Excellent experience start to finish – always very responsive to any queries and the turnaround on the property I was buying was very quick, even in the busy time leading up to stamp duty deadline. Jenny was always very helpful and went above and beyond to close on a short timescale.
Welcome to the next in our series of departmental newsletters. The focus this time is on our Private Client department.
Karen Witter – partner in our Private Client department – on Lasting Powers of Attorney
1. What is the difference between an Enduring Power of Attorney and a Lasting Power of Attorney?
An Enduring Power of Attorney (EPA) is a power of attorney created before 1st October 2007. Since that date it has not been possible to create an EPA, although existing ones are still valid, but instead you can enter into a Lasting Power of Attorney (LPA) for Property and Finances and/or Health and Welfare.
2. What does an LPA actually do?
An LPA is a document you enter into and is your way of deciding who will make decisions about your property, financial affairs and your health and welfare if you are ill, in an accident or lose capacity. These are important for anybody who has assets, and who has family members who would need access to those assets to deal with your affairs for you if you could not.
3. What if I don’t have one?
If you lose capacity, are ill, or have an accident and are unable to deal with your affairs, without a valid EPA or LPA in place, someone will have to apply to the Court of Protection to be your deputy and take over your affairs. This can be a lengthy and costly process, and you have no say in who applies. If you prepare LPA’s now while you are well and able, and have them registered, if the worst should happen, your chosen attorneys will have immediate access to your financial and personal affairs and will be able to take control and look after things for you.
4. What else should I be aware of?
LPA’s are potentially even more important where you are running a business and making decisions every day. Consider who has the authority over the business bank account and to sign contracts if you are unable. Your business could be exposed to risk if you don’t have proper arrangements in place.
DeBrieF NEWS UPDATE
Laura Johnson – solicitor in our Private Client department – discusses the Residence Nil Rate Band
We briefly mentioned the introduction of a Residence Nil Rate Band in our last Private Client newsletter. At the time, there wasn’t much information available about the change in the rules apart from a promise by the Conservative Party that the threshold for inheritance tax would increase to £1million. More details have now emerged and you might not be surprised to hear that it isn’t quite as simple as increasing the threshold to £1million.
What is a Nil Rate Band?
A Nil Rate Band (NRB) is the value of a deceased person’s estate that is not subject to inheritance tax. The current NRB, or threshold, for an individual is £325,000. On death, the first £325,000 will not be subject to inheritance tax and the value of any assets exceeding £325,000 will be subject to inheritance tax at a rate of 40%.
If a person dies and leaves everything to a surviving spouse or civil partner, then the estate will be exempt from any inheritance tax under the spouse exemption. The unused NRB can be transferred to a surviving spouse or civil partner, which means that the survivor’s estate would have a NRB up to the value of £650,000.
What is the Residence Nil Rate Band?
The Conservative Party has introduced the Residence Nil Rate Band (RNRB) to help address the fact that house prices have significantly increased; and in a lot of cases exceed even the double NRB meaning that more middle class families are facing the possibility of their estate being subject to inheritance tax.
The Conservative Party has confirmed that the NRB will not be increased and it will remain at £325,000. Instead, an additional £100,000 (increasing to £175,000 by 2020/21) will be available on top of the ordinary NRB of £325,000 if certain conditions are met. Where those spouses and civil partners meet various conditions, they can transfer the NRB (£325,000 x 2) and the RNRB (£175,000 x 2) between them so that their combined total NRBs and RNRBs will be £1million.
What are the Conditions?
The deceased spouse or civil partner must own a residential property at death, the property must have been their residence at some point and the property must have been left to one or more direct descendants of the deceased person on death.
If the estate is worth more than the ordinary NRB, and the conditions are met to qualify for the RNRB, then the application of the RNRB means that there will be less or no inheritance tax to pay than would have otherwise been the case.
When does it Apply?
The new RNRB will only apply to deaths on or after 6 April 2017. The threshold will increase over the next few tax years meaning that the full benefit of £1million will not be available until 2021.
Does the RNRB apply to all estates?
The RNRB is limited if the value of the estate exceeds £2million. For every £2 that the value of the net estate exceeds the £2million threshold, the RNRB available will tapered by £1.
Whilst some of the details are still to emerge, it is important to review your Wills and consider whether the introduction of RNRB will help you.
DeBrieF TEAM SPOTLIGHT: Laura Johnson, solicitor in our Private Client department
What does your role at Davis Blank Furniss involve?
I am a solicitor in the Private Client department working between both of our offices in Glossop and Manchester. I specialise in preparing tailored Wills, advising about inheritance tax planning, preparing Lasting Powers of Attorney, drafting a range of Trusts including Personal Injury Trusts, advising Trustees about ongoing trust administration and dealing with the administration of a wide range of Estates.
What is the best thing about your job?
I enjoy the variation in the type of work that I deal with. No two days are the same and I meet a wide range of different people with really interesting stories to tell. I like to be challenged and to learn new things all of the time. I am currently working through the exams to become a member of the Society of Trust and Estate Practitioners and I recently passed my first exam with Distinction.
What is the best case you have been involved in?
The best cases are often the ones that are the most challenging, such as high value estates with complex inheritance tax issues and foreign assets. I often deal with clients at a difficult time because they have lost a loved one. The best outcome is for the family and friends to feel that I have made things a bit easier for them by doing my job efficiently and with compassion.
Name the person who has been the biggest influence on your career.
My parents have always been really supportive and proud each time I have progressed in my career. I trained at Davis Blank Furniss and my colleagues have taught me an incredible amount.
If you were not a lawyer, what would you be doing?
I would be an Accountant or a History Teacher.
DeBrieF RECENT CASE
Karen Witter – partner in our Private Client department – discusses a recent case that highlights the importance of reviewing your Will
The case of Joy Williams should be a stark reminder to unmarried couples to make sure that they take legal advice about their rights and responsibilities when it comes to their homes and their Wills.
Joy Williams lived with Norman Martin for 18 years before his death, although he remained married to his wife.
Although Ms Williams and Mr Martin owned their home in joint names, the way they owned it, tenants in common, meant that his share passed to his wife on his death, instead of to his partner and co-owner. Ms Williams has been awarded Mr Martin’s share of the house, but has had to go through the court to get it.
Why has this happened?
Where two or more people own a property together, there are two ways it can be owned. Joint tenants means that each owner has an equal share and that if one owner dies, their share automatically passes to the surviving joint owner(s) irrespective of the Will of the deceased. Tenants in common means that each owner owns a specific share, which can be in any proportion (i.e. 50/50, 60/40 etc) but their share forms part of their estate on death and passes under the terms of their Will.
What can I do?
It’s really important when buying property to be clear about how you want to own the property. It’s possible to swap from joint tenants to tenants in common or vice versa at a later time, but this will involve the other joint owners, so shouldn’t be relied upon.
It’s also important to make sure that your Will is up to date and represents your wishes. If you have a Will referring to a spouse/civil partner, and you divorce, although your Will remains valid, any appointment of your spouse or civil partner as executor, and any gift to him or her will be revoked. The rest of the Will stands. If you don’t divorce though, and separate but remain legally married, your Will remains valid, even if you have a new partner.
If you do divorce and then remarry, any existing Will is automatically revoked on remarriage, unless you specifically made it in anticipation of that new marriage. If you had a Will leaving your estate to your children, it would automatically be revoked if you married or formed a civil partnership (and the Will had not been made in anticipation). If you then died before you made a new Will, your new spouse or civil partner may inherit all of your assets under the intestacy rules, leaving your children without anything.
You should review your Will every year or two, and if you are making any big changes, moving house, getting married, or getting divorced, pick up the phone and have a chat with one of our specialist Wills solicitors to see if your Will needs to be updated.
If you have any queries or require any further information, please do not hesitate to contact our team of specialist solicitors on 0161 832 3304.