Winter 2009
ROUNDABOUT MAGAZINE WINTER 2009
THE LEGAL HELP COLUMNWelcome to our second legal advice page and many thanks to the readers who gave positive feedback on our first effort and the suggestions for future subjects. If you missed the last article and would like to have a copy then please use the contact details at the bottom of the page to request one.
You may recall that last time we dealt with the Will making process and we continue to look at “estate planning” in this edition. Once again I must thank David Bevan, senior member of Bowcock Cuerden’s Private Client Team, for taking the time to answer all my questions.
So David, at the end of the last article we had put together a comprehensive Will, complete with carefully chosen executors, appropriate witnesses and accurately worded bequests and instructions, the client has a copy and the original is safely filed away at the solicitor’s office. What happens next?
Whilst the Will making process is underway there are a number of other matters which should be considered but in terms of the Will itself we should talk about reviews and codicils.
We referred to these last time, you suggest reviewing a will every 5 years?
Yes, although I would say at least every 5 years. Older clients, those with health issues larger families or high value estates should consider undertaking a review more often. People make their first Wills at various ages, some will do it in their twenties, often when they get married whilst others may wait until they are in their fifties. Younger people may be having children or buying a house whilst in later life there could be new grandchildren, lump sum bequests from parents even second properties. These may all need to be considered in a Will.
I take your point, most of us, thankfully, do not lead the type of volatile lives depicted in TV soap opera’s and tend to think nothing much changes. But if you think back over 5 years or more there have probably been changes in all our lives.
Precisely. Think back to the basic will process and split it into 4 parts. 1. Appoint trusted executors to carry out your wishes 2. Identify the full extent of your estate 3. Record your wishes for the disposal of the estate including any specific bequests 4. Put it all together in a legally sound document. The last part is obviously my responsibility and the first 3 are for the Will maker to consider. Relationships with executors could change as could their ability to act and changes in the nature of the estate could make previous instructions difficult to act upon. This is where you need a codicil.
That sounds like a brand of painkillers
That could be seen as a reasonable analogy, a codicil is simply a legal amendment to an existing Will. It formally removes or amends one or more sections of the Will and replaces it with new instructions. It is then signed, witnessed and filed with the original Will. Completing a codicil is therefore a quick and easy way to keep a Will up to date and ensures the Will reflects the individual’s most recent wishes thereby potentially saving the executors and beneficiaries a lot of pain.
Is there a limit to the number of codicils per Will?
There is no formal limit but, depending on the nature and complexity of the Will and codicils, obviously there can come a point where it is simpler to make a new Will. I would normally suggest that 2 or 3 codicils are the maximum and that a new Will should be completed if further amendments are required.
That’s Wills comprehensively covered, anything else we should be considering?
It is always worth considering a Property Trust with an eye on future care home fees.
How do they work?
Let us assume Mr & Mrs S. are living in their jointly owned family home, all the children have left home and they are the only occupants. Mr S dies and his half of the property passes to Mrs S who becomes the sole owner. A few years later Mrs S requires long term care. Under present legislation, if there is no other money to pay the fees, the value of the house would have to be realised to meet these costs. It is not until the total value of her estate falls below £22,500 that the local authority will meet the full costs. With a Property Trust, when Mr S dies his share of the house does not pass to his wife but is placed in Trust for his beneficiaries. Mrs S will have the right to live in the house for the rest of her life and as the Trustees of the Trust will normally be the surviving spouse and their children, the family remain in control. If Mrs S should subsequently require long term care then the house will still have to be sold but fees can only be paid from her share of the house, the rest will be protected and paid to the named beneficiaries.
What if Mrs S. wants to move house?
Often the surviving spouse will wish to downsize their home. Any move would have to be agreed by the trustees, which would normally be a formality.
It seems an excellent idea, are there any negatives?
There may be some practical issues to consider depending on individual family relationships and property trusts are generally not compatible with the equity release products that are available these days.
So generally a good idea but there needs to be some consideration
This is why I prefer to talk in terms of estate planning rather than will writing. It does not need to be a long or complex process but if you are going to the trouble of having a will prepared then it makes sense to consider all related issues.
As a final topic what about Powers of Attorney?
Yes, it certainly fits in with a theme of making provision for events that most of us would prefer not to think about. A power of attorney is the formal process of giving one or more persons the authority to manage your affairs when you are unable to.
I understand there has been a change of name recently?
Indeed there has In 2007 the Mental Capacity Act came into force, prior to this we dealt with Enduring Powers of Attorney (EPA) but these have now been replaced by Lasting Powers of Attorney (LPA).
So what is the difference?
It is difficult to be comprehensive within the scope of this article but it is probably best to look at the general provisions of both the old EPA and the new LPA to show some of the major differences.
OK then, let’s start with the old EPA
The first thing to emphasise is that all EPA’s that were correctly completed signed and witnessed prior to 1st October 2007 remain valid and there is no need for an EPA holder to make an LPA - although there could be circumstances where an LPA may be better suited to the needs of a particular client.
You would grant the EPA to a trusted person who would then be in a position to manage your finances if you were temporarily or permanently unable to do so.
Once that stage is reached then the attorney is under an obligation to register the EPA with the Office of the Public Guardian. Whilst this process is underway the attorney can still deal with some basic essentials such as regular bill payments or food shopping but any larger transactions must wait until the registration is complete.
That is clear enough, what’s new about the LPA?
The Power of Attorney is split into two allowing you to nominate an attorney to deal with your “Property & Affairs” and another to deal with your “Personal Welfare”.
The “Property & Affairs” attorney would be able to collect income or benefits on your behalf, pay bills or even sell your home for you. They would have to have due regard to any conditions or restrictions that have been included in the LPA.
The “Personal Welfare” attorney would be able to make decisions on where you live and any medical treatment you may receive. Again, certain restrictions and conditions can be included in the LPA that would have to be respected by the attorney.
Another change is in registration. As I said before, an EPA grants limited powers pending the registration process. However an LPA can only be used once it has been registered Therefore it has become standard procedure to register LPA’s at the time of completion so they are ready to use if needed.
It sounds more complicated
There is certainly a bit more work involved with an LPA than there was in an EPA but the new system can be used to give the person granting the Power of Attorney more control over their future and also allow them to appoint Attorneys with due regard to the circumstances of family and friends.
What do you mean?
Dealing with the someone’s financial affairs is normally quite complex and difficult without the added emotional concern of a friend or family member being ill. The new system allows you to split those responsibilities between several people having due regard to any potential attorneys’ abilities, health, personal commitments and even geographical location.
So it would suggest that I need several attorneys
Not necessarily, you can appoint just one for both aspects of the LPA or several different ones under each LPA. You may also stipulate that they can act independently or that they must act together. A typical example is money, where it is often stipulated that any individual attorney may access your current account but they must act together in matters relating to savings or investments.
Are there any restrictions on who can be an attorney?
Attorneys must be over 18 and mentally competent. They must read and act according to a code of conduct which is available from the Office of the Public Guardian.
Do I need to use a solicitor to complete an LPA?
No, but given the importance of the document and the subsequent problems if it is not completed correctly, I do not think you will find many people advocating completion of an LPA without professional advice.
So I should consider the points we have discussed and then see a solicitor?
That would certainly be my advice. The documents can be quite daunting and there are approximately 20 pages to complete. There are separate forms for the Property and Welfare LPA’s and the solicitor can ensure that you understand all your options and that the forms are correctly completed and registered. There is one other matter worth mentioning before we close and it is a safeguard which is built into the new system. Before your LPA becomes valid you must have a certificate of capacity drawn up. It is simply a way of confirming that the person making the LPA is able to understand the action they are taking. These certificates are often provided by solicitors or doctors but cannot be provided by a family member, proposed attorney or even a relative of an attorney.
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My thanks again to David for his time and in our next article we hope to look at what actions may be required following bereavement. We would welcome any suggested questions from readers, which could be used anonymously in the next article, please email to the address below.
We would also like to take this opportunity to wish all our readers a Happy Christmas and a Peaceful and Healthy New Year.
Finally I must point out that this article is not intended to be comprehensive or to provide specific legal advice. It should not be relied upon in the absence of specific advice given in relation to particular circumstances.
Graeme Barber
Bowcock Cuerden LLP
01270 611106
Email: info@bowcockcuerden.co.uk
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