Writing a will and other estate planning tools - to ensure your estate is organised simply and efficiently
Writing a Will
Regardless of age, it’s sensible to write a will once you have acquired assets. This will ensure that your estate is distributed in line with your wishes when you die. Writing a will can also save your family and friends time and money. And it can make sure you don’t pay more inheritance tax than you need to.
Once in place, you should consider regularly reviewing and updating your will in line with any changes to your personal or financial situation. This is particularly important after major life events, such as having a child, moving to a new house or, getting separated or divorced.
If you die without a will in place, this known as 'dying intestate'. In these circumstances there are laws in place to decide how your estate will be distributed. These rules are unlikely to reflect your wishes – typically a proportion of the estate passes to the spouse/civil partner, and the remainder of the estate is shared between them and the children, which in many cases would be unnecessarily restrictive – ideally the spouse/civil partner should receive the total estate and then pass surplus assets to children as and when sensible and affordable.
Dying intestate could be especially problematic for couples who have not married or entered into a civil partnership.
It’s important that your will is legally valid. You may wish to use the services of a solicitor to assist you, especially if you have complicated finances and/or family circumstances.
You can find more information at https://www.gov.uk/make-will
Remember that if you need to make small changes to your estate, you could do this via a Letter of Wishes, attached to your will – you do not necessarily need to rewrite it. It is not legally binding but it can guide your executors and trustees in making sure your personal wishes are carried out.
You can read more here: https://wills.which.co.uk/product/letter-of-wishes/
You should review your will with a solicitor and/or tax adviser every few years, in case regulations have changed that affect you. For example, the Residential Nil Rate Band was introduced in 2017, which provides some individuals with an additional Nil Rate Band for Inheritance Tax of up to £175,000 each, if they leave their main residence to their direct descendants. You can read more in relation to the qualifying criteria for the Residential Nil Rate Band here: https://www.gov.uk/guidance/check-if-you-can-get-an-additional-inheritance-tax-threshold
If your will was written to create a trust on your death to hold your main residence, your estate may not benefit from this tax allowance.
Who will inherit your Pension?
Pension funds are extremely tax-efficient, and their benefits can in certain circumstances be retained by your beneficiaries. It is therefore important that your policy accurately reflects your wishes and your preferences are kept up to date.
Although not binding, completing an “Expression of Wish” or “Death Benefit Nomination Form” is the best way to ensure that the pension administrator considers your wishes as to where benefits should be paid in the event of your death, and releases them without unnecessary delay.
Power of Attorney
Many people assume that someone else will be able to look after their welfare and financial affairs if they become too ill to do so. A serious accident or illness, or simply old age can impair your mental capacity to deal with such matters. Although having a Power of Attorney in place is likely to be beneficial you are strongly advised to obtain independent legal advice on this matter before proceeding.
In 2015 there was an update to the guidance from the Office of the Public Guardian, which followed on from changes made in the Mental Capacity Act 2005, the legislation replaced the Enduring Power of Attorney (EPA) with the Lasting Power of Attorney (LPA), which provides the framework for donors to delegate a wider range of decisions to be made on their behalf than it was previously able to do. This update in guidance has, in part, been brought about by the growth in the discretionary management segment of the financial services industry over recent years.
As part of this, an attorney is required to follow the guidance laid out in the act when conducting their duties, one part of this relates to situations where attorneys wish to delegate authority for someone to make decisions on their behalf. The Mental Capacity Act 2005 Code of Practice specifies that, should a donor wish their attorney to delegate authority to a third party to make decisions for them, explicit instruction should be detailed in the LPA document. If an explicit instruction isn’t given, the attorney doesn’t have the authority under the LPA document to delegate the authority to a third party, in this case a discretionary manager who makes investment decisions on behalf of their client, to manage the donor’s assets. This applies even if the arrangement was set up prior to the client losing capacity and prior to setting up the LPA. The same requirements apply to EPAs.
So, if you have a Power of Attorney document in place, it would need to include relevant wording for us (Castlefield Investment Partners) to allow your attorneys to delegate authority to us to continue to manage your assets.
The wording that would be accepted for delegation of authority with Castlefield Investment Partners is: “My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the scheme will make investment decisions and my investments will be held in their names or the names of their nominees.”
Should you be considering putting a Power of Attorney in to place, we would suggest you include the wording mentioned above in to allow us to continue to manage your assets on a discretionary basis.
You may also wish to include the following text: “I would like my assets to continue to be managed in an ethical manner, i.e. with Environmental, Social and Governance considerations taken into account.”
For individuals who already have a Power of Attorney in place, it may be more cost effective to register a new LPA with the correct wording and then revoke the original document, rather than applying to alter the original document.
You could follow these steps:
- Apply for a new Lasting Power of Attorney (LPA)
- Submit the LPA with the correct wording provided above
- Revoke your previous Power of Attorney
This would be a decision that you and your attorneys need to make, as we can’t provide advice on this. It may be suitable for you to discuss this with a legal professional or the Office of the Public Guardian before making any changes.
Written by Castlefield Partner Olivia Bowen.
We recommend all clients seek advice from solicitors and tax advisers.
Please note that this communication does not constitute taxation or legal advice. Should you require taxation advice please speak to a taxation specialist or accountant; and to a solicitor if you require legal advice. Any personal advice in respect of taxation is not regulated by the Financial Conduct Authority. Further information about taxation rates, allowances and protections are available at https://www.gov.uk/.