Wills and Lasting Power of Attorney
Having a Will and Lasting Powers of Attorney in place will be the greatest gift you can ever give to your family and friends.
Wills
Making a Will is one of the best gifts you can give your family. You are making matters as simple as possible for them by doing so and avoiding all of the additional complexity and mess that dying "intestate" can bring. Not only that but, if you don't make a Will your estate will be distributed in accordance with the current so-called "intestacy rules".
This poses a simple yet crucial question- would you rather decide who to leave your estate to or would you be happy for the government to do that for you? It's a no-brainer surely!
Not having an up-to-date Will is just as bad as not having a Will at all so please review your Will every five years or so or as soon as there is a major change of circumstances in your life.
If you don't make a Will or if you don't update your Will you will be missing some good asset protection opportunities.
Lasting Powers of Attorney
Lasting Powers of Attorney (LPAs) are lifetime only documents (so no overlap with your Will) that are just as important as your Will.
LPAs give you peace of mind that you'll be covered should you lose capacity to deal with your affairs. This could happen due to illnesses or diseases such as dementia but could just as easily happen as a result an accident.
There are two types of LPA -one for property and finance decisions and one to cover health, welfare and care decisions.
The health and welfare LPA will only be used by your attorneys if you have lost mental capacity. This would have to be certified by a doctor.
The finance LPA could be used by your attorneys even if you still have mental capacity but only with your consent. It could be that you get to a point in your life where you want to delegate power to your attorneys.
The LPA for finance would allow your attorneys to access your bank accounts, make payments on your behalf and even sell your property if it were necessary to do so. They are under a strict obligation to act in your best interests.
LPAs for health and welfare are just as important as the Finance document and if you do not have one in place, then important welfare decisions such as where you should live, what you should eat, wear and do on a day-to-day basis would be made in committee by representatives from social services, the local authority and the medical profession. It is far preferable to have trusted members of your family making these decisions. Also, in this LPA you can give your attorneys the authority to make life sustaining treatment decisions on your behalf so they can be your voice.
So think of the LPAs as an insurance policy. They may never be needed but they will give you peace of mind that someone will be able to deal with your property and financial affairs and make health, welfare and care decisions for you should you ever lack the capacity to make these decisions yourself.
Asset Protection Wills
Asset Protection Wills (APWs) are mirror Wills between husband and wife or partners, made specifically with the intention of ring fencing assets on the first death, meaning a guaranteed inheritance for children or other beneficiaries.
Let me give you a couple of examples:
- Sarah and Tom are in their forties with two joint children. They are concerned that if one of them dies the survivor is likely to remarry and that as a result of that remarriage their children may lose out.
- Emily and Max are in their seventies and they are concerned about the impact of care home fees on their estate. They have heard that some couples lose everything where the survivor of them needs to go into a care home. They are keen to protect as much of their estate as possible to pass to their children when they pass away.
Both couples are advised to set up a special type of will, called Asset Protection Wills and sever the joint tenancy of the property so they own their home as Tenants in Common in 50-50% shares.
Sadly in each of the examples above the wife passes away. Her share of the house and other assets in her sole name do not pass to her husband absolutely so they do not then form part of the husband’s own estate. Nor do the assets pass to the children because the husband still needs to benefit from those assets. Instead the wife’s assets pass to a Flexible Life Interest Trust*. So, as far as the family home is concerned, the husband still owns his half share but has a life interest in the other half. This means he gets to stay in the property for the rest of his life and his interest is protected. The life interest is flexible meaning that should the husband wish to move house, the whole arrangement can apply to the replacement property. The advantage is that the wife’s half share is ring-fenced and guaranteed for her children one day when the husband passes away.
*The Flexible Life Interest Trust is not suitable for couples who are unmarried or not in a civil partnership. For these couples we would use a Discretionary Trust on first death. This offers asset protection in much the same way.
Tom remarries a few years after Sarah’s death and then sadly divorces. Only his share of the property will be taken into account in the divorce settlement OR
Tom remarries and is still married when he too dies. His new Will made after marriage benefits his new wife over his children who now receive a much smaller proportion of his estate but at least they still receive the whole of their mother Sarah’s estate OR
Tom doesn’t make adequate provision for his wife when he dies, preferring to benefit his children. His wife brings a successful claim as the Court finds she is not adequately provided for as his spouse. The children lose on some of Tom’s estate but still receive the entirety of Sarah’s estate.
Max begins to struggle at home and moves into a residential care home. The Local Authority carry out a financial assessment. They can only include Max’s half share of the property in the calculation. Emily’s share is protected and out of reach of the Local Authority. The house still needs to be sold because Max does not have enough cash assets to fund his care but only the net proceeds of sale from his half of the property can be used to fund his care.
So in a nutshell, APWs protect a proportion of your estate should the survivor of you decide to remarry or require nursing or residential care in the future. What is more, there really aren’t any downsides to an APW. You can also maximise what you are ring-fencing and protecting by adding in cash assets as well as the property share.
"I feel very fortunate to have met Deborah Wise; she made it very comfortable and easy for me to set up the Will and Lasting Powers of Attorney.
It was an efficient, polite, professional and friendly service."
