Property Protective Trusts in a Will
In the past the majority of married couples purchased their home as ‘beneficial joint tenants’, which in effect meant that as a couple they owned the entire property and if one died the survivor continued to own the property solely having passed by survorship. There was no passing of property and the property did not feature as part of an estate passing through the will of the first to die in this joint ownership.
Property can also be held in joint ownership as a ‘tenancy in common’ which means that the joint owners each own a share of the property, normally presumed to be equal unless otherwise stipulated by a deed. The share of a property owned by a tenant in common is capable of being disposed of or gifted by their Will.
The Law of Property Act 1925 allows beneficial joint tenants to change their style of ownership to tenancy in common by making a public declaration known as ‘a Mutual Notice of Severance of Joint Tenancy’ a copy of which is lodged at the Land Registry.
This action then enables a couple to use a property protective trust in their Will which on first death gifts a half share of the property to the Trustees of the Will (usually the surviving spouse and one or more children as there must be at least two trustees) to hold on trust to allow the surviving spouse a life interest in that half share of the property with it passing to the other beneficiaries (usually children) after their death.
The life interest allows the surviving spouse to continue to live in and enjoy the property for the rest of their life, or to sell the property and reinvest the trust share in another property which would be subject to the trust. This enables moving or downsizing in the future.
The benefit of this form of trust is that a half share of the house or its value as proceeds of sale are protected by being in trust and must pass on to the children or other beneficiaries after the death of the surviving spouse. As the Trust Assets (the half share of the house or half share of the proceeds of sale) are not owned by the surviving spouse they cannot be subject to any claim by a future spouse or co-habitee or a local authority to recover community care fees.
The change in tenancy takes effect immediately but does not affect the way in which you can deal with the property in the future as a couple and your individual rights are protected by the notification to the land registry.
The Trust is not implemented until the first death and can be removed from a Will before then if any circumstances changed that would warrant that, but it cannot generally be created after the first death retrospectively.
This is a popular means of protecting a substantial part of your estate for your beneficiaries with minimal disadvantage in that the survivor cannot spend the trust assets for their self, and it is necessary to involve a second person (adult child) as a trustee in the ownership of the Trust Assets.
The trust must be registered by the trustees on the Trust Registration Scheme within 2 years of the first death and we can offer advice and assistance with this.
Severance of Joint Tenancy
It is now considered beneficial for couples to hold the family home as ‘tenants in common’ (50% asset holders) giving them the opportunity to take advance of good estate planning for inheritance tax, or to create protective will trusts and to this end we can arrange the change from joint beneficial ownership and registration of such at Land Registry.
Trusts
Life insurances cover and Pension Fund Death Benefits can form a large part of people’s estates and if not properly catered for can be taxed at 40% on the second death of a couple whose estates exceed the Inheritance Tax threshold. It can be prudent therefore to arrange for these to be paid into Trusts so that they are not part of the second estate for tax purposes.
Land Registry
Occasionally it may be necessary for us to refer you to trusted partners to register unregistered property at the Land Registry or to transfer the title of property already registered in order to create shared ownership to protect your best interests.
Lifetime Will Storage
The safe custody of an original Will is paramount as it is the only document that can be processed through probate and should not be exposed to loss, damage or deliberate sabotage.
Probate
The Probate Service is part of HM Courts & Tribunals Service. It administers the system of probate, which gives people the legal right to handle the estate (for example, money, possessions and property) of a deceased person.
When a person dies, they usually leave an estate (including money, possessions and property). A Will should name one or more executors who are responsible for collecting in all the money, paying any debts and distributing any legacies left to individuals or organisations.
In order to access the estate, the executor needs to apply to the probate registry for a document called a Grant of Representation or ‘grant’. This process is called probate.
The grant establishes who can legally collect money from banks, building societies and other organisations which hold assets belonging to the deceased person. In most cases, applying for probate is a straightforward procedure. The Probate Service administers applications for grants throughout England and Wales.
Probate is issued by the Probate Service to the executor(s) named in the deceased person’s Will.
We can offer advice or referral in relation to applying for a Grant of Probate.
The Community Care Act
Deals with who should pay for community care provided by the local authorities. As care home fee costs are substantial and for anyone with assets above the means testing threshold the cost is entirely theirs. So it can soon consume the value of a house and often does. You can protect your family against the whole of your home being used for this purpose with certain Will Trusts.
Lasting Powers of Attorney
Whilst you are probably mindful of the importance of having a Will, you may not be aware of the consequences should you lose your mental capacity. Should we become incapable of managing our affairs, most of us would want to ensure that someone we trust would look after them. We assume our spouse, partner or family and loved ones will just be able to take control.
Diminished mental capacity is not just a problem for elderly people. The risk is there for everyone – from a road traffic accident, simple fall, sporting injury, illness or stroke. The Mental Capacity Act says if you did not appoint an Attorney whilst you were able, then only the Court of Protection can. Your family or friends would have to apply to the Court of Protection to ask to be granted “Deputy” status. This is a lengthy and time consuming process with possible delays of several months at a time when your loved ones would be better served helping you rather than in court. It is expensive too – initial registration fees and further Barrister costs are often in the region of £3000. This may surprise you but remember this is the law trying to protect you from being defrauded or ill-treated by another.
The only certain way to protect your interests in these circumstances is to make a Lasting Power of Attorney (LPA). If you make this document in advance of any mental incapacity you can name who you wish to become your Attorney(s) and state the powers you’d like them to have. This makes it quicker, significantly cheaper and more importantly, lessens heartache for all concerned.
An LPA is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf.
This gives you more control over what happens to you if you have an accident or an illness and can’t make your own decisions (you ‘lack mental capacity’).
You must be 18 or over and have mental capacity (the ability to make your own decisions) when you make your LPA.
There are 2 types of LPA. You can choose to make one type or both:
- health & welfare
- property & financial affairs
Living Wills/Advance Decisions
A Living Will (legally referred to as an Advance Decision in England & Wales) is a document setting out the circumstances under which you would not want to receive life-sustaining medical treatment if you became seriously ill in the future and were incapable of making your own healthcare decisions. In England & Wales, valid and applicable Advance Decisions are legally enforceable under the Mental Capacity Act 2005 and must be followed by healthcare professionals.
Fees
We have set fees in place for all of our services. Please call Denise Hodgson on 01206 657897 / 07947 280 476 for information about our fees.