It will not be long before cohabiting couples become the most common type of family in the UK.
Following a recent Court of Appeal decision, when cohabiting partners or non-married or civil partnerships joint owners buy a property together they must contemplate and address the unthinkable: that their relationship might break down. Unless they determine at the time of purchase how they are to hold the property and what should happen in the event that they separate, they could potentially be facing a lengthy and expensive dispute.
If one party is contributing more of the initial purchase price or will pay a larger proportion of the mortgage, the parties should consider a declaration of trust setting out the proportions in which they hold the property and how the net proceeds are to be divided upon the sale of the property.
Many first-time buyers now receive help from their parents towards the deposit. If this deposit is not protected by a declaration of trust then in the event of a dispute between the owners the amount could be split equally between them. If you are a parent gifting your child a deposit towards their house purchase, would you wish this to be split equally between them and their partner in the event of a relationship breakdown? Cunningtons LLP can assist by preparing a declaration of trust setting out the proportions in which the parties own the property and registering this information with the Land Registry so that it is evident in the event of a dispute where the net proceeds of sale are to go.
Unmarried cohabiting partners should also consider what they would like to happen upon death.
Whilst we would recommend that everyone has a valid Will to ensure their estate passes in accordance with their wishes, this is particularly crucial for unmarried couples who wish to provide for each other and/or their partner’s children in the event of their death.
Under intestacy rules, the surviving unmarried partner does not benefit from the estate of the deceased. This can cause serious financial problems as well as significant emotional distress. The statutory rules of intestacy do not allow anyone other than your natural children to inherit upon your death, therefore stepchildren or your partner's children will not inherit if you have not made a Will providing for them.
Without a Will, the surviving partner will not be able to deal with matters following the death of their partner. For example they will have no right to arrange the funeral or have any input into the funeral arrangements.
A Will is vital to ensure your estate passes to those that you wish it to and to ensure that your loved ones are provided for in the event of your death.
By writing a Will, you can appoint executors who will have the responsibility for administering your estate in the event of your death and arranging your funeral.
A Will is also extremely important if you have children as this allows you to appoint legal guardians to look after your children in the event of your death.
Cunningtons can assist you by providing you with advice tailored to suit your needs.
When you make your Will, you designate an Executor to ensure that your wishes are dealt with according to your wishes. The role of a Personal Representative (an Executor if appointed by a Will or Administrator if not) can be onerous and the responsibilities attached numerous.
The case of Harris v HMRC recently proved to be a startling reminder of the importance of the role, and that what might appear to be fair or just to the lay Personal Representative does not necessarily mean anything at all when it comes to fully discharging their duties in this role. Mr Harris was the Executor of an estate which he distributed to the beneficiary (the sole recipient named in the Will) before settling the inheritance tax due in relation to it.
Mr Harris was well aware of the tax due (some £340,000.00!), yet transferred the estate’s assets to the beneficiary before the tax had been paid. Mr Harris made the payment in good faith; the beneficiary was also well aware of the tax owing and so to his mind, surely there was no question of the beneficiary simply paying it thereafter out of the assets he had received? Even if not, surely it would be the beneficiary who would ultimately responsible to the revenue for payment?
Unfortunately for Mr Harris, neither were so, and so followed lengthy and ultimately unsuccessful litigation when the beneficiary failed to pay.
The fact that Mr Harris did not have the personal funds to pay the tax, nor the fact that this was an entirely genuine mistake on his part were deemed irrelevant by the Court. Legally speaking, Mr Harris was the Personal Representative of the Estate and therefore personally liable for the debts of the same when matters went wrong.
It is not simply a case of the Personal Representative ascertaining any tax due (or indeed any other debts connected to an estate such as mortgages and credit cards etc.); they are taking on a potential personal debt - meaning that if the estate is not dealt with by them in the correct manner thereafter, it could very well be payable by them rather than via the estate’s assets. As in the particularly extreme example above, such debts could have the effect of diminishing the Personal Representatives own estate - perhaps entirely.
It is important to remember that any debt owed by the deceased could become those of their Personal Representative. It is extremely important in the first instance therefore for the Personal Representative not just to establish the exact extent of the estates assets and debts (and whether there is any inheritance tax due), but also to deal with them in the correct manner. Taking professional advice can help ensure that all of this is undertaken effectively, and ultimately that the Personal Representative is not exposed to financially crippling personal liabilities.
Our Wills and Probate Department specialises in probate matters, meaning that they are able to advise Personal Representatives in such a way as to avoid results like those seen in Harris v HMRC. Our team can assist right from the early stages in determining the nature and extent of the estate’s assets and liabilities, as well as whether any inheritance tax is due, right through to payment of the same and distribution of the remainder to the beneficiaries.
Ways you can assist elderly friends or relatives:
Typically, as solicitors, we see a surge of new enquiries during the winter months in respect of our elderly client services. Unfortunately many of these enquiries are made by family members seeking advice because a family member is suffering from a form of illness or mental capacity which quite often means it is too late for us to be able to assist without making an application to the Court.
To make matters easier for family members and for the elderly person themselves we would suggest that their Wills are regularly reviewed to ensure they are up-to-date and accord with the wishes of the person making the Will.
Without a lasting power of attorney in place, no one - except a spouse - is authorised to make decisions on behalf of someone who had lost mental capacity, whether it happened through trauma of the brain or a disease such as Dementia or Alzheimer’s;
This means that family members cannot make decisions about medication, care, life-sustaining treatment or any health and welfare matters. It also means no one (including spouses) can make decisions on financial matters such as paying bills/care home fees or selling property to pay for care; in this case an application would need to be made to the Court of Protection this process can be very lengthy and costly causing a lot of distress to the family in what will already be difficult circumstances.
Cunningtons can assist offering a free review of Wills to ensure they are up-to-date and discuss the importance of having a Lasting Power of Attorney with your family members.
The Free Will Service helps people aged over 55 to write or update their will free of charge. It also gives guidance for people considering leaving a legacy gift to Cancer Research UK. The service is now being provided at Cunningtons Solicitors LLP where trained solicitors will be able to offer support to people living in Braintree and assist with drafting a will.
Cancer Research UK receives no government funding for its research and relies heavily on the generosity of people leaving gifts in their wills. Over a third of its research into the prevention, diagnosis and treatment of cancer is funded through supporters leaving a legacy to the charity.
A legacy gift can be anything someone wishes to leave in their will. Traditionally this is money but it could be anything that has a monetary value like an estate or specific item. Anything that is left to Cancer Research UK can be marked to be ring-fenced for research into a specific cancer type or research within a local area.
Clare Moore, Director of Legacies at Cancer Research UK, explained:
“We all reach a stage at some point in our lives where we start to look ahead and consider what will happen to our financial affairs in the future, when we may no longer be around.
“At Cancer Research UK, we work with a number of local solicitors, including Cunningtons Solicitors LLP, to offer the Free Will Service to anyone aged 55 or over, helping individuals to make an all-important first will or update an existing one.
“One in two people in the UK will be diagnosed with cancer at some point in their lives. The generous gifts left by people in their wills are so important as they help us continue the work that we do to beat cancer sooner. Without the money we receive from gifts, the progress we make through research would be a far slower.
“We are always so grateful to anyone who leaves a gift in their will to Cancer Research UK – legacy gifts help us find new ways to prevent, diagnose and treat cancer.”
Cancer survival in the UK has doubled since the early 1970s and Cancer Research UK’s work has been at the heart of that progress. Every step taken by its doctors, nurses and scientists relies on donations from the public and the kindness of supporters who choose to leave a gift in their will.
The Free Will Service has been running successfully for over 20 years across a network of solicitors in the UK. Anyone who wishes to use the service is asked to consider leaving a legacy gift to Cancer Research UK but under no obligation to do so.
Cunningtons Solicitors LLP looks forward to offering the Free Will Service to help the people in Braintree and working with Cancer Research UK to help beat cancer sooner.
For more information about leaving a legacy gift and Cancer Research UK’s free will service, visit www.cruk.org/freewillservice or call Cunningtons LLP on 01376 567280.
About Cancer Research UK
New legislation raised the estate values threshold from £5,000 to £50,000 which will exclude around 25,000 estates from probate fees altogether. However, the remaining estates will have increased fees with a revised structure ensuring the value of the fees will be more 0.5% of the estate value. Currently a flat fee of £155.00 (if the executor instructs a solicitor, higher if not) is made on all estates over £5,000. From April 2019 it is proposed that estates valued between £50,000 and £300,000 will pay a fee of £250. For estates valued between £301,000 and £500,000 the fee will be £750 and estates between £501,000 and £1,000,000 will pay £2,500 in fees. Estates worth in excess of £2,000,000 will pay £6,000 for exactly the same process.
Lakshmi Turner, Chief Executive of Solicitors for the Elderly (SFE), said:
“This stealth tax, although much lower than before, is still unjustifiable as the probate process will not require additional work or resources.
“It’s extremely unclear how the executors will pay the probate fees and there remains a lot of unanswered questions around how the money will be recovered from the estate, as assets are frozen until the executors receive the grant of probate.
“There will be older and vulnerable people with estates or properties that have grown in value over their lifetime, so it seems an unfair system. Some may also have little money in the bank, which could lead to complexities when using a property to cover the fees.
“Whilst it’s good to see that SFE’s campaign against the 2017 probate hike has resulted in a 75% fee drop, not every probate application is simple, so we would highly recommend that people seek specialist legal help at this distressing time.
“We would like to see how the additional funds accrued from the higher fees will be directly supporting people who cannot access the legal services they need.”
Although the Government will argue that this system will help those with less to access the courts and save vital money they do not have, those with an estate valued over £50,000, which is not a high value in the current market, may also be left reeling and struggling to find this additional money under the new legislation.
Bryony Wilmshurst, Partner and Head of the Private Client department at Cunningtons said
“The proposed increase in fees is of grave concern and it is hard not to see this as a stealth tax on estates who may have already paid inheritance tax. The procedure for issuing a grant of probate is exactly the same for the probate registry irrespective of the value of the estate as there is no additional work in a higher value estate. It appears that the hike in probate fees is to be used to help support the Courts and Tribunal Service rather than being proportional to the amount of work involved issuing the Grant.
"The new proposal is likely to cause bereaving families a great deal of difficulty.
"A great concern is the potential of vulnerable people being encouraged to pass their assets to their proposed beneficiaries during their lifetime in an attempt to void/mitigate such fees and leaving themselves without adequate provision for themselves in their later years.”
Contact Cunningtons LLP Wills & Probate department for advice on this or any other aspect of Wills or probate.