Wills, Trusts and LPAs: The Right Money – To the Right People – At the Right Time

No one likes to think about the worst happening. Everyone knows they should have savings and a retirement plan, but Wills, Trusts and Powers of Attorney often fall lower on the list of priorities.

But planning for the future is always a positive step. By creating an estate plan you can:

• Reduce, or even eliminate Inheritance Tax (IHT)
• Protect your legacy and provide for your family
• Keep some control over what happens to your assets when you can no longer make the decisions
• Guide your loved ones so that they can honour your wishes without undue stress

Wills, Trusts and Lasting Powers of Attorney are the three main pillars of an estate plan. In this guide we explain what they are and why you need them.

Wills

A Will is a legal document which directs your representatives (or Executors) as to how to distribute your estate. It can be very simple, for example, passing all of your assets to your spouse, and ultimately to your children on second death.

Wills can also be extremely complex, creating Trusts and making bequests to a wide range of beneficiaries, including family members, friends, and charities.

It is important to seek the right advice when making your Will to ensure that your wishes can be met within the bounds of legal process.

Tandem Financial Ltd offer a Will Writing Service and you can read all about it here on our website: https://tandemfinancial.co.uk/how/will-writing-and-estate-planning/

Dying without a Will is referred to as ‘intestacy.’ This means that your estate will be distributed to your relatives according to a standard process rather than in line with your wishes. If you have no family, your estate would pass to the Crown.

The rules of intestacy do not provide for:

• Unmarried partners
• Carers or close friends (even where there is no family)
• Step-children

Similarly, you may wish to exclude certain family members from inheriting or specify which assets should pass to each beneficiary.

The intestacy rules favour the standard ‘nuclear family’ and may be particularly problematic in the cases of couples who live together, second marriages or blended families.

The specific rules applied to your estate will vary depending on your family situation and where you are in the UK. However, even with a relatively modest estate there is no reason to accept the rules of intestacy. Writing a Will is a simple and painless process, and probably not as expensive as you might think.

Trusts

A Trust is another type of legal document which allows you to specify how assets should be distributed amongst your beneficiaries. Trusts can take effect during your lifetime or on your death. They can be created as part of your Will or completely separately.

Trusts will typically have the following parties:

• The Settlor, or original owner of the assets placed in Trust
• The Trustees, who are appointed by the Settlor to manage and distribute the Trust’s assets
• The Beneficiaries, who may receive capital or income from the Trust

The main types of Trust are:

• Discretionary – this is the most commonly used type of Trust as the Trustees have discretion over how and when to distribute the Trust’s funds.
• Bare/Absolute – this type of Trust is effectively an outright gift to the Beneficiaries, without giving them full control. Beneficiaries normally become absolutely entitled to the Trust’s assets when they reach the age of majority, typically referring to age 18.
• There are a number of variations within these basic Trust structures, all of which have different benefits, levels of flexibility and tax consequences.

Some potential uses of a Trust are:

• To transfer wealth outside your estate, reducing IHT
• To ring-fence a legacy for a particular category of beneficiary without immediately giving up control
• To protect assets in the event that beneficiaries divorce or are declared bankrupt
• To ensure that life policy benefits are paid outside your estate
• To allow one party to have the use of an asset (for example an income, or the right to live in a property) while preserving the capital for another beneficiary
• To set aside funds for charitable causes

Trusts can be complex and there may be tax consequences at outset and during the lifetime of the Trust. It is important to seek advice on the most suitable structure and investment strategy. We can assist with all of this at Tandem.

Lasting Powers of Attorney (LPAs)

An LPA allows you to legally delegate important decisions to a trusted relative or friend if you lose capacity to make these choices for yourself.

If you are unable to make your own decisions and do not have a Power of Attorney, your family or carers will need to apply to the Court of Protection. The Court will appoint a ‘deputy’ to act on your behalf.

This means that important choices, such as who should make healthcare decisions for you or manage your money, will be taken out of your hands. The process can also take time, which can be distressing for everyone involved.

The two types of LPA are:

• Property and Financial (paying bills, managing investments and maintaining property)
• Health and Welfare (care, medical treatment and end of life decisions)

Once created, your LPA must be registered with the Office of the Public Guardian to be formally recognised.

An LPA is only valid if it is created while you still have full mental capacity. This is why it is a good idea to create your LPA at the same time as your Will. To be effective, the LPA must be in place before you actually need it.

The purpose of estate planning is to take control and protect your legacy. With the right advice, you can make sure that more of your money goes to your loved ones without delay and with minimal stress.

Find out more about your estate planning options here:
https://tandemfinancial.co.uk/how/will-writing-and-estate-planning/