Legacy loop: spring edition 2022

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Taking a look at the recent case of Higgins v Morgan and others [2021] EWHC 2846 (Ch) involving a 1975 Act claim brought by an adult step-son where the court considered the claimant to have both a “moral claim” and grounds for recovering their CFA success fee.

Background to the case

A claim was brought against the estate of Stewart Higgins by his stepson, Barrie Higgins. Stewart died intestate and under the intestacy rules his estate passed to his cousins as beneficiaries and Barrie was not to benefit. Barrie alleged that Stewart had promised that Barrie would be included in his will and subsequently the distributions under the intestacy rules were against Stewart’s wishes.

Barrie was encountering financial difficulties and depended upon his wife’s profession in wedding photography, which had been impacted by the Covid-19 pandemic. Barrie subsequently brought a claim as a person treated as a child of the deceased under section 1(1)(d) of the 1975 Act. This was defended by the beneficiaries.

What was the outcome?

It was concluded that showing a need for maintenance plus a relevant relationship is generally not enough to be successful in such a claim, and that in instances where an adult child claims inheritance who is well capable of living independently, ‘something more’ was required. This included being able to demonstrate a form of moral claim.

Having regard to s.3 factors taken into consideration by the court when considering whether an award is to be made, the court awarded Barrie £40,800 for his claim, which was subsequently increased to £55,000 to take into account his success fee (as his solicitors were acting under a conditional fee agreement or “CFA”). The judge considered that the promises made to Barrie by the deceased constituted ‘some form of moral claim’ owed to Barrie. The judge also considered their close relationship in comparison to the existing beneficiaries.

What does the outcome of this case mean for charities?

This case demonstrates that something more than being a child of the deceased is required in claims where the child is now an adult. As well as having the relevant relationship to the deceased, an adult child must have a moral claim against the estate. If charity beneficiaries are faced with a claim brought against the estate by an adult child claimant, it is important to seek legal advice early to establish the true merits of that claim and the strength of the position to take in defending the claim.

The court’s attitude to recovery of CFA success fees

From a costs recovery perspective, the judgment in Hirachand v Hirachand [2021] EWCA Civ 1498 (the Re H appeal), handed down very shortly after Higgins v Morgan, provided further clarity on the Court’s willingness to consider a claimant’s CFA success fee when making an award. This significant court of Appeal judgment confirmed that awards under the 1975 Act can include a lump sum to discharge all or part of a claimant’s success fee. This decision may prove to encourage more claimants (and their solicitors) to consider pursuing a 1975 Act claim by way of a CFA.

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What is inheritance tax?

Quite simply, it is a tax on a person’s assets when they die. It can also be applied to the recipient of a gift that costs over a certain amount and the giver has then died within seven years. The gift does not have to be monetary; it could also be property or possessions.

What’s the limit?

Per tax year, a person is able to give away a cumulative total of £3,000 to whoever they choose. They can also give as many small gifts under £250 to different people as they like.

What’s the seven-year-rule?

The seven-year-rule becomes relevant when a person gives away over £3,000 in one tax year. It states that the giver must survive for seven years after the gift for it to be exempt from inheritance tax. If not, the value of the gift is counted back into their estate when calculating the inheritance tax due. Such gifts will use up the tax-free allowance (nil rate band) available on their death and, if the value exceeds this, the recipient is liable to pay inheritance tax. However, the tax payable does start to taper if it has been more than three years since the date of the gift.

Are there any gifts that are exempt?

Donations to charity and some gifts for marriages or civil partnerships are not liable for inheritance tax, depending on how closely related a person is to the happy couple. All gifts between married couples or those in civil partners are also exempt.

Is there a way to avoid inheritance tax for certain?

Unfortunately, unless a person is psychic, there is no sure-fire way to avoid inheritance tax on gifts over £3,000.

Nevertheless, there is the option of using ‘excess income’. If a person can prove their income meets all their living costs, and that their standard of living can be maintained after the gift, then it may be possible to claim an exemption for inheritance tax. However, to qualify, there must be a regular pattern to this gifting.

All this being said, as long as the giver communicates effectively with the recipient about the potential risks of an expensive gift, generosity does not need to be feared. If in doubt, seek advice from an expert.

Contact Suzanne Leggott on 0116 257 6130 to find out more about how our private client team can help you.

For advice or guidance on any other commercial or legal issues, a member of our team can walk you through everything. Click here to discuss.

Inheritance - a gift or a curse?

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Inheritance - avoiding the pitfalls

 

James Bond actor, Daniel Craig, has publically stated that he finds the concept of inheritance “quite distasteful” and will not be leaving his £100 million fortune to his children. Baroness Karen Brady has told her children “they will always have a roof over their head and food in the fridge but the rest is up to them”.

Bill and Melinda Gates have pledged the majority of their wealth to charity. Those with significant wealth often worry that by passing it directly to their children they are gifting them something of a poisoned chalice.

Who wouldn’t want many millions in assets and no terms or conditions on how to use it?
Sadly, many wealthy families who pass their wealth down to the next generation without structure leave their children vulnerable to external forces, corrupt influences by those with their own agenda, and ultimate temptation.

An outright gift of significant value when in the hands of an inexperienced beneficiary can lead to the very worst outcome, wealth lost and a child in rehab or worse.
By leaving that wealth in trust for the children with a full letter of wishes and experienced trustees at the helm, the parents can see a future plan and the child has the support they need.

Trustees can be professionals well versed in the role of family trusts, friends or family members, or indeed a combination of all of these. Trusts can take many forms –a fully flexible discretionary trust or cascading life interests for example.

Leaving a gift in a trust ensures levels of guidance and protection are in place but also opens up the opportunity for significant tax planning for the entire family.

Trusts can be created during lifetime or through your will to take effect on your death. Remember, leaving a gift to a child by a will pass to them when they are just 18 years of age if you do not specify a later
age. Well drafted wills with the appropriate trust provisions included can give much needed peace of mind to a parent wanting to provide for their children. A letter of wishes can outline when the trustees should
consider appointing wealth out to a child to assist in property purchase, education or other milestone events.

The child can request an early distribution of funds and if satisfied the reason is one their parents would have endorsed, often trustees have powers to release assets to the beneficiary early.

However, if the reason is unsound or unsafe funds are retained until the child is older and, one hopes, a little wiser.

Our private client team can advise if you need further support or assistance.

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Lesley works closely with her clients to assist and guide in all aspects of complex estate planning and asset protection including trust and estate administration after death, Wills and Powers of Attorney.

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Trusts come in many forms. They can be incorporated into your will, which only come into existence when you die (a Will Trust), or lifetime trusts which are established while you are still alive. Lifetime trusts can outlive you and continue to be effective after your death, often for the benefit of your family.

Our trusts solicitors can guide you through your options to help you make the best decision for your situation.

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Dealing with the practical, legal and emotional process of a relationship breakdown is difficult and stressful enough as it is, without the added complexity of a pandemic. From family court hearings to financial divorce settlements and maintaining child arrangements, we can help you. Whatever the situation.

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Guides & Advice

Our latest edition of Life Times magazine

Our Autumn Edition of Life Times is Out Now

We bring you the autumn edition of Life Times magazine - a round-up of insightful and informative content.

From looking at how to access the First Homes scheme, to resolving relationship disputes out of court, and Inheritance – A gift or a curse? The autumn issue is packed full of useful tips and information.

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Witnessing a Will Online: The Problems with Remote Signing

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Making Wills Online

Debra Burton comments on the increase in Will disputes being brought following the pandemic and shift into remote witnessing of Wills during the COVID-19 pandemic.

Since the pandemic, Will validity challenges on the basis that Wills have not been properly witnessed are increasing.

The rules on how to make a Will, and the formal requirements regarding how they should be validly witnessed, are generally complicated. Lockdown in the pandemic then made the problem worse as it could prove very difficult to find one witness, never mind two.

There are a number of myths around the signing of Wills, particularly online Wills, including that Wills can be signed electronically or only one witness is now needed.

Neither of these are correct – a person making a Will (known as the testator (male) or testatrix (female)) must sign the Will with a “wet ink” signature and two witnesses are required to witness the signing of the Will.

Beneficiaries are now focussing more on how the Will was witnessed and testing the evidence of the witnesses, where previously they may not have done so.

Challenging a Will based on lack of proper witnessing can be easier (and therefore cheaper) claim to bring after the testator/testatrix has died, as opposed to a claim based on lack of testamentary capacity, for example.

There is no need for expert evidence or judicial discretion if the witness evidence is clear. Either the Will was witnessed properly and is valid or it is not.

If you have concerns about a Will that looks like it has potentially not been correctly executed, please get in contact with our team who would be happy to advise and assist you further.

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Debra is a specialist contentious trust and probate solicitor who advises on all areas of contentious trust and probate matters, representing private individuals, trusts and charities.

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Top tips for making a Will

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Tips for Making Your Will

Making a will for the first time? You might be wondering about the cost of making a will, how to prepare one and who will benefit.

If you would like a copy of these tips to be sent to you in a format that your charity can send out to its donors, please get in contact and we will be happy to send them to you. 

Alistair Spencer sets out his top tips for what to consider when making a Will: 

Work out what assets you own

The value of your assets and how those assets are held, for example in property, shares and so on, will determine whether your estate might be taxed on your death. 

It is worth putting together a schedule of your assets and liabilities with at least approximate values, before attending a meeting with a legal professional to make a Will. 

The legal professional will consider what tax relief might be available, and the most appropriate and tax-effective way of structuring your Will. 

Remember, leaving charitable gifts in your will can have considerable tax benefits for your estate. As well as the gift itself being tax-free, charitable gifts can also reduce the amount of inheritance tax that the rest of your estate will pay. If you give at least 10% of your taxable estate to charity upon your death, the inheritance tax rate for the rest of your taxable estate reduces from 40% to 36%. 

Keep your Will updated

Many people often forget to update their Will after a significant life event and risk the document not outlining what they want it to do.

Once you're married, any Will made prior to your wedding day will be automatically revoked - so if you do separate from your partner, changes need to take place to reflect the change in your circumstances.

It is not unusual to come across situations where an individual has passed away after divorcing but has failed to update their Will, resulting in their former partner still benefiting from their estate.

Life events or causes you are or become passionate about may also mean that you wish to change your will to leave a legacy to a chosen charity or charities.

Whatever the circumstances, it is expected that changes in a person’s testamentary wishes will occur throughout the course of their lives and it is important to review your will as life goes on.

Often, there is no requirement to make an entirely new will when you want to make a change. Providing you are still able to do so, changes to your will can often be made fairly simply.

Decide who will benefit from your will

Many Wills are disputed because family members are left shocked and angry by the contents once a loved one has passed away.

This can lead to costly disputes and the Will writer's decisions being scrutinised and potentially changed.

This is why, once you've written your Will, it is important that you communicate its contents with your family and friends to ensure there are no surprises down the line. If your will leaves legacies to specific friends or charities, let your close family know your reasons for wanting to make these gifts.

If the contents of the Will could be seen as potentially contentious, it is often advisable to prepare a letter of wishes to be kept with it, setting out why you have made the decisions you have in your Will and why certain people might be excluded.

Consider gifts to charities

Leaving money to charities can make such a huge difference, and can mean your money can have a long and positive legacy. There are also some tax advantages of giving money to charity, and in particular, a reduced rate of inheritance tax if you leave at least 10% of your net estate to charity.

Even a small legacy can make a difference!

Choose your executor

Executors are the individuals who will carry out the terms of your Will and sort out your estate when you die. An executor can also be a beneficiary of your Will.

They should be individuals you trust implicitly, must be over 18 at the time of your death and must be mentally capable of doing the job.

Ideally you should name more than one person to act as your executor, as this minimises the risk of both executors passing away before you. However, ensure as far as you can that the chosen executors will be able to work together.

You can also choose one or more substitute executors if the executors you have named are unwilling or unable to act.

It might be sensible to appoint at least one professional executor, although there will be costs associated with this.

Find two witnesses

Any witness should be independent, so they should not be a beneficiary of the Will or a spouse or civil partner of a beneficiary.

Any gift you make to the witness or to their spouse or civil partner will fail.

If you make your Will via legal professionals they will usually provide the independent witnesses.

You must have a minimum of two witnesses and they must both see you sign or acknowledge the Will in their presence before signing the Will themselves.

A recent announcement from the Government allows virtual witnessing of Wills from 31 January 2020 to 31 January 2022, or such other time period as the government may decide. The Will must still be physically signed by the witnesses and the person making the Will.

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Alistair specialises in contentious trusts and probate. He represents private individuals, charities and trustees in a wide range of matters.

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Government Announces Adult Social Care Reforms

New Legislation

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Social Care Reforms

The Government announced last week that, from October 2023, there will be changes made to the Social Care system. These changes will affect how much you will need to pay towards your care in the future. These changes are currently proceeding through Parliament.

The current average cost in England of a stay in a residential home is £600 per week, with nursing care costing on average £800 per week.

What is the current system?

Currently, if the value of your capital assets is above £23,250 then your care fees will need to be fully self-funded, and you will not receive any financial support from the Local Authority, subject to certain limited disregarded items in certain circumstances.

If the value of your capital assets are between, £14,250 and £23,250, then you will get some financial help from the Local Authority.

If your assets are less than £14,250, then you must continue paying from your income, subject to a ‘protected’ lower amount, but you will not need to contribute from your capital. The Local Authority will pay the remainder.

Your Local Authority will do a ‘means test’ to work out how much you will need to contribute from your capital towards the cost of your care.

What are the new changes?

MPs voted this week by a sizeable majority to approve the following changes to the Social Care system.

  • If the value of your capital assets is above £100,000 then you will need to fully self-fund your care.
  • If the value of your capital assets is between £20,000 and £100,000, then you will need to contribute to a percentage of the fees, based on your income and savings, but you can request financial support from the Local Authority on a means-tested basis.
  • If the value of your capital assets is below £20,000 then you will not have to use your capital to pay for your care, although you will still need to contribute from your income, subject to a ‘protected’ lower amount.

The Government also announced that people will not be made to pay more than £86,000 (a lifetime cumulative amount) in care costs. Whilst, on the face of it, this change may be welcomed by many who worry about spending their life savings on care fees, and needing to sell their homes to fund their care costs, this cap does not include the costs of accommodation and food – only personal care. However, care costs paid whilst at home will count towards this total lifetime amount.

This change will only benefit those starting care from October 2023. If you are already paying for your care, then you will not benefit from the new changes.

Can I protect my savings for my family?

There is no definitive answer to this question. It is important to consider your aims and objectives, and your personal and family circumstances. We can advise and support you about the payment of care fees and the relevant disregards. Learn more about this and the matters mentioned above, or to review any existing steps or structures you may have taken or tried to put in place in this area, by getting in touch with our private client team.

These changes will not affect the Deprivation of Capital Rules or the Continuing Healthcare Funding entitlement to Nursing Care (not residential costs or food) for those who are assessed as needing nursing care which is a NHS responsibility.

 

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Lauren helps individuals put plans in place for the future by means of Wills, Powers of Attorney, and other estate Planning.

With our adaptable and creative approach, we ensure your family’s interests are always protected in troubled times. We know that no two families are the same and we take the time to understand the intricacies and sensitivities of the situations that you face.

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Guides & Advice

Can I still make a will during the coronavirus lockdown period?

ITV Central News recently ran a feature on the increase in the number of people writing wills over the last six months – a 550% increase overall and a huge 1200% increase in those under 35.

It’s clear that people are concerned about the risks posed to them by the coronavirus outbreak and want to get their affairs in order and have one less thing to worry about.

Why should I make a will?

Making a will is important and, now more than ever, ensuring your affairs are in order and your will is up to date is on a lot of our clients’ minds. Being stuck in lockdown shouldn’t stop you from putting them in place.

Read more about how preparing a will can ensure your assets pass into the right hands.

How can I make a will during lockdown?

Ordinarily, we would meet with our clients face–to-face, but we appreciate that this isn’t always sensible, particularly if you are vulnerable.

We are happy to meet with you virtually via video conferencing facilities such as Skype, Zoom, Microsoft Teams of FaceTime if you would prefer. From that point on, we can deal with matters by telephone, email or post - we just need to ensure we are speaking with you and not someone pretending to be you!

Once we have fully understood your needs and concerns we will prepare a draft will for your consideration and send this by secure, password protected email or by post, whichever method is best for you. Your draft will is accompanied by a detailed explanatory note of each of the clauses it contains and any additional information needed from you will be clearly highlighted.

Once you receive the draft will we are on hand to answer any questions you may have to ensure you receive the high-quality service and tailored legal advice you would ordinarily receive from us.

How do I sign my will?

Ordinarily, a will must still be signed in the physical presence of two independent witnesses, despite the issues regarding self-isolating. However, the government has very recently announced a relaxation of these rules which will also work retrospectively. The changes mean that a will can be witnessed via video conference facilities.

The new legislation will apply to wills that have been made since 31 January 2020 and will apply for wills made up to 31 January 2022. Read more about the guidance for making wills by video call on the gov.uk website.

Despite this, it is incredibly important that the will is signed correctly. We will provide you with detailed instructions on how to do this and offer suggestions as to how this can be done whilst complying with the current government rules and restrictions.

For your added reassurance, we can oversee the will signing process either by video-conferencing or in person, if necessary.

Can I ask one of my family members to witness signing a will instead? 

Individuals should not be tempted to ask their family or anyone who stands to benefit under the will (or anyone married to someone who stands to benefit) to be a witness. Doing this may inadvertently invalidate any gift to that person you’ve included in your will. Depending on the extent of their entitlement, this may undermine the entire purpose of preparing the will in the first place.

Can someone else manage my affairs if I’m self-isolating? 

If you already have a lasting power of attorney in place then your attorney(s) may be able to manage your affairs if you need some help, depending on how they are drafted and whether they are registered.

If you don’t have one in place already then we can help keep things moving by preparing a temporary power of attorney, which is different to a lasting power of attorney in that it is very specific and you can limit it to the particular task that you’d like somebody to do for you. These can also be put in place quite quickly.

Read more about how you can ensure your affairs remain in order and your assets are protected with powers of attorney.

We encourage our clients to consider preparing these at the same time they turn their mind to preparing a will.

Contact us

No matter where you are on your journey, we can help to support and guide you through the process. If you’d like to discuss putting a will in place, or would like advice or guidance around the process, please contact Matt Parr on 07979 412 698, or fill out our enquiry form, and a member of our private client team will get in touch with you shortly.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

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Guides & Advice

Conditional fee agreement (CFA) case update | Spring/Summer 2020

Conditional fee agreement (CFA) case update | Spring/Summer 2020

Here we take a look at two recent significant cases relating to the recovery of success fees for claimants acting under conditional fee agreements in 1975 Act claims.

What is a conditional fee agreement (CFA)?

Where a potential claimant may have limited funds to bring a case, but have good prospects of success, solicitors may offer to take their case on under a conditional fee agreement, commonly referred to as a CFA or a ‘no win no fee’ agreement.

When are success fees charged?

Payment of legal fees to solicitors are conditional upon their client ‘winning’ their case, and at that point, a further success fee on top of their standard fees can also be charged to the client. Success fees are often substantial and capped at 100% of the solicitor’s base fees.

Until recently, the general position was that only the claimant's base costs could be recoverable from the defendant or the deceased's estate, and not any CFA uplift charged by the claimant’s solicitors.

Example 

Under the will of A, the entire estate worth £250,000 is left to a charity.  A’s spouse, B, brings an inheritance claim against the estate of their late husband.  The charity settles the claim for £100,000 plus costs.

B’s standard costs are £30,000 but the solicitors acting for the spouse were acting on a CFA with a success fee of 50%.

The estate would therefore pay £30,000 towards B’s standard costs. However, the £15,000 success fee would come out of B’s award of £100,000 so she would receive £85,000 after payment of all the legal fees.

Bullock v Denton and Willoughby (2020) and Re H Deceased (2020) EWHC 1134 FAM

Two recent decisions by the High Court have changed this position.

In Bullock v Denton and Willoughby and Re H Deceased, the courts have awarded the successful claimants a higher sum from the estate to compensate them for the success fees charged by their legal representatives.

Bullock v Denton and Willoughby

In the recent unreported case of Bullock v Denton and Willoughby, the claimant brought a claim against the estate of the deceased as his cohabiting partner of five years. The primary defendant (the deceased’s brother) argued that the claimant was a housekeeper and not in a loving relationship with the deceased.

However, the judge found in favour of the claimant and awarded her a life interest in a sum of £140,000 to purchase a property, together with an additional £65,000 to cover her further costs such as moving fees, white goods and payment towards historic debts.

In addition, the judge also awarded the claimant a £25,000 contribution to the success fee charged by her solicitor and counsel. The judge made this award on the basis that the claimant was entitled for these costs to be taken into account when considering her financial needs as the success fee would be a future debt.

Re H Deceased

This decision was then recently applied in the family court case of Re H Deceased (2020) EWHC 1134 (Fam).

The claimant was the estranged daughter of the deceased and had not been financially maintained by her family for more than 20 years. Despite the estrangement, the judge held that the claimant’s claim for financial provision from the estate should not be precluded solely on the basis of a lack of financial maintenance from the deceased. The judge felt that the claimant was “in a position of real need” due to suffering with mental illness and awarded her appropriately to meet her current financial needs.

The judge concluded that success fees could be recovered by claimants in Inheritance Act claims.  However this case is subject to appeal.

The impact of these cases on legacy income for charities

Ultimately, the further awards given in CFA funded cases mean further significant deductions from the estate fund, and lower distributions to any other beneficiaries named in the will.

This could have a real impact on what charities receive from the estate; in our example above, some of the £15,000 success fee would be payable by the estate, in addition to the base costs, meaning the charity receives le4ss money.

The decisions in these cases are likely to encourage people who have potential claims that would have otherwise been put off paying solicitors’ fees (and certainly their success fees) to instruct solicitors and pursue their claim. This is likely to result in a general increase in will challenges and claims brought under the Inheritance Act. If this proves to be the case, charities may find themselves in a position where they are obliged to defend more Inheritance Act claims.

Hopefully the Court of Appeal will overturn the decision in Re H Deceased and make a ruling on this point that will be binding for cases going forward.

However as the appeal won’t be heard for many months, until then, these cases will be heavily relied upon by solicitors (and barristers) acting under CFAs to try to get more money from the estate.

As a charity, what can you do?

If faced with will challenges and Inheritance Act claims, it is important to continue to pursue the necessary steps to recover the legacies and assets you are entitled to from a will - particularly in the current economic climate.

It is always advisable to seek legal advice following notification of a potential claim, as early legal intervention may help to flush out any unmeritorious claims and encourage settlement of disputes out of court.

We can guide you through the process

We understand that legacy donations form an increasingly large part of charities’ income, and to have your bequests challenged can delay and reduce that much-needed income.

With a particular specialism in representing charities, our team of experts can support you in dealing with those disputes and guide you through the process - contact Andrew Wilkinson or Debra Burton in our inheritance disputes team.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Your guide to recovery and resilience

Private wealth, family businesses and family

Your guide to recovery & resilience | Private wealth, family businesses and family

Screenshot 2020-05-27 at 11.18.02

The effects of COVID-19 will undoubtedly have a huge impact on our economy for years to come, with many businesses collapsing under the strain and the level of unemployment set to rise significantly. However, what is less widely reported on is the effect it is having, and will continue to have, on personal wealth. We’ve already seen that the pandemic has led to an increase in people looking at how they may pass on their wealth to the next generation – and even more so for those that own family businesses.

The uncertainty of what’s to come is understandably keeping many people awake at night but, whilst the scope of what our future may look like is still evolving, one aspect that can be controlled is putting measures and provisions in place to plan for the future and protect the wealth of you and your family. As we all try to pick up from where we left off, there are plenty of opportunities out there for effective wealth planning that will make a real difference.

Wills

Review your existing will 
It’s a good idea to regularly review an existing will, particularly if circumstances change such as entering into new relationships, having children or acquiring new assets.

Make a will 
If you don’t already have a will then you should look to put one in place. Begin putting your thoughts down on paper so you can gain a better understanding of your position and the provisions you may wish to make.

Executors of your will 
Decide on who you would wish to appoint as your executives and trustees to administer your will. Choose the right people for the role – you shouldn’t simply appoint people just because they are family and you feel a sense of obligation.

Guardians 
If you have children under the age of 18, consider appointing a guardian who will take over a parental responsibility. Family heirlooms and specified assets - Consider whether you wish to leave specific items of personal belongings, or indeed specific sums of money, to named individuals or charities.

Funeral wishes 
Although not legally binding, if you have a preference for how you wish your funeral to be carried out, and/or have strong wishes in relation to cremation or burial, then you should consider including instructions within your will. Investments – Seek advice about how a change in the investment market, particularly one where asset values are decreasing, could be a good time to make estate planning decisions.

Powers of attorney

Appoint attorneys
Make sure an ordinary power of attorney, and/or lasting powers of attorney in relation to both your finances and your health and welfare, are in place for you and for family members who do not already have them. Ideally, these should be prepared at the same time as preparing a will.

Appoint people you trust
Ensure that the people you trust the most can help you if ever you’re unable to make decisions relating to your property and financial affairs, personal health or welfare.

Specific powers 
Consider whether you wish for your attorneys to have wide-ranging general powers, which would enable them to manage all your property and financial affairs entirely on your behalf, or have more specific and restricted powers to carry out a particular task or transaction.

Tax saving opportunities

Capital gains tax (CGT)
If the value of your assets have decreased then now may be a good time to make gifts of those assets. As an asset value decreases, then so does the impact of CGT. Our blog on protecting your wealth during a period of uncertainty provides advice on how you can make the most of a falling market.

Inheritance tax
Inheritance tax can arise not only on death, but can also be triggered in certain circumstances when lifetime gifts are made. As with CGT, the tax is based on the value at the time the asset is gifted. You should explore opportunities to make lifetime gifts either to individuals, companies or through trust structures, whilst asset values are depressed.

Future changes in taxation
Any abolition or amendment of tax reliefs and measures could result in significantly higher taxes and a reduction in the options available. Therefore, you should act now and plan ahead. Read our thoughts on the types of taxation that could be affected, further down the line.

Donate to a charity
Gifts to registered charities are exempt from inheritance tax, both in your lifetime and on death. Gifts can be made directly or, if you want to be more actively involved, you can set up a charitable trust either during your lifetime or under your will.

Family businesses

Protecting wealth
Now may be a good time to reorganise the share capital of family businesses to create different levels of shares, reorganising them in a way that satisfies all parties in relation to reward and control, whilst potentially mitigating any one or more of inheritance tax, capital gains tax and income tax.

Loss of capacity
Consider making lasting powers of attorney specifically relating to your business role, or reviewing existing ones to ensure that important decisions can still continue to be made should you become incapacitated.

Family matters

Court hearings
If you have a case that has already been listed then check that arrangements have been/are being made to hold this remotely. If you are the applicant then the responsibility for making these arrangements falls to your solicitors. If you do not have solicitor representation yet then the respondent’s solicitors will need to make these arrangements. Our blog on remote court hearings gives an overview of how these work in practice.

Child arrangements
If your child’s time is usually divided between yourself and another parent then that child should continue to see both parents (subject to any restrictions which may override those existing arrangements, such as households having to self-isolate with COVID-19 symptoms). Take a common-sense and co-operative approach to making and adhering to arrangements during this difficult time. However, if you’re unable to reach an agreement with your co-parent, speak to a solicitor to negotiate and settle the arrangements on your behalf, or if that doesn’t work, they can make an application to the Family Court. Watch the recording of our recent webinar on maintaining child arrangements during COVID-19.

Financial settlements
If you’re in the middle of negotiations then it is likely that the disclosure you have already exchanged reflects a much healthier previous financial position. Considerations should be given to existing valuations, and also if there has been a sudden change of income, as this is likely to negatively impact access to capital. Our blog on the impact of coronavirus on financial settlements explains the position where it looks likely that one party may be declared bankrupt in the near future.

Contact us
In response to the pandemic we created our coronavirus hub which includes advice, guidance and insight to help you navigate through these uncertain times. As we all begin to adapt and prepare for the future, our hub will evolve to provide you with further help and resources for surviving, reviving and beginning to thrive in life and business, throughout the challenging times ahead.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

For legal support in relation to the coronavirus or any other matter, get in touch with your team today.

From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business visit SHMA® ON DEMAND.

More guides to recovery & resilience

We are here to help in your business and personal life - contact us today to find out more.

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One of the many obligations that a charity must abide by is the requirement to report ‘any significant financial loss’ to the Charity Commission.  However what does this actually mean for a charity in practice?  Is this even still relevant in the current coronavirus pandemic?

It is well documented how charities are suffering during this pandemic in many ways.  Charities that rely on visitors and their donations, such as religious organisations or venues like art galleries or museums are seeing themselves particularly hard hit, as are all non-health related charities.  If all of these charities were to report ‘significant financial loss’, the Charity Commission could easily be overrun.

It is a difficult call for charities to make, particularly as the Charity Commission is asking trustees to err on the side of caution, but generally speaking a report should be made if:

Of course during this time of change, as well as reviewing their financial positions, all charity trustees should be reviewing and planning for the future looking at how the current pandemic is affecting their own operation.  Is their ability to comply with the charitable objectives either now and in the future being jeopardised?  Staff on furlough leave, possible redundancies, the loss of premises or assets for example will all have a massive impact.

With over 168,000 charities contributing £17.1bn to the UK economy they are a hugely important part of the business landscape. Trustees are advised to discuss the position with a legal adviser and take a holistic approach as to whether the current situation poses a significant threat to the solvency of the charity. At the forefront of minds should be whether the current economic climate is enough of a significant impact upon the charity’s operations and will therefore cause serious harm to the charity’s work now or in the future.

Contact us

To discuss any of these issues or to consider more general estate planning please contact Vicki Simpson or another member of the charities team in your local office.

Shakespeare Martineau has launched a free legal helpline, with a team of experts on hand for any queries on family and private matters. We are also offering bespoke guidance on a range of other subjects, from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

General advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

All the latest views and insights on coronavirus.

If you need to sign paperwork now and in the future, you may not be able to get to the meeting but by planning ahead, arrangements can be made which should not delay your transactions or prevent it from happening entirely.  You can do this by appointing a temporary power of attorney.

How can a delegated power of attorney help me?

It is possible to delegate your legal authority to carry out tasks on your behalf to someone else using a deed – an Ordinary Power of Attorney. The type of authority you can delegate may include the authority to sign contracts or other deeds on your behalf. You become the “donor” and your trusted third party, your “attorney.”

It is possible to implement a wide ranging and general Ordinary Power of Attorney enabling someone to manage your property and financial affairs entirely on your behalf, or to carrying out one particular task or transaction for you. The first more general type is useful in circumstances when you are out of the country or perhaps in self-isolation for extended periods. The second, more specific type, is most common and more suitable if, in all other regards, you can continue to manage your own affairs but simply require the ability to delegate your authority to complete a specific task or transaction.

Whichever type of Ordinary Power of Attorney you decide upon is right for you, you can specify a time limit, at the end of which the authority of the attorney ceases. This cessation could occur even if the transaction they were completing on your behalf is still not complete in which case new authority would be needed by way of a newly executed document.

What can a power of attorney complete on my behalf?

Some examples of when it may be appropriate to execute an Ordinary Power of Attorney to enable someone to act on your behalf include:-

Provided the Ordinary Power of Attorney deed is drafted appropriately, you can choose to revoke the power you have delegated at any point which can be a useful failsafe if your attorney acts in any way contrary to your best interests.

Ordinary Powers of Attorney can be prepared swiftly and they are often required at short notice. It is important, however, particularly if granting a specific power, that the drafting of the deed itself is wide enough to ensure the attorney can do what is required to complete the transaction but not too wide so as to allow the attorney to make decisions outside the scope of the authority you wanted to delegate in the first place.

How do Ordinary Powers of Attorney differ from Lasting Powers of Attorney?

The use of Ordinary Powers of Attorney does tend to be better suited to transactional or commercial contexts and there is an important distinction to be made between them and perhaps the more common Enduring and Lasting Powers of Attorney. The latter two types of power enable your attorney to continue acting on your behalf even if you lost your mental capacity. An attorney acting under an Ordinary Power of Attorney cannot continue acting in those circumstances – their authority ceases with you having lost mental capacity.

If you are concerned about the ongoing management of your affairs in the longer term, in particular in the event you lose mental capacity, you should consider preparing Lasting Powers of Attorney.

If you would like to discuss any of the issues raised here about appointing an ordinary Power of Attorney or any aspect of managing your affairs, please do contact Matt Parr or another member of the private client team in your local office.

For advice or guidance on any other legal issue, a member of our team can help – please click here to discuss.

For more general advice in relation to coronavirus visit our dedicated resource hub.

All the latest views and insights on COVID-19 (coronavirus)

How can I protect my assets?

Wills clearly have an important role in estate planning on death, but often the best inheritance tax planning opportunities are those effected during one’s lifetime.

Whilst stock markets are tumbling, property prices falling and businesses of all sizes are facing uncertain futures, it’s reasonable for people to sit tight and be hesitant to part with their wealth. However, ironically, some of the best tax saving opportunities can be found and achieved in a falling market.

So how can I reduce my tax liabilities?

Capital gains tax (CGT) often prohibits the direct gifting of assets to individuals.  However, if the value of an asset decreases in a falling market, then so does the impact of capital gains tax on the gift – this is because the tax is based on the gain that’s been made on that asset, and not on the value received. This is often overlooked by individuals, who only recognise the potential implications for inheritance tax and not those for capital gains tax.

Gifting assets into a certain trust can potentially mitigate an immediate charge to CGT on the person making the gift, deferring it into the hands of the trustees of the trust, often giving them time to plan/minimise the future crystallisation of such a gain.

A decrease in the value of assets could also mean that more assets can be placed into a trust before any inheritance tax is triggered – so a double tax-saving opportunity.

We understand it’s a difficult time

We know that looking after the wealth you have accumulated during your life really matters, so we want to help you and your family to make the most of it. Whilst it’s currently a time of uncertainty for many, there are plenty of opportunities out there for effective wealth planning that will make a real difference,

Contact a member of your local private client team to help guide you through the process.

For advice or guidance on any other legal issue, a member of our team can help – please click here to discuss.

For more general advice in relation to coronavirus visit our dedicated resource hub.

All the latest views and insights on COVID-19 (coronavirus)

Civil partnerships: Offering financial security for cohabiting couples

Blog | Family

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What is a civil partnership?

Couples in a civil partnership benefit from the same rights and protections as their married counterparts. However, it is free of religious connotations and ideas of ownership, making it an attractive option for those for want to legally commit to each other in a less traditional manner.

What benefits does a civil partnership offer?

There are a host of reasons why a couple might opt for a civil partnership, but one of the main reasons is the financial security it offers.

  • Income tax – Civil partners are entitled to the same income tax allowance as married couples.

  • Inheritance tax – Civil partners are completely exempt from inheritance tax should they inherit their partner’s estate. The surviving civil partner can also effectively double the amount that they can leave to family and friends without having to pay inheritance tax, by transferring the first to die’s unused nil rate band.

  • ISAs – Civil partners can inherit their partner’s tax-free ISA allowance, by using the Additional Permitted Subscription (APS).

  • Transfer of capital assets – These transactions become tax neutral for civil partners, allowing them to move funds and assets between them without generating an immediate charge to capital gains tax.

  • Pensions – Private and occupational pension schemes offer the same rights to civil and married partners. The surviving partner may be able to claim a higher state retirement pension, based on the first to die’s national insurance contributions.

However, for those wishing to enter into a civil partnership, there are still administrative tasks that must be completed, such as the drafting of new wills and other documents. Assets should also be considered and advice surrounding prenuptial agreements should be sought.

Get In Contact

Matt works with individuals and their families to help them negotiate the many pitfalls they can encounter when planning for their future by providing pragmatic, bespoke advice.

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But the reality is many business owners simply never consider, in any detail at least, that they might fall seriously ill or perhaps even die.

They will work hard, fully committed to pushing their business forward and creating an organisation which can support their lifestyle and provide long term security for themselves, their family and their employees.  But they often fail to put in place protective mechanisms to deal with serious illness or death.

But what if the worst happens? What if another major shareholder fell ill or died?  What would happen then?  Have they thought through the sequence of events that follow if the worst was to happen – in most cases, no they haven’t.

This raises many more questions including:-

  1. Who would acquire the shares on death?
  2. Who will exercise voting rights in respect of the deceased’s shares? Would any surviving co owner be able to continue running the business as they would want?
  3. How would the deceased’s family extract value from the business? Any salary may stop, will the family continue to receive an income stream by way of dividends?  Can the capital value in the shares be realised?

All of these problems can be avoided if business owners plan ahead and put in place the necessary structures to deal with these issues.

Fortunately there are solutions available to avoid these situations such as appropriate will planning and putting in place powers of attorney, establishing a shareholders agreement, and cross option agreements amongst a whole host of others solutions that are available.

But planning is key…so to discuss any of the above in more detail, or how we can help you plan ahead, contact Paul Horton on 0116 257 4460 or  Virginia Harvey on 0115 945 3734 or another member of the private capital team.

For advice or guidance on any other commercial or legal issue, a member of our team can walk you through everything. Click here to discuss.

We have, over the last nine months, been anticipating a huge increase in probate application fees charged by HM Courts & Tribunal Service to obtain Grants of Representation across England and Wales. The increase could have seen charges rise in certain circumstances from £155 (when an application is made by a solicitor) to £6,000.

The huge rise in fees has been a major contributing factor in the extensive delays that the public and professionals have experienced in obtaining Grants of Representation from their local, or even regional, probate registries. The delays have caused financial loss through the collapse of house sales and hindering access to loved ones’ accounts following their death.

The proposed rise in fees causing all this fuss recently was a re-hash of a previous proposal which caused a large backlash against the government when fees of up to £20,000 were proposed.

Many involved in the estate administration process, including solicitors and accountants, criticised the huge increases as a stealth tax designed to target those going through very difficult times in their lives.

Brexit, and the lack of parliamentary time to scrutinise the amendments to the fees as a consequence of this, caused the increase to be postponed earlier this year. This in turn caused a great deal of uncertainty but a big sigh of relief as members of the public and practitioners alike who felt less pressure to rush through applications before the rise took hold.

Now that the plans have been scrapped, hopefully, probate registries across the country will be able to take stock and begin working through huge back logs of applications currently sitting on their desks.

Please contact our private client team if you have any queries relating to the probate application process.

The case highlighted the importance of preparing a will which caters for a number of different scenarios, including the death of an entire family. Without Richard’s careful forethought, his estate of over £41 million would not have been left to Oxfam – a charity obviously close to his heart.

Richard incorporated a provision in his will, often called a “common tragedy clause”, which stipulated what should happen to his estate in the event that he, his fiancée and his children were to have died in a common accident. Such a clause avoids the bunching up of estate funds from one family member to the next and ensures that the estate itself has somewhere to go.

Intestacy

If Richard hadn’t prepared a will, the rules of intestacy determine that his estate would have been diverted in accordance with the Inheritance and Trustees Powers Act 2014. His blood relatives, such as parents or siblings could have stood to inherit his estate instead, something Richard appeared to not want.

Richard’s case highlights an important point regarding the intestacy rules and how they operate only to benefit spouses/civil partners or blood relatives. If, for example, Richard’s fiancée and two sons had not been on board the plane and had survived him, it would have been his two sons that would have stood to inherit the entire estate. His fiancée, for whom he would probably wished to have made some provision for, would not have stood to inherit any of his estate at all.

Choosing executors

Provision is made in a will as to who will be responsible for administering the estate and distributing it in accordance with the person’s wishes.

People should pick those that they trust to carry the responsibility. Married couples tend to appoint each other as their executors, perhaps with adult children as replacements. However, it is worth considering who is to be appointed in the event that none of those people live to take on the role.

In some circumstances, it is a good idea to appoint professionals. Solicitors, accountants, and tax advisors are all commonly appointed as a “backstop”. The likelihood is that the firm they work with, or a successor to it, will be in existence at the time of the person’s death and as such there should always be someone to step in and take the role on.

Professional executors are often a good option when it is anticipated that the estate administration may be particularly complex.

Business assets

Currently, an interest in a trading business and shares in unquoted trading companies can often qualify for Business Property Relief (‘BPR’). This reduces the value by either 100% or 50% when calculating any inheritance tax due on them. BPR, therefore, is an extremely valuable relief and should be utilised when it can be to ensure business succession to either future generations or others such as business partners.

Careful drafting of a will for those that own business assets of this nature ensures that, when possible, BPR can be utilised and the assets held in suitable vehicles, such as trusts. The trustees can help manage the business after death, safeguarding the business itself and ensuring its smooth transition to the deceased’s children or others that have been named.

The death of Richard and his family is a sad reminder of the benefits of planning ahead. As a consequence of the advice he sought and received, Richard was able to ensure that a charity benefitted from his significant wealth when it wouldn’t have done otherwise.

Find out more about our wills & succession team.

Without a pre-nup, many people think their case is dead in the water, but that’s simply not the case. When considering the division of assets, it may actually be possible to ring fence certain elements that were accrued prior to the marriage taking place. This is certainly the case for pension pots.

When considering pensions, it is important to be clear about the type of pension scheme that is involved –  different schemes have differing benefits, values and of course, pension freedom rules must be accounted for.

However, the length of the marriage, remains an important factor too, even where there is “no mingling” of assets, for instance joint bank accounts and the like.

The longer the marriage and, in particular, the more the parties relied on the capital and pensions for their future retirement, the less likely the chance of the Court excluding the pension from consideration.  Generally, although there is no law to support this, if a Pension has been accrued entirely pre-marriage, then it is unlikely to be shared, save in relation to need.   ‘Needs’ are critical in most cases, although there can be a degree of crystal ball gazing when looking at future pension needs.

Where the pension is accrued in part pre-marriage and in part post marriage, the approach to be taken may depend on the other factors in the case, such as the proportion of assets represented by the pension accrual for the length of the relationship, the view the court takes about each party’s future earning capacity and whether pension provision can be increased over time.

There are many orders that can be made in the context of financial remedy proceedings, but what is clear, is that all the circumstances of the case, will have a bearing on the outcome.

Currently, it is only possible to file for divorce based on a limited number of reasons, the majority of which assume a level of blame on one of the parties for the breakdown of a marriage, such as adultery.

With the introduction of “no-fault” divorces, the process should largely become quicker and more amicable but as such it might be easy to forget to update Wills to reflect the change.

Whilst a couple remains married, even if in the process of divorcing, spouses are entitled to whatever inheritance may have been granted to them in your existing Will. If there is no Will then, in accordance with the intestacy rules, partners will be entitled to either all or the majority of the estate depending on its value.

With matters being dealt with more amicably, it may slip your mind the need to disinherit your soon to be ex-spouse. It is important to update your Will or put a new Will in place when contemplating or going through a divorce to ensure that assets pass to the right people if you were to die before the divorce is finalised. The last thing that most parties want in these circumstances is for their soon to be ex-spouse inheriting their assets!

If we assist you with your divorce, we will always ensure that you have considered the provisions in your existing Will. Additionally, our private client team are there on hand to assist you in making adequate provisions for your wider family and friends should your marriage come to an end.

Over the last couple of years, there has been a consultation into increasing these fees and charging a different amount depending on the value of the estate – before Inheritance Tax is deducted.

The higher the value of the estate, the higher the fee.

The plans to introduce this new fee scale have been reignited and it is looking increasingly likely that it will be introduced as soon as parliament has sufficient free time to deal with business other than Brexit.

The amount that needs to be paid may increase substantially if the application for the Grant of Representation is made after the introduction of the new fee scale (seen on the right table).

The Probate Registry is not offering any additional services despite the increase in the fees they will charge.

If a person needs to submit an application for a Grant of Representation then we advise that it is done as soon as possible. Our private capital team can assist in getting clients to the stage of applying for the Grant of Representation quickly whilst ensuring the appropriate Inheritance Tax forms have been completed correctly.

The Non-Contentious Probate (Fees) Order 2018 will come into effect 21 days after the date it is approved by both Houses of Parliament at which point the new fees will be applied.