheritance Tax rates 

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold. 

Example

Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000). 

Based on your answers, it appears that you may be liable for inheritance tax. We recommend that you get advice with an inheritance tax planning expert to help you structure and organise your estate in the most tax efficient manner.

Disabled discretionary trust

A trust is the best way of financially providing for a disabled or vulnerable person throughout their lifetime. A Trust allows for assets (such as property, cash and investments) to be held by trusted individuals (known as Trustees) for the benefit of others, in this case a disabled or vulnerable person (known as the beneficiary or beneficiaries). It is the Trustees who decide how to use the assets for the benefit of the beneficiaries and they will be governed by any rules set out in the Trust document.

A trust can be set up to meet your individual circumstances and the needs of your family. A disabled persons trust is a trust set up to specifically to benefit a ‘disabled person’. We recommend that you get advice from a trusts expert to help you consider whether putting in place a disabled persons trust may be appropriate in your circumstances.

The details contained within these videos and guides are UK Legal Checkup Ltd’s understanding of current legislation and could be subject to change. The information provided does not constitute advice and individuals should seek professional advice prior to taking any action.