New Intestacy Rules – What do they mean?

1st Oct 2014
Today new rules come into force for the laws covering people who die without a will. ...
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New Intestacy Rules – What do they mean?

1st Oct 2014

What are the new Intestacy Rules and who do they affect?

Today, sees new rules come into force for the laws governing what happens to someone’s assets when they die without a Will (intestacy law) and who can make a claim against an estate.

One of the controversial parts of the new rules is around the modern family i.e. who receives what if you were co-habiting. Many professionals were pressing for those in unmarried relationships to receive a portion of their partner’s estate if they die without a Will.

At present, unmarried partners are legally entitled to nothing even if they share children or have cohabited for many years. The new laws do not change this. Die without a Will and your partner receives nothing. Their only recourse is to make a claim against your estate.

Having covered what is not changing, what actually does change?

One of the biggest changes is for married couples and civil partners without children. Under the old rules the survivor received the first £450,000 plus half the rest. The other half was split between blood relatives according to strict rules. Under the new rules the survivor receives everything.

For married couples and civil partners with children the theory of “life interest” is now eradicated. The new rules are significantly simpler, with the survivor entitled to the first £250,000 plus half the remainder. The children share the rest. Previously the spouse only got a life interest in half the remainder i.e. they received the income from their half but the capital was protected for the children.

Finally, one of the other significant changes is to the scope of people who are entitled to claim against your estate. As well as redefining who is classified as a dependant the new rules now recognise the ‘blended family’. For example, your partner’s child can now claim against your estate as if they were your child. Even if your partner died before you! Although, it’s worth mentioning that, this doesn’t automatically mean they will be successful if a claim is made.

The changes to the intestacy laws once again highlight the importance of making a Will. If you want to choose who inherits you need to have a Will. Furthermore make sure it’s up to date and relevant.

Above is just an overview of the main changes that will affect decisions when making a Will. There are other technical changes, including certain powers of Trustees, that we have not mentioned.

Please let us know if you or your clients require any further information.

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NEW code of conduct for Will preparation

15th Jun 2014
In response to the UK government’s decision not to regulate Will writing STEP has launched a new Code of conduct for Will Preparation. ...
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NEW code of conduct for Will preparation

15th Jun 2014

In response to the UK government’s decision not to regulate Will writing STEP has launched a new Code of conduct for Will Preparation that all STEP members who prepare Wills MUST adhere too.

Only STEP members can claim to be compliant with the code which sets out standards of transparency and service that a client can expect when using a member. This reassures a client that they are getting the best level of advice and service when doing a Will.

Some areas addressed in the code include;

  • Pressure to appoint the Will company as executors in the Will
  • Selling of unnecessary complex Wills
  • Misrepresenting the consequences of not making a Will
  • Obtaining advance payment for probate plans
  • Inadequate storage facilities

All Pavilion Row‘s Will advisers and Will drafters are members of STEP and are therefore bound by the new code.

When STEP announced the launch of the Code Geoffrey Shindler OBE TEP, STEP President , commented: “The Code will, I hope, become the hallmark to which all aspire when drafting wills. It is a condition of membership that we all adhere to the code, but it should be seen less as a burden and more as a positive benefit. It will demonstrate to clients, the public, to the government and to regulators that we are of a gold standard when it comes to preparing wills for individual clients.”

Pavilion Row see this as a very positive move forward to improve the quality and level of service within the Will industry. It will, we hope, help to eradicate ‘cowboy Will writer’ behaviours, practised by a very small minority, that are currently tarnishing the industry.”

Since the launch of the STEP Code the SRA have launched new non-mandatory guidelines for solicitors who prepare Wills.

The guidance has a focus on professional ethics and behaviour and includes;

  • NOT misleading a client to believe they have to retain a solicitor to write their will, or that it is the norm.
  • NOT as a default position appointing themselves as professional executors
  • The solicitor not encouraging the client to appoint them as executors unless there is a clear reason to do so e.g. it is likely to be contentious or complex

Whilst only STEP can guarantee a true level of qualification in this niche part of law we see that the STEP Code and the SRA guidelines are setting the path to creating a much fairer and transparent service for the clients

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Minimising the Risks of Inheritance Feuds

2nd Apr 2014
It is a simple fact that the number of probate claims continues to rise year on year. There are, in my experience, four major reasons for this. ...
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Minimising the Risks of Inheritance Feuds

2nd Apr 2014

Why do estates become contentious?

Guest Article – Martin Holdsworth, Jones Myers LLP

It is a simple fact that the number of probate claims continues to rise year on year. There are, in my experience four major reasons for this:

  • Too many people die either without a Will or an out of date Will. The Intestacy Rules then rarely allow for the distribution of an estate to provide for a family in the way which the deceased wanted. Without any kind of agreement between ALL the beneficiaries (assuming they are all over 18 years), an application to court is inevitable.
  • Many family units now include step-parents and step-children (the blended family unit). Extra care is needed when advising members of blended families as to the obligations that may exist across the whole family unit and perhaps most importantly how those obligations are met after the first parent’s death.
  • Individuals are now, on average, living longer. Figures from the Office of National Statistics demonstrate that life expectancy over the next 50 years will increase by an incredible 8 years; to 87 for men and 90 for women. With an aging population the incidence of dementia increases and with it allegations of failing capacity and Will challenges.
  • The final significant factor is the reality that, due mainly to house price increases, estates are now worth more than ever before. An inheritance or lack of one can make a huge difference to someone’s financial and emotional wellbeing and it is no surprise, that in a more litigious society, claims are investigated to challenge testamentary provision.

It follows, therefore, that when someone makes a Will, the person they use must give careful consideration to areas where claims are likely.

“With care and knowledge, it is possible to identify and minimise the risk of post-death litigation.” Martin Holdsworth – Jones Myers LLP

The best start point for this is undoubtedly to know your client and understand not just the extent of their personal wealth but also their family dynamics. From this the client must be made aware of the consequential obligations of their circumstances which arise in all manner of ways, some of which may not be obvious.

Whilst testamentary freedom exists, consideration must be given to anyone where the will maker has created a financial obligation. Some are obvious – a spouse, cohabitee or any children still in education for example. However, some are not. I have been involved with claims by ex-spouses, ex-cohabitees, tenants (living rent free in a property owned by the deceased), adult children, mistresses and other individuals who were maintained financially in some form. Seeing a client away from their spouse can make disclosure easier.

Before full advice can be given in regards to a Will it is crucial that proper instructions are taken and recorded. The instructions given must be comprehensive, the Will Adviser must be satisfied that the person has appropriate mental capacity and consideration must be given to the person’s various obligations.

There is little doubt that probate litigation will continue to increase but by ensuring your clients seek proper advice when doing a Will they will have awareness of where claims can lie and reduce their chances of such litigation.

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Planning your digital afterlife

4th Feb 2014
What happens to your digital assets when you die? ...
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Planning your digital afterlife

4th Feb 2014

What happens to your digital assets when you die?

Our lives in regards to who we are, what we do and what we own are increasingly managed digitally.

Any assets managed digitally, i.e. accessed or held online, are referred to as digital assets. These can range from online gaming accounts, to photos, digital music, bank accounts, domain names, cloud storage etc, etc.

Should you die the duties of your executors in relation to digital assets, as with any other assets, are to identify them and arrange transfer to beneficiaries or sell them. However;

  • How do the executors know the assets exist?
  • Are the assets worth anything?
  • Can the executors access the accounts?

As your Will is usually stored securely you could incorporate details, including passwords and usernames, within it. However this is not very practical; every time you change something you would need to change your Will.

The key is that people know the assets exist. A simple list stored with other important documents will at least tell your executors what you’ve got and where to find it.

But are these assets worth anything?

It has always been common for people to leave books, CDs, vinyl collections etc to someone in their Will but what about online versions? Buy music from iTunes and you don’t own it; you simply have a perpetual licence to play the music. The licence is personal and not transferrable. In effect you are just renting it. Similarly digital book providers, such as Kindle, prevent a purchaser from passing on e-books or sharing passwords.

By contrast online games may have a value especially where a lot of time has been spent accumulating a character’s skills, weapons, money etc. Websites such as www.armorybids.com run auctions of gaming accounts allowing you to sell on these characters.

However digital assets are of no value if nobody knows they exist. Frequently forgotten digital assets include loyalty programmes such as air miles which CAN often be transferred.

But how do my executors access the accounts?

The law in this area has been slow to catch up with technology. Currently accessing the deceased accounts with their username and password may mean the executor is committing fraud!

Many companies providing online services have created their own polices for dealing with deceased accounts such as Google’s ‘inactive account manager’. There are also online password storage facilities, like Password Box, with legacy features but these still don’t resolve the issue of whether or not your executors can access your accounts. The problem is there’s no set approach.

In a bid to resolve this issue STEP has created a Working Group to look at access, control and ownership of digital assets when a user dies or is incapacitated. The intention of the group is to create a protocol that can be adopted by all online providers. The challenge will be how, when this is an international market, to create one approach that can be adopted globally.

This is an increasingly important issue with, as yet, no definitive outcomes. We will keep you updated as things develop.

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Why should I remember a Charity in my Will?

9th Sep 2013
Pavilion Row has for sometime been a supporter and member of Remember a Charity in your Will. ...
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Why should I remember a Charity in my Will?

9th Sep 2013

Pavilion Row has for sometime been a supporter and member of Remember a Charity in your Will.

This week is dedicated to the cause with the aim of highlighting the importance of donating through your Will.

Currently 75% of us donate to charity during our lifetime but only 6% include a charity in their Will. This 6% generates over £2 billion of revenue for charities which equates to 19 Comic Reliefs!

Just a small increase of people leaving a charity legacy in their Will could make a huge difference.

As a reminder there are tax advantages of giving to charity in your Will. Click here to read our previous article explaining the benefits.

Download our updated ‘Why make a Will?’ leaflet for further information regarding making a Will.

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Regulation of will-writing is rejected

16th May 2013
The Lord Chancellor yesterday rejected the recommendation made be the Legal Services Board to regulate will-writing activity. ...
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Regulation of will-writing is rejected

16th May 2013

The Lord Chancellor yesterday rejected the recommendation made be the Legal Services Board (LSB) to regulate will-writing activity.

In their statement announcing the decision it recognises that the report produced by the LSB indicates a consumer detriment in the will-writing market. However it felt that the report doesn’t adequately demonstrate that regulation is the best solution or that all other options have been sufficiently exhausted.

The statement went on to say that as separate work is being done to look at simplifying the current legal services regulatory landscape and as part of this the Lord Chancellor will consider whether it would be appropriate to bring will-writing within the scope of legal services regulation, it wouldn’t be beneficial to add complexity to the regulatory landscape in advance of this work.

Whilst the will-writing industry will not be regulated at this stage it is clear that it will continue to be under scrutiny. Pavilion Row’s advice remains; when making your Will choose somebody, whether will-writer or solicitor, who is a member of the Society of Trust and Estate Practitioners (STEP).

A key concern arising from the original LSB report into will-writing was the poor technical quality of the Wills. One in four of wills examined by the panel were found to be inadequate. However simple or complex you believe your affairs to be it is imperative that you get the right advice and your Will is drafted correctly. Too often problems with Wills are not found until the person has died and it is too late to rectify.

STEP members are the most highly trained in this specialist area of law.

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When is a pound worth 60p?

1st May 2013
In George Osborne’s most recent Budget further provisions were made to prevent Inheritance Tax avoidance schemes. ...
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When is a pound worth 60p?

1st May 2013

When you needlessly pay Inheritance Tax (IHT)

In George Osborne’s most recent Budget further provisions were made to prevent Inheritance Tax (IHT) avoidance schemes.

In many ways this helps to reinforce false perceptions; that to reduce your IHT liability you need complicated schemes that will be scrutinised by HMRC.

But for many this can’t be further from the truth. There are plenty of options for standard IHT planning before you need to think about complex and aggressive solutions.

We often come across clients in later life with assets over the IHT band and good incomes that they are saving. But for every extra pound they save they only save 60p i.e. their eventual beneficiaries will be giving 40p to HMRC in IHT!

For these clients gifts out of income are an excellent way to minimise IHT – and one that is often over looked.

But what is classed as ‘income’? And what criteria will HMRC apply when accepting gifts out of income?

  • Normal income includes salaries and pensions – plus interest, dividends and investment income (including rental income and annuities).
  • The gift must be out of normal income and MUST leave the person fully able to maintain their usual standard of living, including luxuries such as holidays
  • The gifts must form part of a regular pattern or provide proof of a commitment (for example, the first payment of a life assurance policy).
  • HMRC will generally accept the expenditure as ‘normal’ if it happens three or more times.
  • Often mis-understood – the gift doesn’t need to be the same amount to the same person – it just has to be of a similar nature. For example, ‘every year I give 50% of my surplus income to family members.’

Gifts out of income are extremely valuable as there is no maximum amount (as long as they fit within the above criteria). They can provide substantial IHT savings and are simple – but they MUST be done correctly and well documented to ensure they don’t form part of HMRC ‘s IHT calculations.

Pavilion Row are specialists in Wills, probate and trusts. If you have any queries regarding the above or would like to understand more about how decisions made now affect what happens in probate please feel free to contact us.

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If you love me you’d make a Will!

14th Feb 2013
How many of us have said ‘I must make a Will’ but never got round to it. Better things to spend your time and money on, maybe? ...
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If you love me you’d make a Will!

14th Feb 2013

I’m sure not many of us have dreamt of our love one coming home tonight presenting us with their Last Will and Testament as a Valentines gift. However you could argue that this is one of the kindest, most thoughtful, considerate and selfless things that somebody could do.

How many of us have said ‘I must make a Will’ but never got round to it. Better things to spend your time and money on, maybe?

But a Will is not about you. You are not making it for yourself. It is about looking after the people you love when you are not around to do so.

You won’t be here to see the consequences of not making a Will but it can be painful.

When you die assets including bank accounts may be frozen
Not having a Will creates delays in sorting out your affairs during which time your money/assets may be frozen and nobody can access them. This can result with those left behind having to borrow money to pay for day to day bills and expenses.

Your partner may not inherit everything and in some cases may get nothing
If you do not leave a Will the law determines who inherits your estate – see our flow chart. If you are not married or in a civil partnership your partner will get nothing. If you have not got children it could be your parents, siblings or even aunts and uncles that inherit!

A claim may need to be made against your children
If your partner has received a reduced or no inheritance they will need to go to court to make a claim on your estate. The claim will be against the other people who benefit, including your children. Imagine that. A court case pitching mother or father against their children’s inheritance!

Failing to make a Will not only causes extra cost and delays it creates a huge burden and stress for those who are left behind at a time when they least need it!

Series: 6 Ways to Avoid a Probate Nightmare, Article: 2 (click here to read Article: 1)

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Give to charity and the tax man pays!

17th Sep 2012
Today sees the start of ‘Remember a Charity Week’ which seeks to bring awareness about the importance of charitable gifts in Wills. ...
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Give to charity and the tax man pays!

17th Sep 2012

Give to charity and the tax man pays!

Pavilion Row is a supporter of ‘Remember a Charity’. Today sees the start of ‘Remember a Charity Week’ which seeks to bring awareness about the importance of charitable gifts in Wills.

Did you know that whilst 75% of people give to charity in their lifetime only 7% leave anything in their Will?

Following recent changes to inheritance tax (IHT) it is worth remembering when giving to charity there are tax advantages now available. If you plan to give 4% of your net estate to charity you can increase the gift to 10% without reducing the amount of inheritance the other beneficiaries receive. The tax man pays the difference!

From April 2012 IHT is reduced from 40% to 36% for people who leave at least 10% of their net estate to charity. This lower rate can only apply if part of the estate is chargeable to IHT at 40%. For example:


Example 1 Example 2
Net Estate £100,000 Net Estate £100,000
Charity Receives 4% £4,000 Charity Receives 10% £10,000
Remainder to be taxed £96,000 Remainder to be taxed £90,000
Tax at 40% £38,400 Tax at 36% £32,400
Inheritance for other beneficiaries £57,600 Inheritance for other beneficiaries £57,600

 

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Solicitors Regulatory Authority (SRA) fails to act against those writing bad wills

26th Jun 2012
The SRA is failing to take action against solicitors who produced sub-standard wills. ...
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Solicitors Regulatory Authority (SRA) fails to act against those writing bad wills

26th Jun 2012

The SRA is failing to take action against solicitors who produced sub-standard wills for their clients according to Elisabeth Davies, Chairman of the Legal Services Consumer Panel.

In a letter to the Legal Services Board she states “Our jointly commissioned research found that solicitors and unregulated will-writers were equally culpable for producing sub-standard wills. However, while we are heartened by trade association initiatives to correct problems, we are unaware of any action to date by the SRA.”

The pressure for regulation continues. Ms Davies also states in the letter “We are acutely conscious that consumers will continue to lack adequate protections until regulation is introduced so it is important that this happens speedily. I know that the LSB is aware of this and will work with colleagues at the Ministry of Justice to make progress as quickly as possible.”

References

Legal Services Consumer Panel

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Will-Writing, STEP demands proper protection for consumers

29th Nov 2011
STEP has published a very helpful leaflet stating their views and position. ...
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Will-Writing, STEP demands proper protection for consumers

29th Nov 2011

In response to the ongoing investigating into the need to regulate will-writing and the associated fields of probate and estate administration STEP* has published a very helpful leaflet stating their views and position.

The leaflet outlines;

  • some of the current problems in the will-writing market
  • what STEP is doing to give consumers confidence they are dealing with well-qualified, reputable practitioners
  • how STEP plans to participate in future regulatory initiatives

An extract taken from the leaflet, which is titled ‘Building Consumer-Confidence in Will Writing’, states:

“Inevitably, the process of putting effective regulation in place for the will-writing and estate administration markets will take some time. In the meanwhile, the legal services market continues to change rapidly, not least with the arrival of alternative business structures widening the options for how legal services providers can be owned and potentially opening the way for an array of new entrants into the marketplace. STEP therefore decided early on that it needed to take measures to reassure consumers using STEP Members that they were dealing with practitioners with both proven standards of technical competence and a commitment to a strong professional code of conduct.”

The full leaflet can be found on http://www.step.org/pdf/WillWriting_WEB.pdf

At Pavilion Row all our client advisers, will drafters and probate administrators are qualified through STEP. We also follow and are committed to STEP’s professional code of conduct.

*STEP (The Society of Trust and Estate Practitioners) is the worldwide professional body for practitioners in the fields of trusts and estates, executorship, administration and related issues.

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Pavilion Row backs the findings of the will-writing investigation run by the Legal Services Board

9th Aug 2011
Pavilion Row has always supported regulation. ...
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Pavilion Row backs the findings of the will-writing investigation run by the Legal Services Board

9th Aug 2011

The will-writing industry has commanded a lot of press attention over the last few weeks. This is a result of a report published by the Legal Services Board Consumer Panel recommending that the industry should be regulated.

A key concern arising from the report was the poor technical quality of the wills. One in four of wills examined by the panel were found to be inadequate. It states “the same proportion of wills prepared by solicitors and will-writing companies were failed”.

Angus Houston TEP, Pavilion Row Ltd states that “The report demonstrates the strong need to standardise the level of qualification a professional needs to provide will services. This is something that I have advocated for some time.”

Will-writing forms part of the specialist area of trust and estate planning. Currently the only professional body in this field is the Society of Trust and Estate Practitioners (STEP) and true specialists in this area are members of STEP. Full members of STEP can be identified by ‘TEP’ after their name.

STEP has also recently launched an industry recognised exam for will writers providing a benchmark qualification in this area of law.

When looking for somebody to advise on and prepare your will Pavilion Row recommends that you use only a full member of STEP or somebody who has passed the STEP will preparation exam. A professional with these qualifications will be able to provide a copy of the STEP certification if requested.

Pavilion Row’s objective has always been to provide best advice to our clients therefore all our will consultants are STEP members or have passed the STEP will preparation exam.

-Ends-

For more information please contact Angus Houston, CEO Pavilion Row on 0845 634 4185

Note to Editors

1. Pavilion Row are specialists in the field of probate and wills. We provide probate and will administration services to professional introducers including solicitors, accountants and other financial professionals. For more information about Pavilion Row Ltd see www.pavilionrow.com.

2. The Legal Services Consumer Panel full report on regulating will-writing can be found on; http://www.legalservicesconsumerpanel.org.uk/publications/research_and_reports/index.html

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