For many of us the last few months has made us think about finally putting our affairs in order, or getting our 'ducks in a row' as some might call it, but what exactly does this process entail? We’ve written this 'glossary' style blog to help explain in detail what may be involved in the process and we also highlight some of the key things you will need to consider along the way.
Most people have heard of a Will, otherwise known as a ‘Last Will and Testament’, but worryingly 2/3rds of adults still do not have one. A Will is a legal document, that outlines what you would like to happen after your death and what your wishes are in terms of how you want your estate to be divided. They are relatively inexpensive and straightforward to produce and can save your family a lot of stress upon your death as they provide clarity of your wishes. This would usually be the first step in getting your affairs in order.
There are several types of Will and it is important that you choose the right one for you and your family circumstances. We will always advise on this in your appointment. We will also discuss the most tax efficient Will so that your Inheritance Tax position is the best it can be.
Without a Will in place, you die ‘Intestate’, which means that the rules governing intestacy determine how and to whom your estate is distributed, which may not be in accordance with your wishes and may not be tax efficient.
When someone dies without a Will, a strict and complex set of Intestacy Rules comes into play. These rules determine how your estate will be divided and can often be the cause of further upset to an already grieving family.
The Intestacy rules (updated on the 6th February 2020) that apply when there is no Will are contain the following provisions:
- If you are married or in a civil partnership and you die intestate, your spouse or civil partner will NOT automatically receive all of your estate. They will only receive your personal possessions, along with the first £270,000 of your estate, plus half of the rest of the estate.
- The other half of the estate will go to any children, grandchildren or great grandchildren.
- If you have no children your spouse or civil partner will get all of your estate
- If your estate is worth less than £270,000, your spouse or civil partner will inherit the whole of your estate and your children will receive nothing.
It is also worth noting that;
- Stepchildren are not considered to be your children and will not be provided for under the intestacy rules. You must legally adopt them or write a Will to ensure they are provided for
- The law does not recognise “common law” partners, if you are cohabiting and have not made a Will there is no guarantee that a partner will benefit
- If you have joint bank accounts, the account passes automatically by survivorship to the other joint account holder
- In most cases your home is the biggest asset acquired during your lifetime. If there is a policy of life insurance in place then the equity in the house and any insurance pay out can make the value of these items significant. Only a Will can guarantee where this goes and how it is divided
- The legal way in which you own property and land together with someone else can make a difference to who inherits it upon death.
Lasting Power of Attorney
A Lasting Power of Attorney or LPA as they are often referred to, is a legal document that specifies the person (or people) that you (the donor) trust to make financial and welfare decisions on your behalf, in the event that you become incapable of doing so. These are only valid during your lifetime and your Will takes over upon death.
There are two types of LPAs: one covering finances and property, and the other covering health and welfare. A property and finances LPA allows your attorney to manage payments from your bank accounts and action the sale of any property for example, whereas the health and welfare LPA allows them to make important decisions regarding your health, such as whether an operation should take place and what care you may require. You must have both in place if you wish both your financial and health affairs to be taken care of.
An LPA only comes into force when it is registered with the Office of the Public Guardian, outlined below. Some people choose to set up their LPAs but not register them until required, but we would advise you register them straight away as registration can take several weeks. This helps to avoid any delays should they be required sooner that you think.
If you have a property & finance LPA then it can be used before capacity is lost, but do not worry the attorney has to carry out your instructions so you retain control. This could be important if you have built up a portfolio of financial products that will need management as an example. The health & welfare LPA however only comes into force when it has been medically confirmed that your capacity has been lost.
Deciding who to make your attorney is an important decision and we will discuss your choice of attorneys with you to help reassure you that you are appointing the right people to manage your financial affairs. You can also appoint a Professional Attorney, and some feel more comfortable with this approach. Our team are very experienced in this area and can work closely with the team at Banner Jones Wealth Management to ensure your wealth is managed properly even when capacity is lost.
'Mental capacity' means being able to make your own decisions. Someone lacking capacity - because of an illness or disability such as a mental health problem, dementia or a learning disability cannot for example understand information given to them about a particular decision.
An LPA cannot be written if mental capacity has already been lost and we would request a capacity assessment from a doctor if we were uncertain before writing the LPA. If the doctor confirms that capacity has already been lost then we would look to help you with a deputyship order, detailed below.
We always recommend writing an LPA sooner rather than later because unfortunately when we reach the age of 65, the risk of developing Alzheimer’s disease or vascular dementia doubles roughly every five years. It is estimated that dementia affects one in 14 people over 65 and one in 6 over 80.
Office of the Public Guardian
The Court of Protection and Office of the Public Guardian are part of the same process and their names are often used interchangeably. The simplest explanation is that the Court makes the decisions and the Office of the Public Guardian handles the ongoing administration, including the registration of all LPAs. The two bodies work together, but with separate defined roles.
Court of Protection
The Court of Protection was established by the Mental Capacity Act 2005 to help vulnerable people who are incapable of making their own decisions. The Court makes decisions for them about their money, property, health or welfare.
The Court has many responsibilities including:
- deciding whether someone has the mental capacity to make a particular decision for themselves
- appointing deputies to make ongoing decisions for people who lack mental capacity
- giving people permission to make one-off decisions on behalf of someone who lacks mental capacity
- handling urgent or emergency applications where a decision must be made on behalf of someone else without delay
- making decisions about a lasting power of attorney or enduring power of attorney and considering any objections to their registration
- considering applications to make statutory wills or gifts.
If someone you care for loses mental capacity and you have had this confirmed by a doctor, then you can apply to the Court of Protection for permission to make decisions for them, this is known as a Deputyship Order. You then become their Deputy. You only need to do this if there isn’t an LPA in place.
It is very important that the application forms are filled in correctly and that you know exactly what powers you are applying for. For example, you might only need the power to help your loved one to manage their money, or to make decisions about what treatment they receive in hospital. Or you might need a much more general power to help them with all their financial and other decisions. Something to bear in mind is that the Court has the final say on who the Deputy will be, unlike the LPA process where you have that choice.
Our Court of Protection team are very experienced in dealing with these forms and we will help you to work out which forms you need and then complete them for you to ensure they are processed by the Court of Protection without delay.
The process of applying to the Court to become a Deputy can take several months, and the process is more costly as the application fee alone is £365, but for those without an LPA in place, it really is the last resort.
Before deciding on whom to appoint as the Deputy/Deputies, it may be worth noting that it can be quite a big responsibility and it may not suit everyone. We know from experience that sometimes families find it hard to nominate an appropriate Deputy. As a Deputy, you will need to pay annual fees for supervision by the Office of the Public Guardian and also for a security bond. The Deputy will also need to prepare and submit annual reports regarding the finances of the person subject to the deputyship order and have been known to conduct audits of the accounts to check for abuse of power.
If you are worried about the additional responsibilities of becoming a Deputy then you can appoint a Professional Deputy to help remove this burden.
We have a lot of experience in acting as Professional Deputies and we look after the affairs of several clients year after year. We act as a Professional Deputy for a client who suffered a serious brain injury in a car accident. We employ their care staff, organise any car and house maintenance as well as preparing the annual financial reports. We also offer the family additional support by managing the client’s financial investments with the assistance of the Banner Jones Wealth Management team. This is important to the family know that by having a professional managing their finances that the client will have the money to pay for their ongoing care for years to come.
As they say, prevention is always better than cure, so we would advise that the minimum you need to consider to put your affairs in order would be write a Will and an LPA. With those documents in place, you can relax in the knowledge that you have done the best you can to plan for the future. It is important to remember though that things do change, and we would advise that you review your Will specifically every 5 years, just to make sure that everything is still as you wish it to be. You can also review your LPAs, so if the person you wish to be your attorney can no longer do it through illness perhaps, then you can amend that in readiness.
If you need help and guidance with anything mentioned in this article then our team are only a phone call away. Appointments can now take place over the phone, in the Chesterfield and Mansfield offices (subject to availability) or in the comfort of your own home/garden if suitable distancing can be offered. Call us now on 01246 560 560.
Banner Jones Wealth Management is:
- the trading name of Banner Jones Wealth Management LLP (registered in England & Wales, number OC380075)
- is not a law firm authorised or regulated by the Solicitors Regulation Authority
- an Appointed Representative of Future Life Wealth Management Ltd which is authorised and regulated by the Financial Conduct Authority.