Samuel Phillips Law busts myths surrounding Wills and Trusts
We ask Felicity, Senior Associate and Head of Wills, Probate and Trusts Team at Samuel Phillips Law, all your questions.
When it comes to thinking about setting up a Will and Trust it’s often something that many of us don’t think twice about until later in life.
But no matter what your circumstances or age, it’s something very important to consider.
Although it can seem so daunting thinking about what happens once we’ve passed, no one knows what is around the corner.
Setting up a Will and Trust will give you peace of mind that your partner, your little ones or your family won’t have to face the difficulty of sorting out your affairs once you’ve passed.
But it can all seem so complicated, right? That’s why we caught up with the experts at one of the most prestigious law firms in Newcastle, Samuel Phillips Law to help.
From how to protect your home from being sold to pay for your care to why having a Power of Attorney is vital, we ask Felicity, Senior Associate and Head of Wills, Probate and Trusts Team at Samuel Phillips Law, all your questions about Wills and Trusts…
WHAT’S THE DIFFERENCE BETWEEN WILLS AND TRUSTS?
A Will is a legal document which states whom you would like to receive your property, assets etc. on your death. It also details who is responsible for distributing your estate on your death and can contain other wishes such as who cares for your minor children and your funeral preferences. A Will only comes into effect on your death whereas a Trust is a legal relationship created as a way of managing assets. There are many different types of Trusts and Wills often contain Trusts, but Trusts can also be made during your lifetime.
3 THINGS YOU SHOULD KNOW ABOUT TRUSTS
- The law surrounding Trusts is extremely complex – you should seek advice from a qualified solicitor to make an informed decision about whether a Trust is right for you.
- Trusts are not ‘tax-free’ – different Trusts are taxed in different ways and you should not be fooled by thinking a Trust will avoid tax altogether
- Setting up a Trust does not mean you won’t have to pay for your care home fees – sadly they are not a miracle fix.
3 THINGS YOU SHOULD KNOW ABOUT WILLS
- You DO need a Will. Regardless of your circumstances, whether you’re married, single, cohabiting, have children, are childless, do not own property or own a lot of property, every person needs a Will.
- It’s not that painful. Many clients put off making a Will because they don’t want to think about dying or they think it’s going to be a painful experience, but the process of making a Will with a professional is stress free and often fairly quick.
- Do it properly and do it once. You’ve heard the expression ‘buy cheap, buy twice’, the same applies to Wills. A properly drawn up Will could last you years if not forever. So get one written professionally that will cover a lot of different eventualities and it’s off the to-do list for a considerable amount of time.
SAMUEL PHILLIPS LAW ANSWERS YOUR QUESTIONS
My child is a dependent and I want to make provisions for when I pass away. But if my mental capacity goes, how do I protect my house from being sold to pay for care and ensure it successfully passes to my child?
You should write a Will to make provision for any minor children. Your Will can appoint guardians whom your children would live with in the event of your death and provide protection for their inheritance. If you were to move into care and a child under 18 still occupied your home, the local authority should disregard the value of your home during a financial assessment for the funding of your care.
However, if no qualifying relative occupied your home, your property would be at risk of being sold to pay for your care. There are things you can do now to attempt to protect your home from being used for care, however, you should be aware that local authorities have a lot of powers and if they believe you have done something, such as transferring ownership of your home to an individual or a trust, to avoid paying for your care, then they can treat you as still owning that asset and still count the value in your financial assessment.
This means you could end up paying for your care as if you owned your home, but you no longer own it and so don’t have access to the asset to fund your care fees – this is a lose-lose. You should seek advice from a qualified solicitor before considering any planning options so that you can make an informed decision about what is best for you.
I’m a business owner – what rules do I need to follow so that I can save on Inheritance Tax and protect my business for future generations?
Business Property Relief is an Inheritance Tax relief currently available for qualifying business assets at either a rate of 50% or 100%. This means that, if your business assets qualify for the relief, there will be either half of the usual Inheritance Tax to pay on the asset or none at all. It is important to seek advice during your lifetime as to whether your business will qualify for relief though, as the rules surrounding the relief are complex.
I suffer from a chronic condition and I’m expecting to need full-time care in the future. What are the best ways I can plan financially to manage the cost of care fees without putting them onto my heirs?
The key here is to seek advice ASAP. The earlier you plan, the more likely the planning is to be effective. You should speak to a solicitor about your circumstances who will be able to help you plan for future care needs.
I’m in my second marriage but I have children with my first spouse. What is the best way to ensure that my children inherit my estate but that my current spouse is also provided for, in the event of my death?
It is important that you have a Will in place. There are lots of different options to protect children from earlier relationships as well as current partners. For example, you could split your estate between your children and your current partner, or set up a trust whereby your current spouse would have the right to income from your estate and the right to live in any property for the remainder of their life but then, on their death, the children receive the bulk of the inheritance.
Is making Lasting Powers of Attorney more important than making a Will?
Arguably, yes. If someone dies without leaving a Will, the law dictates who is entitled to administer the estate, who will receive the estate and in what proportions. However, if an individual loses mental capacity and there is no Lasting Power of Attorney in place, no other person has the legal authority to make decisions for that person – not even a spouse or next of kin. In these circumstances, an application would need to be made to the Court of Protection to enable someone to make decisions for the incapacitated person. This is a stressful, expensive and onerous process. Having made Lasting Powers of Attorney whilst mentally capable to do so, would prevent this.
Do I need to speak to a qualified solicitor before making a Trust or can I set one up on my own?
If you’re thinking of doing anything to do with Trusts or care home fee planning, speak to a qualified solicitor first as the law is complex and lengthy. There are lots of unregulated businesses out there selling Trusts as a miracle fix for care home fee planning, charging thousands to set up the Trusts and then they don’t end up working as they’re deemed ‘deprivation of assets’ by local authorities.
Often, we see clients who are sold the dream that property in the Trust will be Inheritance Tax-free which, again, is not true – if you still occupy the property rent-free this is a gift with reservation of benefit, which means Inheritance Tax is still charged on the property. Clients are simply not given complete advice, so they are making completely uninformed decisions that turn out to be expensive. So, I recommend coming to Samuel Philips Law and getting the full advice to make an informed decision.
If you’re interested in finding out more about Wills and Trusts, Samuel Phillips Law can offer advice in the strictest of confidence.
Samuel Phillips Law Firm, Floor 5, General Buildings, 18–24 Grey Street, Newcastle upon Tyne NE1 6AE