What is the Inheritance Threshold – Rules and Allowances?

Inheritance Threshold

When someone dies, there is a tax applied to the value of that person’s estate which is known as Inheritance Tax (IHT). The beneficiaries and/or executor of the deceased’s estate are liable to pay the tax if the value is above a tax-free allowance, which is known as the threshold.

In some cases, there will be no inheritance tax to pay but if the value of the deceased’s estate is above the threshold, IHT will be payable. There are measures that can be taken in order to reduce the level of inheritance to be paid on your death if you think that the value of your estate is likely to be above the threshold limit.

To add to the mix, the government announced a series of changes to inheritance tax in 2021 that have become applicable in January 2022. The changes are designed to make reporting IHT returns simpler for estates above and below the threshold limit. So, let’s explain the inheritance tax threshold limit, as well as the rules and allowances around IHT.

Inheritance tax thresholds

There is currently only one threshold and that is £325,000, which is called the nil rate band. So, any estates valued below this threshold limit are levied at nil tax. Any estates above the threshold must pay IHT on the sum over and above £325,000 at 40%. Let’s give you an example:

If your estate is worth £600,000, your IHT is calculated as follows:

£600,000 – £325,000 = £275,000
£275,000 x 40% = £110,000 IHT

So, based on this calculation, the estate’s beneficiaries will receive £325,000 + £165,000 which equals £490,000; this is the remainder following payment of IHT.

However, there are several situations where the threshold is different.

Married and civil partnerships – if you are married or in a civil partnership and leave your entire estate to your spouse or partner, should you die first, there is no tax to pay and in most cases, the nil rate band threshold won’t have been affected either. This means that the living spouse will be able to add the unused balance of their deceased spouse’s/partner’s threshold to their own, essentially doubling their threshold. But if your spouse/partner leaves a part of their estate to other beneficiaries, or made a lifetime gift seven years prior to their death, if the estate is of high enough value there will be IHT to pay and some of the nil rate band threshold may be taken.
Leaving a property – if you are married or in a civil partnership and leave the family home to your living spouse or a direct descendent, i.e. a child or grandchild only, in its entirety, under current rules there is a further £175,000 tax free allowance but only if the value of the property is under £1 million. Anything above this value and the allowance drops significantly. Again, any unused tax allowance balance can be added to the living spouse’s allowances on their death.

Spouses/civil partners and IHT

In most cases, you are able to leave your estate, i.e. your assets, property and any other possessions, to your spouse/partner tax free. In addition, the surviving spouse or partner is able to add any unused tax free allowance to their own tax allowances. So, in reality, you could leave your spouse/partner as much as £650,000, or £1 million if it includes a property, without them having to pay any IHT.

However, if the deceased spouse/partner used most or all of their tax free allowance by leaving a proportion of their estate to a direct descendent, the above does not apply. Also, if the spouse/partner died before 21 March 1972, the double allowance rule does not apply either.

Tax free gifts and trusts

When making gifts to spouses/partners or to charities, there is the potential they are exempt from tax but it does depend on when the gift was made. If it was given at least seven years prior to death to an individual – that means it was not gifted to a business or a trust – there will be no tax to pay on the gift. However, if the person dies before the seven years, there will be a tax levy to pay. How much tax is paid depends on when the person dies during that seven year period. For example, if the person dies within 5 years, only those five years apportioned to the gift are tax free; the remainder of the gift is included in the deceased’s estate. This is known as IHT taper relief on potentially exempt transfers (PETs).

The total amount a living person is allowed to gift a spouse/partner, another individual or a charity or a political party in any one tax year is £3,000, which is known as an annual exemption. This can be carried forward for one year only; i.e. if you didn’t make any gifts in one tax year, you can add the annual exemption allowance from that year to the next year, making a total annual exemption in the second year of £6,000, or £12,000 if making gifts as a couple.

You can also gift tax free to your children, up to the age of 18, for their training or education. In addition, parents are allowed to gift their children £5,000 tax free for their wedding and any gifts for the maintenance of relatives that are infirm or old is also tax free. Any gifts below £250 are also tax free.

It is also possible to put assets into a trust that is left to a beneficiary after your death. Whilst the trust doesn’t exempt the estate from paying IHT, it can go some way to reducing the amount of IHT paid. The reason is that assets held in a trust are managed by appointed trustees on behalf of the beneficiaries – it is worth noting here that the trust legally owns the assets and not the trustees or the person who set up the trust. If you live beyond seven years from the date the trust was established, those assets are not included in the estate upon death and may be tax free. Instead, a 20% IHT tax levy is imposed when you set up the trust and every ten years, the assets are revalued and 6% IHT is paid at the time, minus the nil rate band threshold of £325,000.

Ultimately, before you consider any of the above, you must always get professional advice and it is recommended to use a solicitor or probate firm to help you.

At Probates Online, we are able to offer a professional probate service online, including making gifts and establishing trusts on your behalf.. If you are looking for advice on inheritance tax, gifts or trusts, or need to apply for Grant of Probate, Letters of Administration or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

Inheritance Tax Relief by Leaving a Gift to Charity

Inheritance Tax Relief

As people in the UK are being encouraged to get their will drawn up and their estate planning in order, there are several ways to reduce the amount of inheritance tax payable on a deceased person’s estate. One of these is the inheritance tax relief received by leaving a gift to charity.

As the value of property increases so does the value of people’s estates, pushing them above the £325,000 inheritance tax threshold. Indeed, the OBR, Office for Budget Responsibility, are suggesting that by 2026 there could be as many as 50,000 estates falling victim to inheritance tax. But by leaving a gift to charity in your will, your beneficiaries could receive inheritance tax relief.

What is inheritance tax relief?

First, let’s start with explaining inheritance tax. It is the amount of tax your beneficiaries will pay on your estate upon your death. Currently, the inheritance tax rate is 40% and the threshold is £325,000. So, if your estate is valued at £600,000 and you deduct the threshold amount of £325,000, your beneficiaries who have inherited your estate will pay 40% tax on the remainder – £275,000 – to HMRC. If the estate is valued at less than £325,000, there is no inheritance tax payable.

However, there are some tax allowances that can reduce the amount of inheritance tax paid by your estate beneficiaries. One of these allowances is if a percentage or the entire estate is ‘gifted’ to a charity, or the estate is left to a living spouse or civil partner. Inheritance tax relief also applies to gifts that have been made to a beneficiary seven years prior to the death of the testator.

Why leave a gift to charity?

Many people have favourite charities which they have supported in their lifetime, and they often choose to further support the charity upon their death by leaving a gift to them in their will. As well as the charity benefiting from the gift, it can also benefit the deceased’s family by reducing the amount of inheritance tax (IHT) payable.

When gifts are left to qualifying charities – a charity that is established for a charitable purpose and satisfies jurisdiction, registration and management conditions – the level of IHT applied to the deceased’s estate above the threshold drops to 36%, as long as a minimum of 10% of the net estate’s value (the baseline amount) is gifted.

So, taking our example above, if the deceased gifts £50,000 to charity, which is above the 10% baseline amount, and the cost of funeral expenses and paying any debts are deducted, i.e. £20,000, the amount of IHT payable is £275,000 – £70,000 = £215,000 x 36% = £77,400.

So, the total amount payable to HMRC is £77,400, leaving £137,600 to the deceased’s beneficiaries as their inheritance.

What to consider when leaving a gift to charity in your will?

If you are thinking about leaving a donation to a charity in your will, here are some points to consider:

Cash or asset – leaving a gift to charity doesn’t have to be cash; you can also leave an asset, such as property, jewellery, antiques or even artwork. It is then up to the charity what they do with that asset. In addition, you can also leave what is known as a reversionary gift; this is a gift, like a physical asset, that is initially left to the deceased’s specified beneficiary, usually a spouse, and upon their death it passes to the charity.
Ensure it is a qualifying charity – not every charity can claim to be a qualifying charity so make sure the charity you choose is registered with the Charity Commission in England and Wales. Scotland and Northern Ireland have their own charity register where you can check to see if the charity you’ve chosen is registered. If your charity is not registered but adheres to the Charities Act definition of a charity, your estate and beneficiaries will still benefit from inheritance tax relief.
Add any instructions – when making a gift to charity, you may want the funds you give, or the asset, to be used in a specific way, such as aiding research. In this situation, you can add any instructions to your gift in your will but make sure you discuss with the charity of your choice first, to ensure it is feasible for the charity to honour your wishes.
The gift value may change – if you are gifting a lump sum to a charity or a percentage of your estate, be aware that this may change and the charity may receive less than you intended. By index-linking the gift, you can protect your charitable gift from increases in inflation which would impact a lump sum. However, if gifting a percentage of your estate and the value of your estate decreases in size, you may wish to adjust the percentage of the gift in your will.
Residual gifts – similar to the above, if you leave the residual amount of your estate, i.e. what’s left after expenses, debts and any other legacies have been deducted, you may find that the charity receives a greater proportion of your estate because their gift is tax-free, whilst another beneficiary will have tax deducted from their share.
Double-check the charity’s details – when drawing up your will in advance of your death and making a gift to a charity, always keep up to date with the charity’s details, such as any name changes to the charity, or a different address or the charity closes. Therefore, add the charity’s registration number (if there is one) and if not, update your will accordingly.
The cause of a dispute – always be upfront with your family and other beneficiaries about your charitable gift in your will. In accordance with the Inheritance Act (Provision for Family and Dependants) 1975, beneficiaries have the right to dispute a charitable gift. So to avoid any disputes after your death, make your intentions clear and reassure family and beneficiaries they will be provided for in the future.

At Probates Online, we are able to offer a professional probate service online that is efficient and affordable. If you are an Executor of a will and need to apply for Grant of Probate, Letters of Administration or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

What Are the Risks When You Set Up Lasting Power of Attorney?

Lasting Power of Attorney

Should you have a long-term debilitating illness or be suffering from a loss of mental capacity, it is reassuring to know that someone you trust is managing not only financial matters, but is also able to make decisions regarding your ongoing health, welfare and care.

To make this possible, before (and if) you get to this stage in your life you will need to draw up a Lasting Power of Attorney (LPA). By appointing someone, known as the ‘attorney’, to look after you and make decisions on your behalf when you are not capable of doing so yourself can bring great peace of mind. However, there can be risks associated with a Lasting Power of Attorney.

What is a Lasting Power of Attorney (LPA)?

An LPA is a legally-binding document that allows an appointed, or ‘chosen’, person, called an attorney, to handle your financial, health, well-being and care matters should you be in a position where you are unable to make decisions for yourself.

There is a difference between a Power of Attorney (POA) and an LPA – a POA is only designed for an attorney to handle your financial and property affairs. An LPA is designed for an attorney to manage your financial, property, health, welfare and care matters.

Whilst you can draw up your own LPA using a DIY option, it is better to have a POA or LPA drawn by a legal professional who is experienced in this matter to ensure that nothing has been left out, that it is correct and that it will be registered with the Office of the Public Guardian (OPG) in England and Wales via a form. There are different rules for drawing up an LPA in Northern Ireland and Scotland. This means that should the POA or LPA become active, there is no possibility of it being rejected by another party, such as banks, doctors or utility providers.

Choosing the right person to act as attorney is crucial to an effective, properly managed LPA; they must be over 18 years of age and someone that you trust to look after your affairs. They don’t necessarily need to be a member of your family, they can be a close personal friend and sometimes that can be a preferred option to release any emotional pressure a family member may feel. Remember that the person you choose will have access to your bank accounts and all matters relating to you. They will be making decisions and signing off on any financial matters, including selling or buying property, as well as your care and where you will live.

You may decide to choose more than one attorney, each having a different responsibility towards you, such as one to look after property matters, another to make financial decisions and another to manage your care and welfare. Ultimately it is up to you but bear in mind that their individual decisions will have an impact on another attorney’s decision so make sure they all know each other and are happy to collaborate together.

If you do not have an LPA and lose the mental capacity to make decisions yourself, then an application to the Court of Protection must be made and they will make a decision about your financial, property, health and welfare matters, or appoint a deputy to act for you.

Risks associated with an LPA

As with any situation where you are handing over control of your affairs, there is an element of risk involved. Some of these risks are:

● They will have access to your personal, private and confidential information.
● They will be making decisions about your lifestyle, such as where you will live if not in your own home.
● They will make decisions on what treatment you should and should not receive.
● They have access to your personal correspondence and other papers, such as your medical records.
● They will be managing your bank account(s) and other financial matters. However, if it is found by the court that they have acted dishonestly, fraudulently or mis-managed your finances they will have to pay you back.

It is vitally important that you trust the person(s) you appoint as an attorney(s). It may be wise to include an advance decision or statement in your LPA that specifies your wishes/preferences in certain situations. Some questions to consider when choosing your attorney are:

● Do you wish to have another person, i.e. a member of your family, to have a say in what treatment you receive, your future healthcare and personal care. Ultimately the decision is down to your attorney but if you’ve made this wish, they should consult with the other person.
● Will your attorney listen to medical professionals about your treatment/healthcare and always have your best interests at heart?
● Will they be making decisions for you in the short-term or long-term?
● Do you fully trust them to make the right decisions for you as you would have made yourself?

It is worth noting that if you have appointed more than one attorney to look after specific areas of your life, they cannot make a decision on an aspect they have not been appointed for; i.e. if they are looking after your financial and property matters, they cannot make a decision about your healthcare or welfare.

There are some areas where an attorney is not allowed to make a decision on your behalf, such as:

● To go against any decision or preference you’ve made, i.e. refusal of certain treatments, in your advance decision/statement in your LPA.
● To agree to a deprivation of liberty (a situation where your liberty is taken away from you, i.e. you are not free to leave and are placed under constant supervision) to be imposed on you without a court order.
● If you are under a guardianship, they are not allowed to make a decision that conflicts with your guardian’s decision, such as where you live.
● They are not allowed to make decisions that you wouldn’t normally make yourself, such as going against the law.

At Probates Online, we are able to offer a professional online probate service, including drawing up a Lasting Power of Attorney or Power of Attorney, which is efficient and affordable. If you want advice on LPAs and POAs or need to apply for Grant of Probate, Letters of Administration or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

Types of Wills – Which Type of Will Do You Need?

Types of Will

The Covid-19 pandemic has highlighted many aspects of our lives, none more so than the need for making a will. However, the latest research from Canada Life shows that 59% of UK adults have not written a will – that’s 31 million people whose estate could end up in the hands of someone not of their choosing.

But when it comes to writing your will, it can be hard to know which type of will you need as there are four different types of will in the UK – single, joint (mirror), living and trust wills. So let’s take a closer look at the different types of will, what they should include and which one is right for you.

Do I need a will?

First, let’s answer a common question. In a nutshell, yes, you do need a will if you want to decide who gets what from your estate on your death.  But that’s not the only reason; a will can also be used to ensure that should you not be able to take care of yourself and make your own decisions at some point in life, your affairs and wishes are taken care of during your lifetime.

A last will and testament is one of the most important documents in your estate planning and it is up to you who benefits from your estate, and who manages the distribution of your estate when you die.

Types of Will

Different types of will have different purposes; wills are drawn up to not only cover how your assets are distributed upon your death but can also include your funeral plans, the beneficiaries for any special items or sentimental or personal value – such as family heirlooms – and some wills also cater for your healthcare wishes if you are incapacitated and are unable to make your own decisions. Which will is suitable for your needs depends on your circumstances.

  • Single (simple) will – probably the most well-known, common will that is used by an individual that details their wishes upon their death. It can be used by anyone that is single, divorced or in a relationship where their wishes are different to that of their partner/spouse. This type of will is also used by people that have children from a previous relationship and wish to divide their estate between children/spouses from both relationships. However, in these circumstances, you may find that a trust will is more appropriate.
  • Joint (mirror) wills – this type of will is for couples, whether it is your spouse, your civil partner or the person with whom you have a long-term relationship, that have the same wishes upon their death, hence the term ‘mirror’. Whilst two wills are drawn up by your solicitor (or yourself), the wills are almost identical. There are several things to be aware of if you decide to have a joint will:
    • Upon the death of one spouse, the entire deceased’s estate passes to the surviving spouse.
    • Upon the death of the surviving spouse, the estate is distributed in accordance with the joint wishes specified in the will. This could create a problem should the surviving spouse remarry or commit to another long-term relationship as any step-children will be omitted, or there are children from a previous marriage.
    • There has to be an element of trust between spouses/civil partners as there is no guarantee an estate will be passed on to the people you wish.
    • Because the two documents of the will are drawn up at the same time, either party is entitled to change their will at any time and they legally do not have to advise the other party of the change. Therefore, you may find that a trust will is a better option.
  • Trust wills – there are several different types of trust wills, depending on your needs, and they provide greater flexibility over who benefits from your estate, which can be broken down into property and assets. A trust will can also detail how the estate is managed upon your death if the beneficiaries are below a certain age, and your wishes in terms of your healthcare and welfare[1] .
    • Discretionary trust wills – this type of will puts a proportion of, or the entire estate into a trust that is managed by your appointed trustees upon your death. A discretionary trust will name the beneficiaries of the trust, which may be receiving an income from the trust until the beneficiary reaches a certain age or to look after a beneficiary’s health and welfare, such as a child or adult with a disability. The trustees must manage and administer the trust according to your wishes, although they do have some discretion. In addition, it can protect beneficiaries from paying too much tax and from creditors should a beneficiary be in severe debt.
    • Property trust wills – this type of trust will work in a similar way to a discretionary trust will but holds your property (or properties) in a trust from which a beneficiary can receive an income. For example, a surviving spouse would receive an income from the property trust and also be able to continue to live in the property but on their death, the assets pass to other beneficiaries as stated in the trust will.
    • Flexible Life Interest trust will – again, this is similar to the other types of trust will but provides greater flexibility in providing an income from the assets protected in the trust. Therefore, should you have a spouse that needs ongoing care or there are care home fees to pay, the trustees have greater control on how and when the trust funds are released. Whilst these types of trust do protect from Inheritance Tax, both Capital Gains Tax and Income tax will still apply.
  • Living will – lastly is the Living will which is also known as Advance Decisions because this type of will details any care and medical treatment you may require in the future, should you be in a position where you can’t make those decisions for yourself. This can include life-support, being put on a ventilator or CPR as well as treatment for long-term illnesses, such as Parkinson’s or cancer.

All wills must be signed by the testator (the person making the will) in front of at least two witnesses, who will also sign the document as confirmation they have seen the testator signing the will. 

As well as the above types of will, which are the most common, there are also two other types – holographic wills are handwritten wills and oral wills, which are also called ‘nuncupative’ wills.

At Probates Online, we are able to offer a professional probate service online that is efficient and affordable.  If you are an Executor of a will and need to apply for Grant of Probate, Letters of Administration or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

What Is the Process to Obtain Grant of Probate or Letters of Administration?

Process to Obtain Grant of Probate

When someone dies, whether there is a will or not, the executor of the will or a family member will need to apply to the court for Grant of Probate or Letters of Administration. This gives them the authority to handle the deceased’s estate including all the necessary financial and property aspects.

However, sometimes probate must be applied for, in some cases it is not needed and in other circumstances, Letters of Administration will be required instead of probate. So, what is the process to obtain a Grant of Probate or Letters of Administration?

When is probate necessary?

First, let’s just clarify when probate is necessary. The general rule is that if the value of the deceased’s estate is more than £5,000, Grant of Probate is required.

If there is a will, it is the appointed executor’s role to apply for probate but if there is no will or executor, the next of kin or a family member representing the deceased will need to apply for Letters of Administration. This grants them the authority to handle the deceased’s estate and they will be called the administrator.

Other circumstances where Letters of Administration are required are:

● One person has been left the entire estate;
● There are no executors named in the will;
● The named executors are not prepared to accept the role.

Only an executor of the estate can apply for a Grant of Probate. If there is no executor, the next of kin or a close relative must apply for Letters of Administration in order to manage the deceased’s estate.

When is probate not necessary?

Let’s quickly explain when you don’t need to apply for a Grant of Probate. As a rule, if the majority of the deceased’s estate is jointly owned with their living spouse or civil partner, such as joint bank accounts or a mortgage, they may not need to apply for Grant of Probate. Other circumstances when probate is not necessary are:

● The estate is valued at less than £10,000 and there are no shares or land as part of the estate. If the estate is particularly small and there is only a token amount in a bank account, the bank has the discretion as to whether they need Grant of Probate to release the funds.
● If any money, i.e. bank accounts, or property are owned jointly with a living spouse or civil partner.

The process to obtain Grant of Probate or Letters of Administration

Once the death has been registered (which must be within five days), applications for Grant of Probate must be submitted to the court within six months. This is not because there is a time limit on applying for probate; it is because there is a time limit on paying HMRC any Inheritance Tax that may be due. In practice, reporting the estate’s value to HMRC and applying for probate is usually done at the same time, as both are needed to finalise the deceased’s estate.

Whether there is a will or not, the process to obtain a Grant of Probate or Letters of Administration is similar. The first step is to itemise the deceased’s estate and calculate its value. This will include any money in their bank or building society accounts, the value of the deceased’s belongings and any property held in the deceased’s name (even if it is in joint names, the value still needs to be ascertained). You will need to consider:

● Bank accounts, pension funds and any other financial assets, such as mortgage on a property, savings and life assurance policies
● Any property, whether in joint names or not, will need to be valued by a local estate agent. It is always worth getting three to four valuations.
● Any outstanding debts, such as utilities, mortgage payments, credit cards, loans or any other monies owed by the deceased
● Any gifts the deceased made that are above the official allowance within the previous seven years (not including Christmas, birthday or anniversary gifts) – they may be subject to Inheritance Tax.

In most cases, you will need a copy of the death certificate and/or will be sent
to the relevant organisations.

Applying for probate can either be done through a solicitor, particularly if a solicitor holds the deceased’s will, a family solicitor, or you can file for probate yourself online. If there is a will, you will need the following to apply for probate:

● An official copy of the death certificate (if applying online, this will be a scanned image);
● The original will;
● The application fee.

One thing to note is that you can only apply for probate online if:

● All the named executors are alive and able to make decisions; and
● The deceased spent most of their life in England and Wales.

The actual process to obtain Grant of Probate or Letters of Administration is:

● Register the death to receive the death certificate
● Advise beneficiaries and notify the companies the deceased dealt with, including banks, insurance companies, mortgage providers and utility providers. Ask them to close the deceased’s account, stop any additional charges and send a final statement.
● Submit Grant of Probate or Letters of Administration forms along with HMRC’s inheritance tax forms. All of these forms can be submitted online but you will need to send some original documents, such as the will and death certificate.
● Pay inheritance tax to HMRC, if applicable. In most cases, surviving spouses/civil partners or family members will need to get a loan to cover this cost until the deceased’s estate has released the assets.
● Pay any outstanding debt, such as utility bills, credit card balances, loans or mortgages. If there aren’t sufficient funds to cover these costs, discuss with the creditor to arrange a repayment agreement.
● If there’s life insurance, now’s the time to claim as this may be enough to cover any outstanding debts and funeral costs
● Allocate the estate’s assets to the beneficiaries according to the deceased’s wishes, if they left any, otherwise equally.

If there is no will, the next of kin or a close relative of the deceased will need to apply for Letters of Administration which you can do yourself via post using the form PA1A, which is a probate application form. This can be downloaded from an online probate service or from a probate registry near you.

At Probates Online, we are able to offer a professional probate service online that is efficient and affordable. If you are an Executor of a will and need to apply for Grant of Probate, Letters of Administration or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

Why Use an Estate Planning Lawyer to Make a Will?

estate-planning-lawyer

Some people don’t need to worry about making a will, such as young adults with no children or assets, just yet; however, a large proportion of people in the UK not only need to make a will but also need to consider estate planning lawyer if they have a number of valuable assets. 

Whether your estate is reasonably straightforward or more complex, such as an extensive property portfolio of assets in foreign countries, using an estate planning lawyer enables you to incorporate several aspects pertaining to your estate under one roof.

What is estate planning?

There are several aspects to estate planning, including making a will, which incorporates every aspect of planning who gets what, where, and when upon your death, as well as who makes decisions on your behalf, if required during your lifetime. Let’s look at the different aspects of estate planning:

  • Making a will – a will is a legal document that lists all your assets and their relative value, states your beneficiaries and what you have decided they will receive upon your death.
  • Powers of Attorney (POA) – a POA gives permission to a person of your choice to make certain decisions on your behalf should you be in the position of losing your mental capacity to make the decisions yourself or will be out of the country for a long period of time, or you are seriously ill for any reason. However, there are three forms of POA:
  • A continuing power of attorney gives permission regarding your property assets and financial matters.
  • A welfare power of attorney is only used when you do not have the mental capacity to make decisions on your medical care or about the treatment you receive, and even about where you live.
  • A combined power of attorney brings together the above two POAs so the person of your choice can make decisions about your financial matters as well as about welfare and health.
  • Planning business succession – if you run a business, an estate planning lawyer will help you plan the running of the business when you want to retire or upon your death, including:
    • Who takes over the business’s operations?
    • Where do the business’s profits go, i.e. equally to beneficiaries or reinvested back into the business?
    • Does your death impact a partnership agreement?
    • If you’ve appointed an executor, are they experienced in selling a business?
  • Trusts – a trust is a method to manage your finances and assets for your beneficiaries, and they can help reduce the impact of inheritance tax and capital gains tax.

What’s included in your will?

There are four forms of wills – simple, joint, living, and testamentary trust – which one you choose largely depends on your circumstances and your estate. Whilst there are also handwritten wills and oral wills, known as ‘nuncupative’ wills, let’s look at the four main types.

  • Simple will – the most common, a simple will is the choice of many people. It details your assets, who will receive them, names guardians for your children under the age of sixteen. A simple will often forms the basis of other wills.
  • Joint will – also known as mirror wills, they are signed by more than one person but culminate in separate wills for each testator. They are usually made by spouses where the executor, beneficiaries and other matters are the same. The drawback of joint wills is that should the surviving spouse’s wishes change, they can’t change the joint will.
  • Living will – this type of will isn’t to do with distributing your estate on your death but is to do with your wishes should you become incapacitated. Similar to POAs, you can specify who will make decisions on your behalf and what your wishes are should something happen to you.
  • Testamentary trust – this type of will puts certain assets into a trust, such as property, for your beneficiaries to benefit at a later date, i.e. minor children. You will need to name the trust’s trustees – the people who will manage the trust – in the testamentary trust will.

Before you carry out any estate planning or make a will, you will need to take an inventory of your assets. An estate planning lawyer will be able to help you with this task and review your assets to work out the most tax-efficient way in which to pass on your assets to your beneficiaries.

Your will needs to include:

  • Physical property, such as buildings and land.
  • Intangible property, such as stocks and shares, bonds, patents and copyrights, intellectual property and businesses owned, or any interest in a business that you have – you will need to specify who will take over your part of the business.
  • Unproductive property of value, such as jewellery, artwork, cars and furniture.
  • Cash, including money in your bank accounts and savings accounts. Don’t forget that your spouse and family will require cash to pay any outstanding debts as well as taxes upon your death.

However, there are some things that shouldn’t be included in your will, such as:

  • Property that is held as a joint tenancy, i.e. a property that is jointly owned with someone else. The reason is that the property will transfer for the other joint owner automatically.
  • Any insurance policies, trusts or other retirement plans that already state a beneficiary. However, it is possible to change your beneficiary, or beneficiaries, on any of these, as well as pensions and life assurance policies.
  • Any stocks, shares or bonds that are already set up to transfer to someone else upon your death.
  • Digital assets are also not included in wills, at the moment, so cryptocurrencies may be a difficult asset to place in a will. However, an estate planning lawyer will be able to advise you accordingly.

The more concise and accurate your estate planning and will be, the smoother the transition for your family and beneficiaries.

At Probates Online, we offer a professional probate service online that is efficient and affordable. If you are an Executor of a will or close relative of a deceased person, and you need to apply for a Grant of Probate or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

Should I Use a Last Will or a Living Trust to Distribute My Estate?

Estate

Even if you didn’t think a will was important in the past, the last 18 months of Covid-19 will undoubtedly have changed your mind! But the other topic that’s being discussed at length is trusts. Both are legal documents that detail how you want your assets to be distributed but there is a fundamental difference between a trust and a will.

Whilst estate planning via a will is vitally important, a trust could be just as beneficial, if not more so; or, indeed, combining the two may be the ultimate solution. So, to help you decide whether you need a will, a trust or both, let’s clarify what a will is, what a trust is, and how they may be beneficial for you.

What is a last will?

A last will details your wishes and who benefits from assets and/or property, i.e. your estate, after you die. In the majority of cases, you will appoint an executor, or executors, in your will and it is their job to manage your estate upon your death, including selling any property, paying outstanding bills, as well as dealing with HMRC to pay any inheritance tax due. One thing to point out; before you assign an executor(s) to your will, make sure you have asked that person, or persons, if they are happy to take on the role as it is demanding and involves a lot of paperwork!

You are only allowed to include any assets or property that you own, i.e. they are in your name only. So, if the property you live in is jointly owned with your spouse or partner, it will automatically revert to them upon your death.

What is a living trust?

A living trust is a form of will in which your beneficiaries will benefit from your property and/or assets but while you are still alive. You appoint trustees to oversee the management of the trust and hold legal title to the assets defined in the trust upon your death. There are a number of reasons why you may choose a trust over a will, including:

● You’d like your beneficiaries to benefit from your assets while you are alive, i.e. paying school fees
● You want to protect your property and/or assets from paying less, or no, inheritance tax
● Your beneficiary is not able to fully benefit from your assets as they are incapacitated.

Differences between a last will and a living trust

The main difference between a last will and a trust is that a will only comes into force when you die, whilst a trust can start to benefit your chosen beneficiaries while you are still alive.

The main benefits of a will over a trust is that you can name guardians for any minor children, appoint an executor to handle your estate upon your death to relieve the burden from your loved ones, and detail your final wishes.

Just because there is a last will doesn’t mean the executors of your will don’t have to apply for probate. If your estate is valued at more than £5,000 in total, they must apply for probate. If there are very few or no assets in your estate and its value is less than the £5,000 benchmark, probate is not always necessary.

With a living trust, you maintain control over the trust and how it is managed until your death, at which point the appointed trustees take over and administer the trust according to your wishes. For example, if a beneficiary receives an interest payment from the trust and it is your wish that they don’t have access to the trust in full until they are 21 years of age, but you die before they reach this age, the trustees will continue to ensure the interest payments are made until that person reaches 21 years old.

Assets in a living trust are not part of the probate process and are therefore protected from inheritance tax. In addition, jointly owned assets and property can also be included in a trust, whereas they can’t in a last will.

Whereas a last will ‘leaves’ assets and property to a beneficiary and is therefore subject to probate as well as inheritance tax, assets and property in a living trust are owned by the trust, i.e. they have been transferred to the trust. This means they are not subject to probate as they can’t be ‘passed on’. The grantor is a trustee of their own living trust and manages the assets and property within it until they die, at which point successor (named) trustees take over the role. They will administer the trust and either continue its management for a period of time or distribute its property to your named beneficiaries in the trust documents.

Because of the probate process, your assets and property detailed in a last will are a matter of public record. It is filed at the courthouse and anybody can access the details. However, a trust is a private record that only you, the appointed trustees and the beneficiaries have access. The only time that this would change is if a beneficiary or heir challenges the trust’s validity and files a lawsuit, at which point the trust documents become evidence.

Can I have a last will and a living trust?

Estate planning via a will is just one option of protecting your assets and property upon your death and ensures the people you wish benefit actually do. But combining it with a living trust, particularly if your estate is large and complex, ensures the best financial and legal protection for your estate.

However, to combine the two, it’s better to have a Pour Over Will which is designed to specifically work with a living trust. Essentially, it means that any assets or property you own that isn’t included in your trust will be transferred to your trust upon your death.

If you’re not sure what type of will or trust is right for you, contact us at Probates Online. We offer a professional online probate service that is efficient and affordable. If you are an Executor of a will or a trustee, or a close relative of a deceased person and you need to apply for a Grant of Probate, or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

What to Do When Someone Dies: Do You Need a Probate Solicitor?

probate solicitor

When someone dies, it’s a very stressful, emotional time, especially if they were a close relative or family member. However, there are some procedures that must be done immediately, and some things that are legally required.

A question that always arises is, do I need a solicitor to apply for probate? In some circumstances, it is possible to apply for probate yourself but in other cases, where there’s no will or the deceased’s estate is complex, getting help from a solicitor is the best policy.

Steps to take when someone dies

Whether the deceased died at home, in hospital, in a care home or even abroad, the doctor attending will issue you with a Medical Certificate of Cause of Death. This is possibly one of the most important documents you will need.

● Register the death – you will need to register the death within 5 days, or 8 days if in Scotland. The 5-day period includes weekends and bank holidays. You will need to register the death at your local Register Office, if they died at home, or the Register Office local to the hospital/care home. Only a close relative can register the death, but if no relatives are available, it can be done by someone who was present when the person died, someone who lives in the house where the person died or someone who is arranging the funeral (but not the funeral director).


● Arrange the funeral – this can only take place after the death has been registered. It can be arranged by a funeral director on your behalf, or you can organise it yourself. In some cases, the deceased may have made their own funeral arrangements before they died.


● Advise relevant government departments – whether they are receiving benefits, allowances or a state pension, or if they are still working, you will need to notify the relevant government departments. This can be done using the Government’s Tell Us Once online service.


● Bereavement benefits – you may be eligible to receive financial support, such as the Bereavement Support payment or Guardian’s Allowance.


● Benefits, pensions and taxes – if your spouse/civil partner has died, you will need to manage theirs and your own benefits, pensions and taxes.

● Hear the will (if there is one) and deal with their estate – you may need to apply for grant of probate or letters of administration. If the deceased left a will, it advises who the beneficiaries are and other details. If there is no will, the estate will need to be valued.

Applying for probate

Whilst it isn’t compulsory in England and Wales, many people use a solicitor to apply for probate. There are quite a few legal procedures that need to be adhered to and having a solicitor handle the matter for you can greatly ease the burden, particularly if the deceased was your spouse/civil partner or close relative.

If probate is required and not applied for, the deceased’s estate cannot be accessed nor transferred to their beneficiaries and sits in limbo. Probate grants legal authority to the person that applies for it to deal with the deceased’s estate. It’s not wise to assume that assets are in joint names; it is better to check all the relevant details.

DIY probate

If you are named an executor in their will, or if there is no will but you are their next of kin, you will be responsible for completing probate for their estate. The probate process can be a lengthy process, time-consuming and if the deceased’s estate is large and/or complex, there is the potential to make mistakes, which will cause further delays and you could be held legally or financially responsible.

In some cases, using a solicitor to apply for probate may not be necessary. For example, if there is no property, land, shares or investments as part of the estate and is worth less than £5,000, and whether the deceased owned the estate outright or in joint names. But in most situations, the deceased’s bank, building society or any other financial firm may insist on probate to close their accounts and release any funds. If you choose to apply for grant of probate yourself, complete the necessary forms, including the value of the estate, working out how much inheritance tax (IHT) is due and making the payment to HMRC, liquidate (sell) any assets and distribute the estate to beneficiaries. You can opt for a DIY Probate Pack, which can be bought online, and includes all the relevant documents to be completed and provide informative guidelines on how to apply for probate. However, be aware that there is no legal support network to offer advice should an issue arise during estate administration.

Probate through a solicitor

If the deceased’s estate’s value is in excess of £5,000, including property, land, investments or shares, or a business that needs to be liquidated, or if there is no will, using a solicitor to apply for probate is the best option. Even if you are a named executor, working with a probate will take much of the burden off your shoulders and ensure you have the right legal advice on tap if you need it.

A probate solicitor will handle applying for grant of probate, or letters of administration if there is no will, as well as deal with all the legal, tax and estate administration processes. If the deceased’s estate is large or complex, i.e. involves multiple properties, extensive investments and trusts, the deceased may well have put the estate administration process into the hands of a solicitor as part of his wishes in their will.

One word of warning; some banks and solicitors have been known to charge relatives around 6% of the total value of the estate. Legally, this is not part of the probate or estate administration procedure. If you are choosing to use a solicitor to help you with the probate process, select one that offers a fixed probate fee upfront.

At Probates Online, we offer a professional probate service online that is efficient and affordable. If you are an Executor of a will or close relative of a deceased person, and you need to apply for a Grant of Probate or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

Wills, Probate and Estate Management in a Covid-19 World

Wills Probate and Estate Management

The past 18 months have not been easy on many families due to the number of deaths caused by the coronavirus pandemic. In turn, the impact of Covid-19 on probate, as well as the management of wills and estates for individuals and families, has been significant.

When there are as many as 59% of the UK population without a will, the level of people dying ‘intestate’ – without a will – has been extremely high. As of April 2021, the Ministry of Justice (MoJ) reported that the average wait for Grant of Probate was now 35 working days; in the last quarter of 2020, it stood at around seven weeks (40 days). However, in reality, these figures don’t reflect the real situation.

Evidence suggests that only if a Grant of Probate application wasn’t ‘stopped’ did it stand a chance of being approved within the seven-week time frame. Reasons for it being stopped, could for example, include: an error on the application, more information being required or a dispute over who is applying for Grant of Probate. In reality, applications that were ‘stopped’, which happened far more than expected, were at around 12 weeks. Ironically, applications for Letters of Administration for estates without a will took less time (around nine weeks) than those for estates with a will (around 14 weeks). One would think that having a will would ensure the application was dealt with in a timely manner.

Initially, following the first lockdown, there were fewer Grant of Probate applications. This was put down to the fact that executors were often unable to get the documents they needed, such as the will, to go with an application. Once measures had been put in place to allow access, there was a sharp increase which was felt by The Probate Registry. To reduce the time it took to register a person’s death, they started to accept electronic signatures and encouraged legal professionals (as well as executors and families) to use their digital service. That said, certain documents still needed to be sent via the post, such as the original will.

How long does probate take?

Before the pandemic, the time to complete the probate process took seven to 12 months, but that was only if the estate was simple and there was a will. If there was no will or disputes, it could take longer. Sadly, the impact of Covid-19 on probate has caused major delays, particularly if the probate process involves the sale of property.

With so many in the property market being affected by the pandemic there is still a significant backlog of probate properties to be sold. Remember, it wasn’t really until the second lockdown of 2020 when estate agents were allowed to work again in an effort to keep the economy stable. The stamp duty holiday didn’t appear to have impacted this backlog as much as was hoped, and since the SDLT holiday has ended, it did little to help the situation.

The impact of Covid-19 on staffing levels

The fact that so many legal professionals, support staff, staff in courts, the Probate Registry and HMRC had to work from home also had a major impact on the probate process and estate administration.

Although many offices are now being staffed, the impact of Covid-19 on probate is still being felt because of the backlog experienced among surveyors, probate services, conveyancing professionals and estate agents.

There is added pressure for many estate administrators from HMRC. Inheritance Tax (IHT) on an estate must be paid within six months from the date of death and prior to Grant of Probate being issued. But, if the property is the main asset and it has to be sold before any payment to HMRC can be done, it means that many families have had to find the money to pay HMRC before they see any form of funds back from the estate. Although HMRC may accept instalments while the property is being sold (with the balance being paid once funds are available), there is still only a finite amount of time.

Online probate application

In addition to the lockdowns, solicitors, lawyers and the courts were forced to work from home which resulted in the introduction of the electronic probate forms in May 2020. The Law Society and the HM Courts and Tribunals Service (HMCTS) wanted legal representatives and private individuals to move over to the new online system by 18th May 2020 and submit probate applications via their new virtual paper forms. HMRC also started to send the IHT421 forms directly to the Probate Registry within 15 days of being issued.

However, there were plenty of instances where communication fell by the wayside – the legal professionals weren’t always aware the right forms had been sent to the Probate Registry and they also found HMCTS’s new online system difficult to use unless the deceased’s estate was simple.

Making a will and its execution

This is another area that was severely impacted during the pandemic. As dictated in Section 9 of the Wills Act 1837, for a will to be valid it must:

● Be in writing.
● Be signed by either the person making the will (the testator) or another person in the presence of the testator and at the direction of the testator.

In addition to this, the Act specifies that it must be signed in the presence of two or more witnesses who:

● Are present at the same time when the will is signed and they must see it signed.
● Must each attest and sign the will in the presence of the testator.

Of course, with lockdowns, social distancing and self-isolation over the past 18 months, to satisfy these requirements has become nigh on almost impossible. In Scotland, the rules were changed temporarily whereby a solicitor could act as a witness via video conference, as long as they were not an executor of the estate or any trust associated with it. However, in England and Wales, these measures were not taken, although witnessing through a window was considered acceptable.

Registering a death, applying for Grant of Probate or Letters of Administration, administering an estate, selling property, paying IHT, dealing with banks and sorting other financial assets; all these aspects have an impact on the families left behind. The impact of Covid-19 has only served to heighten the issue and, as we head into another winter and more potential restrictions, tensions are running high.

At Probates Online, we offer a professional probate service online that is efficient and affordable. If you are an executor of a will and need to apply for a Grant of Probate or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.

Reasons for Making a Will and How to Pick the Right Adviser

Reasons to make a will

According to research from Canada Life, 59% of people don’t have a will. That’s potentially 31 million people who may die ‘intestate’, i.e. without a will, and whose assets, financial, property and other, may be inherited by someone not of their choice.

It’s a fair conclusion that most people believe that even if they don’t have a will in place, all their assets and possessions will pass to their spouse or civil partner if they die. Actually, that’s not strictly true. The only time all your assets pass to your spouse/civil partner is if you have no children and there are no other living relatives. In most cases, that isn’t the situation.

Another misconception is that because you’ve been living together for years and are common law partners, the same rules apply as if you were married. Again, that’s not true. In England and Wales, the state or common law partner is not recognised in the legal sense and therefore your partner will not receive any of your estate if you die without a will. These are just two reasons to make a will. So, why should you make a will?

What is a will?

First, let’s just clarify; a will is a legally binding document that sets out how you want your estate distributed upon your death. Also known as a last will and testament, it will include your beneficiaries and the possessions/assets you bequeath to them, who will bring up your children and who will look after your pets, if applicable, the details of any trusts and can also include your funeral arrangements. If you have an uncomplicated estate, you can write your own will, although that is not recommended, but if you have a complex estate, always seek the help of a qualified solicitor or professional will-writer.

Reasons to make a will

● Decide who looks after your children – if you are a single parent and were to die before your children had reached the age of 18, who would look after your children if you died? Instead of the court choosing who has the role, you can specify in your will who is going to be their guardian (do ask them before you add this clause to your will and make sure they are happy to take on the role). This not only ensures who you want to raise your children, it also stops someone you don’t approve of taking control.


● Sets out who benefits from your estate – as your will is a legally-binding document, how you decide who benefits from your estate is down to you. Whether your estate is minimal, i.e. doesn’t include any property, there will still be family heirlooms you wish certain people to have when you die. Of course, if your estate is large and complex, it becomes an even more important reason to make a will. Your will also makes sure that should you and your partner not be married, you are able to protect them and the family home by leaving them a share of the property or set out a right to reside in the property for them.


● The option to disinherit – your will defines who gets what and allows you to leave someone out of your will, if that’s your wish. Without a will, someone may inherit part of your estate which may be against your wishes. For example, if you have remarried, you may not wish your ex-spouse/civil partner to inherit any of your estate.


● Make a gift or a donation to a charity – you may decide that you wish to make a gift/donation to your favourite charity upon your death. Not only does this benefit the charity, there is the potential that your family will pay less inheritance tax, particularly if the donation is over 10% of the value of your estate.


● Ensure your family/children are provided for in the future – as well as making sure the right person raises your children (if applicable), you may also want to ensure their financial security, such as paying school fees, setting up a trust from which they receive a regular income or a deposit on their first home. A trust is a beneficial way of providing for your children once you’ve gone. You can either set it up before your death or leave instructions for a trust to be established after you die. Either way, a will makes sure your wishes are honoured. One essential point to note here is that if you do not have a will, only blood relatives will automatically inherit from your estate. If you have remarried and have stepchildren, foster children or adopted children, or any other dependents, there is every likelihood they will not benefit from your estate should you die unless you have a will in place.


● Avoids paying too much inheritance tax – whatever you do, your family will have to pay inheritance tax on your passing. However, you can reduce the tax burden by making a will. What you leave to your spouse/civil partner is automatically exempt and any property you leave your children/grandchildren may well be subject to less tax. Trusts are another area where less tax may have to be paid.


● Avoids disputes – without a will, deciding who gets what from your estate could get messy. Avoiding any family disputes, arguments or disagreements is a good reason to make a will. You can make your wishes clear and smooth the probate process, too.

Finding the right adviser

Whilst there are facilities available for writing your own will, you run the risk that its validity could be challenged. You may also miss out on certain aspects of your estate, which could cause probate problems. Therefore, it is always recommended you get professional advice from a solicitor or will-writer to help you write your will and ensure it is legal.

You may choose a solicitor who specialises in writing wills and probate; whilst this may be the more expensive option, they are highly experienced and will be able to make sure you have included every aspect of your estate, even things that you hadn’t thought of, such as any cash you may have in the bank.

There are also professional will writers but not all are legally qualified solicitors, lawyers or chartered legal executives, and therefore not necessarily regulated. Always check their credentials and qualifications carefully and make sure they are a member of the Institute of Professional Willwriters (IPW) which is the professional body that regulates the will writing profession.

Banks and charities also offer will writing services, which often come under the title of estate planning but as with professional will writers, do your due diligence. Recently, there has been a rise in online will writers, driven predominantly by the coronavirus pandemic. Their fees are likely to be lower than solicitors or even professional will writers and they are not allowed to be executors of your will.

At Probates Online, we are able to offer a professional probate service online that is efficient and affordable. If you are an Executor of a will and need to apply for a Grant of Probate or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.