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End of life matters - Wills, Lasting Powers of Attorneys and a Laugh!!
- 1. End of Life Planning Miriam Spero TEP Head of Private Client Law Phillips Lewis Smith miriam.spero@plslex.com 020 7925 2244 This talk is intended for information purposes only. Everyone’s circumstances are different and you should seek personalised legal advice. It does not constitute legal advice © Phillips Lewis Smith 2020
- 2. This presentation will cover: • What happens if you lose mental capacity? • What happens if you die without a will? • What is a will? • How a will can be used to solve possible problems and benefits it can bring? • How to make a gift to charity in your will? • When to think about updating your will?
- 3. What happens if you lose mental capacity?
- 4. Ways of dealing with mental incapacity Enduring Powers of Attorney pre-planned Finance Lasting Powers of Attorney pre-planned Finance or health Advance directives pre-planned Health Deputyship court appointed Normally only finance
- 5. Or alternatively you could get a dementia elephant
- 6. Lasting Powers of Attorney • Buildings insurance for the brain • Just because you make an LPA doesn’t mean you can no longer deal with your affairs Health and Welfare Property and Finance When can it be used? Only if lack capacity Can be used whilst have capacity if so wish What type of decision? Where you live, medical care, Claiming benefits, selling your house, investing your money
- 7. Health & Welfare – life sustaining treatment • LST can mean care, surgery, medicine • What is life sustaining depends on situation • Attorney cannot make decision because he is motivated to bring about P’s death
- 8. What does it mean to lack capacity? If P is unable to: 1. Understand the relevant info 2. Retain the info and use it to come to a conclusion 3. Communicate the conclusion Capacity is time & decision specific
- 9. The 5 Principles of the Mental Capacity Act 2005 NB: these apply to people making decisions under LPAs, Deputyships or if no power is in place Principle 1 • A person must be assumed to have capacity unless it is established that he lacks capacity.
- 10. Principle 2 • A person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success.
- 11. Principle 3 • A person is not to be treated as unable to make a decision merely because he makes an unwise decision.
- 12. Principle 4 • Can the decision be made or the act done in a way which is less restrictive of P’s rights and freedom.
- 13. Principle 5 • An act done, or decision made, under the MCA 2005 for or on behalf of P must be done, or made, in his best interests.
- 14. Best Interests 1. Don’t make decisions based merely on P’s age / appearance / condition / behaviour 2. Consider whether P will regain capacity to make the decision 3. What were P’s past and present wishes, feelings, beliefs and values? 4. Take into account the views of anyone named to be consulted, involved in P’s care or interested in their welfare
- 15. Choosing your attorneys Resthaven K Lear J Shmo
- 16. Choosing your attorneys • You can have attorneys and replacement attorneys • They can be a mix of family/friends /professionals • You must trust them 100% • Include someone from the next generation • Ensure they can work together • Ensure they have the appropriate skills
- 17. How do you want your attorneys to act • Together and separately • Together only – not necessarily the best option because • Together for some decisions separately for others • You cannot have majority rule i.e. 2 out of 3
- 18. Restrictions and guidance • Suggest your attorneys consult certain of your peers when making decisions • Discretionary management regime • Accounts prepared each year • Show a 3rd party bank statements regularly • Order in which replacements step in • What sort of care home if any
- 19. Registering your LPA • An LPA needs to be registered at the Office of the Public Guardian before it can be used • £82 fee • You can cancel it as long as you have capacity • Your attorneys cannot change your will
- 20. Gifting from the Donor’s funds
- 21. Investing for P • OPG due to issue new guidance soon • Very, very, very conservative No lizard farms (Re Buckley [2013])
- 22. Deputyship • If you don’t have an LPA and lack capacity someone can apply to the Court of Protection to be appointed your deputy. • Normally only get financial deputyships – health decisions under best interests principles
- 23. Pros and cons of deputyship Pro Con Deputy has to have an insurance policy in case they make off with your funds It can be expensive – • court fees • annual management fees annual • insurance policy paid from your funds Deputy has to prepare accounts and submit them to OPG You don’t choose your deputy Supervised by the OPG unlike LPA Application process is glacially slow
- 24. Advance decision to refuse treatment
- 25. Making an Advance Decision Over 18 and have capacity Specify the circumstances which must arise for the AD to be operative Specify treatment not to be given If dealing with life sustaining treatment must be in signed, witnessed writing and statement that specified treatment not to be provided even if life is at risk Must lack mental capacity Contemplated circumstances arisen Treatment required is as specified Maker not withdrawn/altered AD when had capacity Not subsequently made H&W LPA giving attorneys authority to give or refuse consent to same treatment AD relates to Using an Advance Decision
- 26. Advance decisions (2) Can withdraw whilst capacity – withdrawal doesn’t need to be in writing Must apply to specified treatment and specified circumstances and no reasonable grounds for believing circumstances exist which P did not anticipate at time of AD and would have affected his decision Effect of applicable AD is that a health professional can withdraw or not give specified treatment and protected from liability
- 27. It is not bad Karma to make a will – just make sure it is done properly Making Will vs dying intestate
- 28. We do not have a commercial relationship with …
- 29. Intestacy Common misconceptions why you don’t need to: Too expensive I don’t own enough I have no spouse or kids so why should I care? Everything will automatically go where I want 40-50% of people die without making a will!
- 30. Intestacy If you die without a will the law sets out what happens, distributing your estate amongst a fixed category of your family members whether you are close to them or not.
- 31. Real life soap opera! • Angie marries Den and gives birth to Sharon • Angie divorces Den after he does the dirty • Angie marries Arthur • Den marries Michelle and fathers Vicki then dies • Arthur dies leaving everything to Angie (nothing to his sons from first marriage) • Angie dies – will leaves everything to Sharon • Sharon dies 3 months later – without a will • Sharon’s estate (containing Angie and Arthur’s estates incl. the house) passes to Den’s daughter Vicki from his second marriage!
- 32. What does a will consist of and what can you do in it? • A will is a document which sets out what you want to happen with your estate when you die • They have to comply with certain formalities set out in the Wills Act 1837 i.e. in signed writing , witnessed by two people (not beneficiaries or married to beneficiary) • Can be handwritten, typewritten and even written on an eggshell- not on Etch a Sketch
- 33. With a will you can decide who gets what
- 34. Structure of a will 1. Executors / Trustees 2. Guardians for children under 18 3. Funeral wishes 4. Specific legacies 5. Pecuniary legacies 6. Residue 7. Administrative provisions 8. Execution clause
- 35. You can include your funeral wishes
- 36. What can you do in your will? • Leave items, a cash gift or a share of your estate to friends, charities, clubs • Tax plan – IHT is payable at 40% above £325k (NRB) – no IHT on gifts to spouses or registered charities • Use the Transferable Nil Rate Band between spouses • Use the Residence Nil Rate Band • Take into account multiple marriages/relationships • If potential beneficiaries are in fluctuating circumstances you can include a discretionary trust
- 37. If you leave 10% of your estate (above the NRB) to charity IHT reduces to 36% E.g. Bachelor John Smith dies with estate of £750,000 Taxable estate: £750,000 - £325,000 (NRB) = £425,000 If he leaves it all to family and friends (i.e. not to charity) IHT @ 40% = £170,000 If he leaves 10% (£42,500) to Alzheimer's Society IHT @ 36% = £137,700 Legacy £42,500 Total cost £180,200
- 38. Deeds of variation • Can give away all or part of inheritance under a will or intestacy • Provided done within 2 years of death and meets certain requirements it is written back into the will for IHT and CGT • Can vary a will to make use of 36% tax rate
- 39. When in particular should you think about making a new will? • you buy property • you have children • your relationships change – marriage, divorce, break up from cohabitant • You receive an inheritance • You are diagnosed with a serious illness • Your family changes
- 40. Gifts with Reservation of Benefit (GROB) Do not give something away and continue to use it more than minimally without paying rent THIS IS A WORST CASE SCENARIO
- 41. • Divorced Freda gives her nephew Fred her house in 2004 and continues to live in it w/o rent (value £500k) • Freda dies in 2018 when the house is worth £1m • The house is deemed to be Freda’s for IHT (up to £400k IHT) • Fred sells the house in 2020 for £1.25m. His base value for CGT is £500k (not £1m) so his gain is £725k and CGT would be £203k) Nightmare on Gift with Reservation Street
- 42. A professional can help avoid challenges to your will
- 43. Why go to a solicitor to have your legal documents prepared? • You can make your own will or prepare your own LPAs however, a professional will make sure your will/LPA etc does what you want it to • We will consider things you haven’t • We can help you tax plan • We will make a detailed file note and against your estate for lack of capacity, undue influence, undue pressure and lack of knowledge and approval • We have insurance and are regulated, qualified and trained and can securely store your documents if you wish
- 44. Make an active decision to make or not make a will/LPA and don’t put it off
- 45. One final thing …. travel first class – your heirs will! Miriam Spero TEP Phillips Lewis Smith Tel 020 7925 2244 Email miriam.spero@plslex.com This talk is intended for information purposes only. Everyone’s circumstances are different and you should seek personalised legal advice © Phillips Lewis Smith 2018
Editor's Notes
- Good morning. My name is Miriam Spero. I am a wills, probate and lasting power attorney solicitor Stafford Young Jones solicitors based just the other side of the river. I’m here today because I am a supporter of the Alzheimer’s Society knowing a number of friends and family who have suffered/are suffering from dementia and because I am passionate about educating people so they can make informed decisions. You don’t have to make a will but it is important that you know what the implications of not making one are. Wills don’t have to be complex or expensive and it doesn’t have to be a scary process. I’m told there isn’t time for questions now but do catch me in the lunch break or email or call me. I believe the only stupid question is the one that isn’t asked. Donning his metaphorical sparkly leotard and acting as my assistant today is our managing partner Andrew Strong over there so feel free to approach him too.
- In this presentation I’m going to explain what happens if you don’t have a will, the basic structure of a will, and how a will can be used to solve possible problems, I’m also going to sneak in talking about Lasting Powers of Attorney which are documents you can make whilst you have capacity that allow your chosen attorneys to make decisions about your property and finance and or health and welfare if you lose mental capacity. My aim is to take the fear from this topic. Some people think it is bad juju to make a will.
- Don’t have to retain long term Explain P and donor and deputy
- Best interests discussed below
- Pictures, macaton, meds
- Ferragamos, betting shop
- Judith’s mother
- If only one attorney make sure you have a replacment
- Birthday/marriage/etc RE GM Senior Judge Lush said £3000 + 10 X £250 – anything else apply to court Court = jealous of P Smith/Craig
- Derivatives broker
- Protection from policy – don’t have with LPAs and accounts How court chooses a deputy Slow – care home fees health under best interests but no one can deal with bank accounts and investments – cheese sandwich
- If in best interests give pain killer if incidental effect to abbreviate patient’s life – not motive – death is due to disease or injury to which condition attributable Not assisted suicide (positive act) – Advanced decision (negative act) Effect of applicable AD health professional can withdraw or not give specified treatment and protected from liability – irrelevant if thinks in best interests to give treatment
- I can assure you we do not have a business relationship with these guys. And we do not pass their contact details on to your nearest and dearest once you make your will. Although thank you for letting me look up pictures of Mr Clooney and Mr Cussack on office time. I’m guessing a number of you do not have a will, some of you made one 37 years ago at that solicitors near where you used to live but can’t remember what it was called and where it is, some of you will know where your will is but it is out of date and needs a wash and brush up and the class swots will have regularly updated their will and they and their executors know where it is.
- 75% of people who die do not have a will which means that they die intestate. Some common misconceptions about a will are that they are too expensive, I don’t have any assets, I have no spouse or kids and one of my personal favourites in this day of multiple marriages and cohabitation, it will all go to my spouse/civil partner or children or common law spouse.
- If you die intestate the law sets out what will happen, distributing it amongst a fixed category of your family members whether you are close to them or not. This can lead to soap opera scenarios.
- I am currently dealing with the probate of a mother and daughter who died within a short space of each other. The names have been changed to protect the innocent and to show my age. I gave up on soap operas when the Archers threw Nigel off the roof. Angie marries Den and gives birth to Sharon • The Irish Catholic Angie divorces Den after he does the dirty- the divorce was not amicable! • Den marries Michelle and has Vicki • Angie marries the loveable Arthur • Arthur dies leaving everything to Angie otherwise to Sharon (nothing to his sons from first marriage to Pauline) • Angie dies – will leaves everything to Sharon So far so normal then • Sharon dies 3 months later – without a will • Sharon’s estate (containing Angie and Arthur’s estates incl the house) passes to Den’s daughter Vicki from his second marriage! Not her fiancé of 14 years or her close friends.
- A will is a document which set out what you want to happen with your estate when you die. It has to comply with certain formalities set out in the Wills Act 1837 – in writing, signed by the testator whose signature is in turn witnessed by two witnesses. Can be written by hand, typewritten and even written on an eggshell
- Structure of a Will 1. Executors–are responsible for gathering in your estate, paying your debts and distributing the estate in accordance with your will. They do not have to do the actual donkey work (A large chunk of my workload is acting for executors) but they are the ones who are legally responsible. 2. Funeral wishes – These are wishes and are not binding on your executors. It is always a good idea to let your executors and next of kin know what you want because it’s not so bad if you wanted to be cremated and they buried you but it’s going to take an awful lot of glue if they cremated you and you wanted to be buried! 3. Specific legacies – a separately identified item. This could be the house, Ming vase or the pet hamster. 4. Pecuniary legacies – sums of money 5. Residue – everything else after all the debts and legacies 6. Administrative provisions – these are powers given to the executor/trustees to help them deal with the estate and any trust arising under it. 7. Execution clause – This is where the testator signs in front of two witnesses who are not beneficiaries of the will and are not married to a beneficiary – otherwise their gift under the will fails. Your residuary beneficiaries legacy will vary depending on how much money is left in your estate. The specific legacies will be paid first, then the pecuniary legacies are paid and only then will the residuary beneficiaries receive anything – if there is anything left.
- Leave gifts to friends, family, charities and clubs as you would like. And gifts to charities, like gifts to spouses and civil partners are exempt from IHT. You can do some tax planning in your will. Some assets are exempt from IHT so you may want them to go to ‘taxable’ beneficiaries when you die and not pass to your spouse first. Since 2007 the transferable nil rate band came in for married couples. Before you had to use your NRB or lose it so parents were inserting trusts in to their wills or leaving assets to the children so it didn’t get wasted. Since 2007 the survivor of a marriage acquires what is left of the first to dies’ NRB. So if Bob died today leaving all to his wife Sue she would have TWO NRB when she dies. You can only ever have 2 NRB so if one partner in a marriage is widowed they should make a will to use one and then the survivor would have two. This is something to take legal advice on You can include trusts in your will. A discretionary one allows the trustees to exercise discretion as to which of the beneficiaries get what and you can leave a letter of wishes guiding the trustees. You can also have a life interest trust which is particularly useful in second relationships.
- From 2012 if you leave 10% of your estate to charity (above the NRB) which is currently £325k (£650k if has the full transferable nil rate band) IHT reduces to 36% Rough e.g. Bachelor John Smith has estate of £750,000 Which means his estate will pay £170,000 in IHT. If he leaves £42,500 to Alzheimer's Soc the tax on the balance drops to 36% i.e. £137,700 not Total cost to estate i.e. legacy and tax = £180,200
- If you are left something in a will or under and intestacy, within 2 years of the death you can make a deed of variation which allows you to redirect some or all of your inheritance. Provided it contains the requisite information it as if the deceased made the gift and not you – so if you die within 7 years it is not a gift from you and a second lot of IHT can be avoided. There are a number of other reasons why you may enter a deed of variation. For example varying the will to make use of the 36% tax rate which I have recently done for a client. Mum left a certain amount to charity and we did a deed of variation to up the gift slightly and he benefited from the 36% tax rate.
- A big glowing sign that you have got the wrong adviser is if they try to get you to put your house into an asset protection trust and you live in it without paying rent. To avoid care home fees A number of cowboy companies – don’t rely on glossy websites
- Avoid errors – No Tippex on will, Think carefully about appointing a professional as a trustee or executor – we do it where clients want a professional involved, we have insurance and are governed by SRA Wills can be contested for: • Lack of capacity - don’t understand that they are making a will • Undue influence • Lack of knowledge and approval – didn’t know the contents when they signed • Fraud • Defective document • Inheritance (Provision for Family & Dependants) Act 1975 – claims for financial provision This is where the deceased did not make proper provision for their relatives or dependants either in their will or by intestacy and judges have a wide discretion to redistribute assets to produce a fair result. Certain categories of relation/dependent e.g. someone you have been living with for two years and supporting have the possibility of claiming. A professional will draftsmen will check for capacity and undue influence and keep file notes in the event the will is challenged. They should also be able to advise on the 75 Act claim although obviously whether someone has a claim on your estate will depend on your circumstances when you die. Challenging wills is expensive.