Stephen Down

Watford Notary Public

64 Courtlands Drive

Watford

WD17 4HT

Tel: 0208 4212989

Mobile: 07981026101

Email: stephen@watfordnotarypublic.co.uk

Website: www.watfordnotarypublic.co.uk

About Me:

I qualified as a solicitor in 1999 and as a Notary Public (a specialist lawyer dealing with international documents) in 2004.  Between 2002 and 2010 I was a partner at a High Street Solicitors firm in Wealdstone.  From 2010 I have worked from home in Watford where I specialise in elderly client work, particularly Lasting Powers of Attorney, Wills and Probate.  I also handle conveyancing work and Deputyship applications.

Purpose of todays talk:

I will be speaking about Lasting Powers of Attorney, what they are, how they are made and registered and why they should be done.

I will then give an overview about Wills, why they are important and outlining the current Inheritance tax position explaining the nil rate band, the transferable nil rate band, the residential nil rate band and exemptions and reliefs that are available.

Finally, if time allows, I will be dealing with the position after death-when you need to apply for probate and what you need to do.

LASTING POWERS OF ATTORNEY:

Background:

Before I talk about Lasting Powers of Attorney specifically I will firstly talk about General Powers of Attorney.

A POA is where a person authorises somebody else, presumably someone they trust, to do things on their behalf.

Commonly it will be used where someone is going abroad for some time and they authorise a relative, friend or paid professional to look after their financial affairs in their absence.

As a Notary Public POAs are one of the most common types of document that I will deal with, typically for people buying or selling a property abroad where they do not want to have to be continually travelling to that country signing the paperwork that comes through.

They are also often used by the elderly or infirm to allow a trusted person to carry out tasks on their behalf.  They may not want to have to deal with their bank or deal with the sale of their property and so they assign that task to another.

POAs can be as general or as specific as the donor wants it to be.  They can only deal with financial matters so you could not have a POA for a relative to make health decisions on your behalf.

Why make a LPA?

So why not just make a General POA so that someone else can handle your financial matters?  Because if you reach a stage where you lose the capacity to make decisions for yourself a standard POA should no longer be used, it is revoked by mental incapacity.

So Lasting Powers of Attorney are there to be used when the donor has lost the ability to make decisions for themselves and in the modern age where people are living longer but where conditions such as Alzheimer’s, Parkinson’s Disease and Dementia are far more commonplace it is understandable why the need for them has become so prevalent.

The consequences of not making a LPA and then losing the capacity to make decisions for yourself can be significant.  The only method then available to appoint someone to act is by way of Deputyship and a lengthy and costly process with the Court of Protection.  In most cases a Deputy is only appointed to make financial decisions on the donor’s behalf and will not be appointed to make health and welfare decisions.

EPAs:

LPAs were introduced from 1^st October 2007 and since then in excess of 4 million have been registered with the Office of the Public Guardian.

Prior to that date there were Enduring Powers of Attorney and these continue to be registered even now.

The main differences between EPA’s and LPA’s are:

1. EPA’s can be used as a general power of attorney prior to being registered.
2. They can only be used for financial and property matters and not for health and welfare decisions.
3. They can only be registered when the donor is losing or has lost mental capacity to make decisions for themselves.

As I say, EPAs are still in existence and if you have one will still be registerable assuming that all of the parties signed the document prior to October 2007.  If you have made an EPA you should dig it out to check and consider whether you now wish to make an LPA to cover Health and Welfare decisions.

LPAs:

The 1^st consideration for the donor-who do I trust enough to be my attorney?

You want somebody or some bodies who you trust implicitly.

The role of an attorney, whether it be for a general POA, EPA or LPA is to act in the best interests of the donor.

They are filling the donor’s shoes and each and every decision should be based on what they think the donor would have done if they had capacity and what is in the donor’s best interests.

They must also try to engage the donor as much as possible in the decision making process and indeed it may be that there are some decisions that the donor is still able to make such as where they would like to live, who they would like to see, what they would like to eat, whilst being unable to make other decisions such as which bank account would yield most interest.

Usually people will appoint their closest relatives, if they are not too elderly their spouse followed by their children.

Those without close relatives might appoint close friends or a professional such as an accountant or lawyer.  I have acted as an attorney for clients and arranged for carers at the donor’s home and later finding suitable residential care.  A paid professional will be expected to act to a higher standard than a friend or relative but will be getting paid for their expertise.

You can appoint as many attorneys as you wish and often where someone has a number of children they will appoint them all jointly, although of course there is no need to do that.

It is important that your attorney(s) know that you are looking to appoint them and that they have an understanding about what that entails.  You should discuss it with them in advance and they should have prior knowledge of what your wishes are.  An extreme but obvious example is someone who follows the Jehovah’s Witness faith should ensure that their attorney is aware that they would not want a blood transfusion.  On a more basic level you might want to make it clear that you wish to live at home up until the point where it becomes medically unviable.  Or you might want them to continue making payments on your behalf to a particular charity.

Financial & Property LPA:

One crucial difference between the 2 types of LPA is that the financial one can be used before someone has lost capacity if they consent to the attorney acting on their behalf.  So it fulfils the place of a general POA up until the time that the donor loses capacity when it automatically takes effect.

A Health & Welfare LPA can only be used once the donor has lost the ability to make decisions for themselves.

The Financial LPA enables the attorney to deal with all things financial.  They can handle the donor’s cash, they can manage their bank accounts, make payments on their behalf, receive money on their behalf.  They can buy and sell property including the donor’s home.  They can apply for benefits on the donor’s behalf.  They can make gifts on the donor’s behalf on customary occasions (e.g. birthday, Christmas, weddings).

You might want to place restrictions on how your attorney’s act; e.g. prohibit them from selling your home, or say that it can only be done if your Dr has said that you can no longer live independently.  You may wish to make provision for the attorney to provide maintenance for your spouse or children out of your capital or income.

Where a donor owns their own business they may wish to make a separate LPA dealing just with their business, perhaps appointing a business partner or professional.  In this case the LPAs need to be carefully drafted so that there is a clear delineation between the attorney for the business and the attorney for personal matters.

The financial attorney should be very careful in keeping separate records for their actions as an attorney, ideally keeping annual accounts.  They should be aware that the Office of the Public Guardian oversees attorneys and will intervene where concerns are brought to their attention.  As such the attorney should be able to show from records and justify each decision that they make.

Health & Welfare LPAs:

This LPA can only be used when the donor has lost the capacity to make decisions for themselves.  It enables the attorney to make decisions on:

• Where the donor should live (for example moving to a Residential Care Home) and who they should live with
• The donor’s day to day care, even including what they should be eating and wearing
• Consenting or refusing medical treatment on the donor’s behalf
• Provision of community care services
• Whether the donor should take part in social activities, leisure activities, education, etc.
• Right of access to personal information such as health and social care records

There is a specific question on the form where the donor will decide whether or not to give their attorney authority to make decisions on whether they should be given life sustaining treatment, for example through assisted breathing or feeding.

It is important that the donor speaks to their attorney in advance of making the LPA and makes them aware of their views on being kept alive though resuscitation, ventilators, etc. so that they will be able to make an informed decision when required.

Some people will have already prepared an “Advance Decision” or “Living Will” document outlining their wishes for treatment when seriously ill.  If that is the case then ideally the LPA will make reference to it.

Needless to say a donor may have a different attorney for the Health & Welfare LPA and Financial LPA.  They might have a son who is always there with them for hospital appointments and meeting carers and would be ideally placed to make such decisions but who is financially unsound.  It should be noted that a bankrupt or someone subject to a debt relief order cannot be a financial attorney but can be a health attorney.

It is essential that the LPA is signed in the correct order, the donor needs to sign 1^st confirming their instructions in the LPA, next they will need to sign before their “Certificate Provider”, this is the person who is confirming that they have sufficient understanding to enter into making the LPA and where a professional is involved will usually be that person, alternatively the donor’s GP or if not a friend or neighbour who is not an attorney but has known the donor for at least 2 years and has met with them on a regular basis throughout that time.  3rdly the attorneys need to sign.

The completed LPA is then sent with the registration fee to the Office of the Public Guardian who check the legalities of the form.  If there are people to notify then they will send notice of the application to them along with the attorneys.  The process takes around 2 months from submission of the forms to registration of the LPA.

Once you have the LPA you will want at least 1 certified copy of it to show to relevant parties (e.g. banks, GP, hospital staff, care home staff, government agencies).  Whilst the donor has capacity they can self-certify copies.  Most lawyers will provide a certified copy along with the original.

Make sure that your attorney knows where the LPA and copies are kept.  When they need to use them they will need to show at least the certified copy to the relevant organisation along with proof of who they are.

WILLS:

Jointly Owned Property:

Whether or not you have made a will jointly owned property will automatically pass to the survivor or survivors.  This is most commonly the case with houses and flats especially the matrimonial home.  Usually married couples who buy their home together will do so as “Joint Tenants” rather than “Tenants in Common”.

The difference is that as joint tenants you own the whole property for yourselves jointly and then when the 1^st of you dies the survivor automatically takes sole ownership.

Tenants in Common instead have a distinct % share of the property and so when they die that % is passed on through the terms of their will or by intestacy rules.

If you are not sure how your house is owned then you can check the Land Registry documents and if it shows a restriction that the property can only be sold with the consent of both proprietors then it is held as tenants in common.

Joint ownership can also apply to other assets; e.g. jointly owned furnishings, bank accounts, etc.

Please note that although it falls outside of the deceased’s estate as far as the will is concerned it remains a taxable part of the estate; e.g. a joint owner of a house will be deemed to have passed on 50% of the value of that property upon their death for Inheritance tax purposes.

Another issue is that what appears to be jointly owned such as a bank account with 2 or more signatories may not actually be jointly owned.  If signatories have been added for ease of use but have not put in any of the funds in an account then they are not joint owners and the balance of the account would be part of the deceased’s estate.

Intestacy:

If a person dies without having made a will they are said to have died Intestate and the Intestacy Rules will then apply to that persons assets (save for the Joint property).

Intestacy Rules will also apply where there is a will but it fails to deal with all or some of the assets or the executor appointed is unable to act for whatever reason.

If the deceased left a spouse but no “issue” (children, grandchildren, etc.) the spouse will inherit everything.

If the deceased left a spouse and issue the spouse will receive the chattels, £250k free of tax and half of the remainder.  The issue receive the other half on trust.

If there was no spouse or issue then the whole of the estate goes to the 1^st on this list:

• Parents
• Siblings
• Half siblings
• Grandparents
• Uncles and aunts
• Uncles and aunts of half blood
• The Crown

Consider the position of the co-habitee.  If there is no will in place to provide for them then under the intestacy rules they are entitled to nothing.

Foreign Property:

Generally speaking for a UK citizen the land that they own abroad is governed by the law of that country (known as the “lex situs”) whereas moveable property, including money held in bank accounts is governed by the law of the country they come from (the “lex domicilii”).  So in simple terms a holiday home in Spain would be subject to Spanish property and estate law whilst a Spanish bank account would be subject to English estate law.  It is generally therefore advisable to seek advice from a lawyer in the country where you own the 2^nd property to discuss what will happen to the property when you die and whether you should have a separate will in that country.  If that is the case it is important that your English and foreign wills do not contradict or override each other; e.g. it is usual practice to commence a will by stating that all previous wills are revoked, but you would not want to revoke a previous foreign will and therefore should make reference to it, and similarly for a later drafted foreign will.

Many countries do not have the testamentary freedom that we have in England and Wales, and please note that Scotland and Northern Ireland have separate laws when it comes to inheritance, LPAs and the like, to England and Wales.  For example there are “forced heirship” rules in many countries where a % of property has to be left to particular relatives.

This contrasts with England where a person has the freedom to do what they wish with their property as long as they are of sound mind, and could if they wanted ignore their relatives and leave everything to their pet, or a charity or to whomever they choose.

The importance of having a will:

Unless you are happy with the effects of the Intestacy Rules it is essential that you have a will in place.

As long as it follows certain formalities; e.g. it should be signed before 2 witnesses who then sign before the testator, it can be as detailed or as short as the facts require.

I have drafted wills that have had enormous lists of various possessions that are to be given to the different people that the testator has known over the years; my car to Joe, my suit to Bert, my record collection to Frank and so on.  At the other end of the scale you have the testator who leaves everything to one person, whether that be their spouse, their child or to their favourite charity.

What is most important is that you have given due consideration to the extent of the property that you possess at the time of making the will and weighed up the competing interests of all those who might be considered to inherit some or all of your property.  You should be especially keen to avoid the possibility of the will being challenged after your death.  The ideal method is to speak to all of your nearest and dearest and tell them what you propose to do with your estate and to obtain their blessings to do so.  Of course this is not always possible, especially where there are estranged relatives.  The next best option is that there are full written reasons left as to why a particular relative or friend has not received a legacy or has received a smaller portion.  If instructing a lawyer they will keep a record of your reasons for overlooking likely beneficiaries.

This is important because aggrieved relatives or others who were financially dependent upon the deceased are able to bring a claim against the estate after the death, and even if the claim fails they can drain money from the estate.

In making a will choose who you would like to be the executor of the will.  This is the person or people who will look after your estate when you die.  It will often be the main beneficiary assuming that your estate is quite easy to handle.  E.g.  where you jointly own your home with your spouse then you will often leave everything to your spouse and appoint them as your executor.  This might not be appropriate if your spouse is elderly or infirm or would prefer others to carry out the task.  If so then you would look to appoint the next generation or a lawyer.  The named executor can always seek advice from a lawyer in any event.

Next decide on the specific gifts that you wish to make.  There might be family heirlooms that are to be given to specific relatives.  Then consider if there are specific sums of money or particular bank accounts that you wish to leave somebody.

Finally decide who should receive what’s left, what is known as the residue.

You should also consider the position if one or more of your beneficiaries dies before you, it may be that you would then have a new will made but what if you weren’t able to?

The default position is that gifts made to children (or grandchildren) will pass to their children if they have died before you.  This does not apply to other relatives, so if you left a gift to your sister it would not go to her children if she died before you unless your will specifically provided for that.

If there is tax to be paid on your estate you will also want to consider where the tax will be paid from.  Similarly, if there is a mortgage outstanding then you will want to consider if that is to be paid off from the rest of the estate or whether it should continue to attach to the property (the default position).

For Inheritance tax the default position is that it will be paid from the residue of the estate unless stated otherwise.

Inheritance Tax:

Everything left to your spouse is free of IHT.

Everything left to a registered charity is free of IHT.

On death the deceased has a “Nil Rate Band” (NRB) of £325,000.  This has been the level for the past 10 years.  Prior to that there were regular uplifts taking inflation into account.

Since 2007 we have had the “Transferable Nil Rate Band” (TNRB).  This means that if a deceased person survived their spouse and their spouse didn’t use up all of their NRB on their death their remaining portion can be passed to the survivor.

It’s common for the 1^st spouse to leave everything to their surviving spouse and so that being the case the survivor has a NRB and TNRB total of £650,000.

Since April 2017 there has also been a Residential Nil Rate Band (RNRB).  This applies where a house or flat is left by the deceased to their child or later issue.  (Unusually it also applies to step-children).  In 2017 the rate was £100,000 and this has increased by £25k each tax year and so currently stands at £150,000.  In April 2020 it will reach its peak and limit of £175k.

There is also a Transferable Residential Nil Rate Band (TRNRB) which applies if the 1^st spouse to die did not use their RNRB (in many cases it wouldn’t have existed and in most others the property would have passed by survivorship to the spouse and therefore would not have been used).  So potentially when a surviving spouse dies they could have a combination of nil rate bands of £1 million.

There are other methods of reducing the IHT payable.  Business Property Relief (BPR) may be available if you own your own business or share in a business or if you own shares in unlisted companies.  Octopus Investments are a method for buying shares that will attract BPR after 2 years.  This is an area for a Financial Advisor.

During your lifetime you can make gifts of up to £3k p.a. without liability to tax.  There are also one off gifts which are exempt upon marriage of a child or grandchild.  Gifts to charities or political parties are also exempt.

Gifts above those amounts will be “Potentially Exempt Transfers”.  They will be free of IHT if the donor survives 7 years.  If he dies within the 7 years then they will form part of his estate and will be the 1^st part of his estate to use up the NRB and TNRB.

Beware of Gifts With a Reservation of Benefit (GROB).  If you gift something but retain the use of it then it will still form part of your estate upon your death.  The most obvious example is a house.  If you gift your house to your son but continue to reside there it remains part of your estate unless you are paying the equivalent of market rate rent.

Before making your will you should consider the likely IHT consequences and decide where you would like the tax to be paid from.

Funeral Arrangements:

The arrangements for a funeral can be put in a will or in a separate letter of wishes.  They will not be legally binding upon your executor but conventionally will be followed and it can be a good way of avoiding conflict or friction between family members who may have differing views on how their loved one should be remembered.

What do you want to happen to your body?  Burial or cremation?  This is usually put in the will.  You might consider donating your body for medical education or research.  You might wish to donate organs or tissue.

If you are being buried then decide the location and whether you want a headstone and if so what should be inscribed. Consider purchasing exclusive burial rights from a cemetery.  It should be in the name of the surviving spouse if you intend to be buried together.

If you are being cremated consider what you would like to happen with the ashes.  Cremation is acceptable to Anglicans, Sikhs, Hindus and Buddhists.  It’s now accepted but not recommended by the Roman Catholic Church, but it is forbidden by Jews and Muslims.

There are now many different types of funeral and some people decide not to have a ceremony at all.  If you are having one is there particular music you would like to have played and would you prefer people to donate to charity rather than buying flowers?

It’s not obligatory to have a religious minister.

It’s not obligatory to have a funeral director and the ceremony doesn’t have to take place in a Crematorium or place of worship.  There are now personalised funerals for example involving railways, canal boats or motorbikes.

Green funerals are becoming more popular, for example people choosing to be laid to rest in a biodegradable coffin made of cardboard or willow with burial in woodland.

Probate:

The first consideration is to register the death and obtain a death certificate and copies.  You need to book an appointment with the Registrar and take the Dr’s certificate along with the following information:

• Date of death and place of death
• Gender, name and surname of deceased with any maiden surname
• DOB of deceased and place of birth
• Occupation (or last occupation before retirement)
• Usual address of deceased
• Name and occupation of deceased’s spouse

You will then obtain a certificate for burial or cremation (green certificate) to be handed to the funeral director.

You will also obtain a “Tell us Once” reference which can be used online to inform HMRC, DWP, passport office, DVLA and the local authority in one go about the death.

Do you need a grant of probate?

This will depend upon the assets of the deceased and the type of ownership.

Jointly owned property (often the case with a house owned by husband and wife and often with bank accounts) will automatically pass to the survivor and so can be dealt with through production of a death certificate.  But when the last joint owner dies probate will be needed to transfer ownership.

Relatively small amounts in bank accounts or investments (e.g. under £5000) will often not require a grant of probate, usually production of the death certificate and a declaration by the deceased’s representative will suffice.

Where there is land solely owned by the deceased or where they were a Tenant in Common rather than a Joint Owner then a grant of probate will be needed in order to transfer the ownership through the Land Registry.

Where there are large sums held in bank accounts or as investments then the bank, NS&I or other company will insist on seeing a grant of probate before releasing the funds to the executor.

In order to apply for a grant of probate you will need to ascertain the value of the deceased’s estate at the date of death, so this will entail contacting the bereavement department of banks and other organisations.

You will need to get a valuation of the land owned by the deceased.  If there is unlikely to be any IHT payable then valuations from local estate agents should be acceptable.  If there is going to be IHT payable then it is advisable to have a Chartered Surveyors Probate valuation.

Once you have ascertained the value of all of the deceased’s assets and all of their debts too you can apply for probate.

Most estates will not incur IHT and if the gross value of the estate is less than the “excepted estate” limit of £325000 or £325000 plus the TNRB or if the gross value is less than a million and all or part of the estate goes to the spouse or charity and there is no IHT then the simpler HMRC form is used which is relatively straightforward.

If it falls outside of those criteria, and there are other criteria which might make it more complicated even if no IHT is payable; e.g. the deceased owned foreign property worth more than £100k, then the more detailed IHT forms are required and the forms will need to be submitted to HMRC before applying for a grant of probate.

If IHT is payable then it needs to be paid before a grant can be obtained and banks will have provision for making payments to HMRC before the grant is obtained.  Where portions of the IHT will be paid from land or unlisted shares then this can be paid by instalments until the asset has been sold.