Other
Products
Advance
Directive (Living Will)
Children's
/ Grandchildren's Trust
Change of Name by Deed Poll
Codicil
Conveyance
Deed of Trust
Deed of Severance
Discretionary Trust
Disabled Discretionary Trust
Exclusion Clause
Life Interest of Residue Trust
Parental Responsibility Agreement
Right of Residence Clause
Storage
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Advance Directive (Living Will)
An Advance Directive (or
Living Will) is a completely separate document from your
Will, and is for use in England and Wales but not in
Scotland.
It
is a way of letting your doctors and family know what
medical procedures you would not want to receive
if, at the time the treatment was to be given to you, you
couldn't communicate. Treatment could be for any illness
you have now or which you develop, or as a result of any
future accident.
It is important to realise that you can only use a Living
Will to refuse treatments or procedures. It is not
possible to request specific treatments. You can use your
Living Will to say what quality of life and level of
treatment you would consider acceptable if you developed a
terminal disease or if you were in a persistent vegetative
state (an irreversible coma where you are only kept alive
by artificial feeding devices).
You
should note that there are no laws in England and Wales
about Living Wills, and whether such a Living Will will be
considered enforceable depends on the way it is written
and what it asks doctors to do.
Do
not confuse a Living Will with an Enduring Power of
Attorney. When you give somebody Power of Attorney, you
give them the authority to conduct legal and financial
business on your behalf. However, an Attorney is not
permitted to make any decisions on health care.
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Children's / Grandchildren's Trust
A Children's Trust (or Grandchildren's Trust) can be
included in a Will
if you wish to leave part of your
estate to children (or grandchildren) who are aged 18 or
under at the time of making the Will.
The Trust is a standard set of clauses that can be
inserted in your Will (ie it is not a bespoke trust,
though this can be incorporated in your Will for an
additional fee).
The Children's Trust states an age greater than 18 but no more than 25
at which children will inherit, at the same time giving the
Trustees the discretionary power to advance monies to children
or their guardians before they reach the specified age,
provided the monies advanced are for the advancement of the
children. This acknowledges that the Trustees of the Trust are
the people best placed to decide at the time whether to
advance monies before the specified age, and if so, in what
amounts.
If you do not have a Children's Trust or Grandchildren's
Trust in your Will, minor children will inherit at 18 and your
Executors (who are also your Trustees) will be responsible for
administering the inheritance until that time. If a large
proportion of the inheritance is needed by the child in an
emergency (eg a life saving operation in the USA), the
Trustees will only be able to advance a certain proportion of
the inheritance - not all of it.
If you have children under the age of 18, remember to
appoint Guardians in your Will.
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Change of Name by Deed Poll
You can change your name by Deed Poll. Prime Wills can advise you how to do this and provide the
necessary forms. Ask your Will adviser for further details.
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Codicil
If you wish to alter a clause in your Will, you can do so by
writing a Codicil. A
Codicil (like a Will) must also be prepared, signed and executed
in a particular way. You do not need to rewrite your Will or
have a Codicil if you or any person named in your Will changes
their address.
Prime Wills will only write a
codicil if we have drafted the original Will. However, you may find that
it
is no more expensive to re-write your Will than it is to
write a Codicil.
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Conveyance
If
you wish to transfer ownership of your property during your lifetime to someone
other than your spouse, yet at the same time retain the right to live
in the property for the rest of your life, you will need to do this by a
conveyance accompanied by a Deed of Trust. We can only do
this if the property is mortgage-free or loan-free.
We
will always wrap a Trust Deed around this type of conveyance - see Deed of Trust.
For example: Mr A is single and wants to convey half of his house to his son
because he wants to try and reduce the value of his estate. If we did not write a
Trust Deed
protecting Mr A's share in the property and
his right to live in it, his son
may be able to force
the sale of the property and thus Mr A may lose his house.
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Deed of Trust
If
you wish to transfer ownership of your property during your lifetime to someone
other than your spouse, yet at the same time retaining the right to live
in the property for the rest of your life, you will need to do this by a
conveyance accompanied by a Deed of Trust. We can only do
this if the property is mortgage-free or loan-free.
We
will always wrap a Trust Deed around this type of conveyance.
For example:
Mr A is single and wants to convey half of his house to his son
because he wants to try and reduce the value of his estate. If we did not write a
Trust Deed
protecting Mr A's share in the property and his right to live in it, his son
may be able to force
the sale of the property and thus Mr A may lose his house.
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Deed of Severance
People who are "co-owners" of property hold it
either as "joint tenants" or as
"tenants in common". A
Deed of Severance changes ownership of the property from joint
tenants to tenants in common, and is usually used by couples
making an Inheritance Tax Saving Will or a Property Protection
Will.
Please note that a Deed of Severance does not alter who owns the
property, but merely changes the manner in which the property is owned.
If
a property is owned as joint tenants, both partners
own the whole of the property and on death the surviving
partner will inherit the whole house, irrespective of what
is stated in the deceased's Will.
If
a property is owned as tenants in common, each partner owns a specific
share of the property (usually 50%).
When one partner dies,
his or her share of the property forms part of his or
her Estate. This then means that they can separately make
a gift in their Will of their share of the property to
whoever they choose.
Prime Wills will draw up a Deed of
Severance for you and register it with HM Land Registry (if your property
is registered). If your property is not registered, the Deed of Severance
should be placed with the deeds of the property. If you don't know whether you are joint tenants or tenants in common, you
should consult the solicitor who acted for you on the purchase of your
property.
A Deed of Severance can be mutual
or non-mutual. A non-mutual Deed of Severance is where one
joint owner wishes to sever the joint tenancy but the other joint owner
cannot do so because they are mentally incapable or unwilling to do so. In
this case, the severance forms will be sent out as normal and they require
the signature of the person wishing to go ahead with the severance and the
signature of the remaining joint owner to prove that they have signed it. If
this is impossible due to that person being mentally incapable of signing, then
the severance form can be sent via recorded delivery. It has to be proven
that this person received the severance form, and the onus of proof is on
the person serving the severance.
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Discretionary Trust
A Discretionary Trust is a legal mechanism whereby one or more persons, called
Trustees, are obliged to look after and deal with assets (the Trust property)
for the benefit of the beneficiary. The Trust deed will establish the
obligations and powers of the Trustees, and how they are to benefit the
beneficiaries. In a Will, the Trust is set up on the testator's death.
Discretionary Trusts give the
Trustees power to make gifts of capital and or income to a stated number of
beneficiaries. The Trustees may be given the discretion to give money directly
to the beneficiaries, or use it for the benefit of the beneficiaries.
A Discretionary Trust can have a
number of beneficiaries whom you may wish to benefit from the funds held. No one
specific beneficiary has an absolute right to receive either income or capital,
and the trustees decide who gets what and when - at their discretion.
This type of Trust is useful for those people who wish to defer the decision
about who gets what and when. This decision can be made by the Trustees
depending upon the circumstances or needs of the beneficiaries at any given time
following your death.
The
Trust can last for up to 80 years, and must contain provision as to who will be
entitled to anything that remains in the Trust when it comes to an end.
In summary, the key points about a Discretionary Trust are:
- Trustees have discretion as
to how the assets are used - the Trustees are free to make all the decisions
- The person to benefit from
the Trust must not have a right to the income or capital - ie income
or capital is given only at the discretion of the Trustees
- The intended beneficiary
must not be the only person named in the Trust - i.e. must not be the 'sole'
beneficiary
Without these features the Discretionary Trust is not properly constituted
and the person may be treated as though they own the house or have the money.
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Disabled Discretionary Trust
If
you have a disabled child or beneficiary who you wish to benefit in your will
then the best way to deal with their inheritance would be to put it into a Disabled
Discretionary Trust. You can put money, property, shares or any other assets
into the Trust.
- The
Discretionary Trust is set up by parents or other relatives in their Wills
as a way of making long term financial provision for a disabled child or
beneficiary.
- The
Trust itself will be a clause in the Will and will include the Trustees'
powers.
- The
Trust assets will be looked after by a minimum of two Trustees (maximum of
four) and by setting up the Trust the testator is saying who they wish to
look after their beneficiary's assets. In the absence of a Trust where the
disabled beneficiary is unable to manage their money the Court of Protection
will have to get involved and appoint a "receiver". This receiver may not be
the person the testator wished to look after their beneficiary's assets.
- Please
bear in mind that not to make any provision at all for a disabled son or
daughter on the grounds that another member of the family will look after
them or that the state will provide for them may not be a wise course. This
is because under the Inheritance Act (1975), if insufficient provision is
made it is possible for Social Services and the Department of Social
Security to challenge the Will. In turn this can result in an unpleasant,
unhelpful and costly legal dispute.
- The
reason a Trust is useful is that assets once put in Trust do not belong to
the "object" of the Trust (ie to the disabled son or daughter who
is intended to benefit). This means that the capital held in the Trust is
not taken into account when assessing entitlement to state benefits such as
Income Support or local authority obligations to fund care.
- The
Trust is termed "discretionary" because the Trustees appointed to
administer the Trust have discretion subject to the terms of the Trust as to
how, when and by whom the capital and interest of the Trust are used. They
may pay for things the statutory services may not be able to give, for example a
holiday, a new coat or even additional care. They may hold and invest
assets, including owning, managing and maintaining a property. This is
particularly useful if the beneficiary lacks the legal capacity to enter
into a contract (eg in the case of mental incapacity).
- A
further defining characteristic of a properly drawn up Discretionary Trust
is that the intended beneficiary - e.g. son or daughter - belongs to what is
termed a "class" of people and is not the sole beneficiary of the
Trust. Therefore further beneficiaries need to be appointed who would
inherit the Trust on the death of the disabled child or beneficiary. It is
usually envisaged that on the death of the disabled child or beneficiary the
Trust will end and be divided equally between the remaining beneficiaries.
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Exclusion Clause
If you exclude someone from your Will, they may be able to contest your Will in
Court following your death. This may be done on the basis that the omission
was an oversight, or because you have not properly provided for any of your
dependants who are unable to maintain themselves, or if you have not been fair
to your wife or husband (or even an ex-wife or ex-husband who has not remarried).
Therefore it is advisable to incorporate an Exclusion
Clause in your Will naming the person to be excluded. This
makes the testator's intentions clear and Executors can,
if the need arises, refer to the clause to prove the
exclusion was deliberate. However, the Court will consider
these reasons but they will not be bound by them.
For
Scotland, spouses have "prior rights" and
spouses and children have "legal
rights" - see Rules of Intestacy.
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Life Interest of Residue Trust
A Life Interest of Residue Trust in your Will can, on your death, enable a person or persons of your choice
to receive the income from your estate during their
lifetime. Upon their death the Trust comes to an end and
the capital is passed to the ultimate beneficiaries of
your choosing.
Trusts of this kind are often useful when you wish to give
your partner or co-owner a right to live in your property
after your death, and then to ensure it passes to your children following the
death of your partner or co-owner. This type
of Trust is suitable in a situation in which you wish to
provide for your children from a previous relationship as
well as your current partner - ie if your responsibilities are "divided".
If you
own your home outright or own a share as tenants in common
then you may also wish to give your partner the right to
live in your home rent free until they die, remarry or for
only, say, a specified period. Once they die or after the
specified event has taken place then your home and/or the
capital sum will pass to whoever you have specified in
your Will, such as your children.
You should, however, bear in mind that unless your Estate
is fairly large, the income from it may be insufficient to
support your partner. A gift of a life interest also
causes the duties of the Executors and Trustees to be more
onerous.
When considering a gift of a life interest, it is very
important to remember that the recipient does not own the
property or capital sum and therefore cannot dispose of it
in his or her own Will. It is also important to remember
that the prime duty of your appointed Trustees is to keep
a fair balance between income for the person getting a
life interest and capital growth for those who will
ultimately be entitled to your Residuary Estate.
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Parental Responsibility Agreement
A
mother of a child automatically has parental responsibility. If the father is
married to the mother he automatically has parental responsibility. However, an
unmarried father does not have parental responsibility if the child was
born before 1 December 2003. (If the
child was born on or after 1 December 2003 and the father's name is on the birth
certificate, then the father does have parental responsibility).
The father may acquire parental
responsibility by
making a Parental
Responsibility Agreement with the mother. This
agreement with the mother must be made on the correct
form, and it must be properly witnessed and registered. Prime Wills and
National Legal Services can provide this form and advise on how
to get it witnessed and where to register it.
If the father does not have parental responsibility, he
does not have any automatic rights to the child if the mother dies first.
Therefore, in a Will the mother of
the child will need to appoint the father as her first
choice of guardian.
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Right of Residence Clause
This is in effect a Trust in your Will giving the right to reside in a property
to a particular person. It differs from a Life Interest of Residue Trust in that
the Right of Residence Clause only refers to a right of occupation of a
property, and once that occupation is given up the resident is not entitled to
an income for life from the asset. If the house were rented out, the resident
would not be entitled to the rent.
For example, a 60 year old divorced man might have two
grown up children, own his house in his sole name and live
with his partner. He might want to leave his entire estate
including his house to his children, but he might want to
ensure that his partner is not left homeless on his death.
He can achieve this in his Will by giving his partner a
right to reside at the house after his death. She will be
obliged to maintain and insure the house to the
satisfaction of the trustees. Usually the right will be
expressed to terminate on a particular event e.g. her
marriage or co-habitation, or it might be expressed to
last for a particular period such
as 5 years from the death of the testator. The choice is
the testator's. In all cases, the right will terminate
when the resident no longer uses the house as her or his
principal private residence. Upon termination, the
property passes outright to the children (or such other
beneficiaries as the testator might specify).
Please note that if the 60 year old man in the example wants to give a right
of residence, he should think through the implications
very carefully first, as once it comes into operation
there is very little incentive on the resident ever to
leave the property, given that he or she is occupying it
rent free. For example, if the partner was 50 years old
and the testator's children were in their mid-thirties,
then if the right to reside was not terminable after a
fixed number of years, the partner might happily continue
living at the house rent free and live until she is 95.
The children might have died or be in their dotage before
they ever see a penny of their inheritance!
In another example, if the testator has three grown up
children, one of whom still lives at home, the testator
might want to give a right of residence to the child who
still lives there. This is achievable, but again there is
no incentive on the child ever to move out, and if he
outlives his siblings, the siblings will never see their
inheritance. (Bear in mind that if the testator were
simply to leave the house to his children in equal shares,
then as part of
the administration of the estate, the child who lives
there would be given every opportunity by the executors to
buy out the two-thirds share due to his siblings at an
agreed valuation. Presumably his siblings have a mortgage
or pay rent - is there any reason why the child living at
home should not do so as well?).
One further point: if the house is of high value, there
could be a double charge to Inheritance Tax, firstly on
the death of the testator, and secondly on the death of
the
resident. This is because the resident will be treated as
having an interest in possession in the house, meaning
that the value of the house will be counted as part of his
or her estate for IHT purposes.
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Storage
Once your Will is signed and witnessed, you should consider keeping it in a safe
and secure place where it cannot be damaged. You should also ensure your
Executors and/or family know where it is kept as your
Executors will need the original Will, not a copy, on your
death.
Prime Wills can store your Will for
you for a modest annual
fee. Ask your Will adviser for further details.
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