New rules if you have not made a will
The Covid 19 outbreak has changed all our lives. It has been a triggering point for many people to review their legal affairs especially in regards to their Wills, Lasting Powers of Attorney (LPAs) and tax planning.
The rules that determine what happens if you have not made a will are called intestacy rules and they changed on 6th February 2020. If you have not made a will and you are married your spouse is entitled to what is known as a statutory legacy. The amount of this legacy has been increased from £250,000 to £270,000. If your estate is worth £270,000 or less then the whole estate will pass to your spouse. If the estate is worth more than £270,000 and there are children, the excess will have to be divided equally between your children and the spouse. This may not be the outcome you want.
For example, if your estate is worth £600,000 (£300,000 house, £250,000 land and £50,000 savings) then £270,000 and all your personal possessions will pass to your spouse, and the excess of £330,000 will have to be divided in half. The first half of £165,000 will pass to your spouse and the second half will pass to your children. In this instance your spouse could face the difficult decision of needing to sell property or take out a loan in order to pay for the £165,000. This may prove problematic, especially if your spouse wishes to continue farming the land or needs savings to continue living on the farm.
If you are unmarried, but in a cohabitation relationship, then your cohabitee will not inherit your estate in accordance with the rules of intestacy. This may lead to unnecessary disputes, which can cause delays and increase the cost of dealing with your affairs after you have passed away.
Therefore the increase in the statutory legacy should not be relied upon and instead a valid Will should be prepared. It is only by having a valid Will you can ensure that your estate will be divided in accordance with your wishes. We advise all married couples, civil partners or cohabitees to discuss their tax planning and will wishes with a professional solicitor, who can help them find the best way forward.
The current coronavirus outbreak has made us all realise that there might be a time when we will need to rely upon others to help us with our finances and care needs. Fortunately LPAs can be prepared which will enable you to appoint a trusted person in this regard. The people you appoint are called your attorney's. You can appoint one or more attorneys and they can be your spouse, children or any person you trust. There are two types of LPA one for Property and Financial Affairs and another for Health and Welfare.
The LPA for property and financial affairs gives you the option to appoint attorneys of your choice, who will manage your finances, home and land for you, if you are unable to do so, because of loss of mental capacity or physical inability. We have seen many cases where clients do not have this document in place, and upon loosing their mental capacity, the only option for their family is to apply to the court for a deputyship order, which takes much longer, costs more and the people appointed might not be the ones you would wish to appoint to deal with your financial matters. It is therefore best to prepare this document when you can, even if you may not ever need it.
The LPA for health and welfare is used to make decisions about your medical treatment and social care, if you loose your mental capacity and are unable to make those type of decisions yourself. You are in control of who should be appointed and what sort of decisions should be made by your attorneys on your behalf, i.e. whether they can give or refuse consent to medical treatment or whether you continue to live at home with appropriate support or perhaps move to a residential home.
Although coronavirus is still with us, we at Trowers & Hamlins' Private Wealth department are continuing to work for you. We offer free initial consultation, after which a no obligation quotation will be provided to you.
Please do not hesitate to contact us if you would like to discuss any of the above or indeed have any questions related to your Wills, LPAs or tax planning.