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Helen Freely Private Client Partner Druces LLP

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Presentation on theme: "Helen Freely Private Client Partner Druces LLP"— Presentation transcript:

1 Helen Freely Private Client Partner Druces LLP

2 Wills Lasting Powers of Attorney Living Wills Personal Injury Trusts

3 I dont need a Will because it will all go to my wife anyway… This is not always the case. If you do not have a Will your estate will pass under the Intestacy Rules which are laid down by statute. The Intestacy Rules determine who gets what depending on who survives you. At worst, your estate could pass to the Crown. I dont need a Will because I dont have any assets anyway… What if you inherit something from someone else or win the lottery just before you die? You could leave your estate in a real mess for your loved ones to sort out. Also, your business may be starting out now but could be very valuable upon your death. Everyone knows what I want to do with my estate anyway… We all know how different people can interpret what you have said. Regardless of what you have said in your lifetime it is not a valid Will unless it is in writing and your signature is witnessed by two independent adult witnesses. MYTHS ABOUT WILLS

4 I can just go down to WH Smith and do one myself… Of course you can, but unless it is the most simple of Wills, chances are you will get something wrong. The scope for error is high. Also, some assets pass outside of your Will, for example some jointly held property (most peoples most valuable asset), will pass in such a way that your Will may not have any effect. It is much safer to take proper advice in relation to your entire estate, if anything to reduce any difficulties for your family later. Remember it is a document which deals with your entire estate and all of your beneficiaries / relatives, so it is worth getting it done properly. A well drafted Will is likely to save your estate money in the long run, as contentious probate cases can be very expensive.

5 Who do you want to sort out the estate for you, and act as your Executors? Who do you want to act as guardians for your minor children? Do you have specific funeral wishes? Do you have assets abroad? If so, you should have a Will in each jurisdiction where you have assets. At what age do you want minor children to inherit? 18, 21, or 25 Are you on a second / third marriage or civil partnership, with children from a previous relationship but want to treat everyone fairly? Are you thinking about future long term care needs already? SOME QUESTIONS TO THINK ABOUT IN RELATION TO YOUR WILL

6 Do you want to leave gifts to charities? Or give certain items to certain people? Is there anyone you particularly want to exclude or who you suspect may challenge your Will? In which case you should get a professional to make it bullet proof. Are you likely to get married or enter a civil partnership soon? In which case, your will should be drafted in contemplation of marriage as marriage revokes a Will. Do you never intend to marry or enter a civil partnership with your partner? In this case, it is even more important to provide for them in your Will as under English law your partner has no automatic rights to your estate. Are you a high net worth individual, who needs inheritance tax advice and estate planning? Because the laws relating to Wills are old and archaic, professionals put in appropriate administrative provisions to enable your executors to carry out their duties effectively. It needs to be executed correctly – with you signing it in the presence of two independent adult witnesses, those witnesses giving their name, address and occupation.

7 Documents whereby the donor (you) give the attorney (someone you trust) authority to step into your shoes and make decisions on your behalf – either now or in the event you lose mental capacity. There are two types:- Property & Affairs Health & Welfare LASTING POWERS OF ATTORNEY (LPAs) What are they?

8 These deal with:- Your assets Financial affairs House Bank accounts Shares They do not deal with Trustee appointments or directorship appointments (in which case the trust document or company documents govern this) Can take effect immediately or only in the event of you losing mental capacity. LASTING POWER OF ATTORNEY – PROPERTY AND AFFAIRS

9 These deal with:- where you live what you wear what you eat whether to refuse or allow life sustaining treatment Only take effect in the event of you losing mental capacity. LASTING POWER OF ATTORNEY – HEALTH & WELFARE

10 They need to be registered with the Court of Protection before they can be used You can appoint one or more attorneys, and, if more than one, you can appoint them to act jointly or independently. Bear in mind that if you appoint them to act jointly, if one of them has died or is unable to act, the other will not be able to act on your behalf. If they are only to take effect on loss of mental capacity, they can only be activated after an appropriate psychiatric report has been obtained. In order for them to be used, they are registered with the banks / doctors, so that your attorneys can step into your shoes as decision maker. NB – if you never intend to marry or enter a Civil Partnership with your partner, but want them to make decisions on your behalf, it is vital that you complete a Health and Welfare Lasting Power of Attorney, because otherwise they will not be able to make health decisions on your behalf. They will not necessarily have the status of being your next of kin. PRINCIPLES COMMON TO BOTH TYPES OF LASTING POWER OF ATTORNEY

11 What are they? Documents which set out your wishes to your medical team as to what they should do in the event that you are unable to communicate your wishes to them. The express your decisions, in relation to future healthcare which is intended to apply both now and at some future time when you no longer have the capacity to express your wishes. LIVING WILLS (also known as ADVANCE DIRECTIVES or ADVANCE DECISIONS)

12 A Lasting Power of Attorney for health and welfare is more effective as it has more legal authority. You could do both an LPA and a Living Will but just a Living Will on its own can throw up problems. GENERALLY

13 A simple document may be too vague to follow Complex documents may be heavy on medical terminology and could be too specific for the eventual circumstances and difficult to understand. There are no specified form of words. An oral Living Will may be vague and imprecise and there are problems of proof of the terms of the decision. An oral Living Will cannot refuse life-sustaining treatment. An Living Will will not be applied to the treatment in question if: - The person making the advance decision has the capacity to give or refuse consent Or –The proposed circumstances are not the circumstances specified in the Living Will – e.g. the definition of different types of comas, diabetic coma, brain injury, vegetative state, locked-in syndrome, etc PROBLEMS:-

14 or –Circumstances exist which the person did not anticipate when the Living Will was made (e.g.. so with the advances in medical science I must emphasise the importance of keeping Living Will up to date and re-confirming it, perhaps every year). Living Wills usually contain a triggering event, normally requiring a doctor to confirm that there is no hope of recovery. As a prognosis is only ever the best possible guess and there are cases of incorrect diagnosis and prognosis, a Living Will might not help in these circumstances as the effect of the document could not be corrected once the patient had died. There is a danger of vulnerable patients being pressurised into signing a Living Will. The British Medical Associations code of practice emphasises that patients should be discouraged from signing them at a time when they just received a poor prognosis or bad news about their condition but have not yet had time to consider this with their medical team

15 State what the document is, date, your full name, address, date of birth, distinguishing marks, and to whom it is addressed, e.g. my doctor, my family, and all other members of my healthcare team General statement and values history, i.e records of any discussions with your doctor or healthcare team, and that persons GP, and contact details, and whether the doctor has a copy of the advance decision. It should contain a statement that it is only to be used if you lack capacity to make treatment decisions. Otherwise it will not be valid under the Mental Capacity Act Circumstances in which the decision should apply – i.e. a definition of the triggering event, so at what time and in what circumstances the decision will come into operation. Often that the decision will operate once one or more doctors confirm that the patient is in the specified mental or medical condition. Then you have to express clearly the treatment which is being refused, either generally and specifically, e.g. that you wish to be given no treatment other than being kept comfortable and free from paid, but could include specific types of treatment which are unacceptable, e.g. blood transfusion for Jehovahs witnesses. THINGS TO INCLUDE IN YOUR ADVANCE DIRECTIVE:-

16 The reasons for the decision should be set out which will help the doctors decide whether there has been any relevant change of circumstances which would render the decision inapplicable under the Mental Capacity Act E.g. religious reasons. Life sustaining treatment – generally better to put this in a Lasting Power of Attorney for Health and Welfare Persons to be consulted – you may want the healthcare team to consult with specific relatives and friends who know of your wishes, but consider again a Lasting Power of Attorney The document should be signed by you, and witnessed and dated. It should have a provision for it to be confirmed at later dates, e.g. I hereby confirm the contents of my Advance Directive on this date and signed and witnessed again. Witnessing the signature is not essential except where the advance decision seeks to refuse life-sustaining treatment. You cannot include a decision to refuse basic care, i.e. warmth, shelter, personal hygiene and the offer of food and water by mouth. Also, let people know where it is kept and lodge copies with anyone who is close to them.

17 Trusts as enemies of the people* –v- Trusts as protective mechanisms Proof that trusts are unpopular:- They are the subject of monstrously discriminatory and illogical taxation but no-one seems to mind and not a whisper of complaint. The ordinary voter thinks that trusts are for the rich, are just a tax avoidance tool, and so the trust has nothing to complain about if it is taxed out of existence. Too many people have abused their existence and created shams. The trust has been used for tax avoidance to a degree which has seriously stained its reputation. There is an element of smoke screens with trusts, especially with non-disclosable letters of wishes. It is often the trust itself which annoys the beneficiary class (especially the third generation of beneficiaries who sometimes did not know the settlor) and however well intentioned the trustee, the beneficiaries in the end feel they have no option but to declare war on the trustees. The beneficiary sees no reason to thank his trustee but longs to paddle his own canoe. *A lovely phrase coined by Christopher McCall, QC PERSONAL INJURY TRUSTS (also known as COMPENSATION TRUSTS)

18 Yet, one of the oddities of trust law, is that no-one knows when he will need a trust:- –The father who sees his daughter making a possibly unwise choice of husband and wanting to give her protection –An unmarried couple who own a property together but who have made unequal contributions to the property –The old man fearing the onset of Alzheimers may well feel that he would rather choose trustees to look after himself and his family and put them in post while he still has enough capacity to help them learn their job. –The victim of an accident may well find that a trust is crucial to his future care. –The recipient of a compensation payment, which needs to last for his lifetime and not be dissipated upon divorce or on expensive care fees.

19 It is a protective mechanism It is designed to control devolution – to get the trust fund to the right people, not the wrong ones. It was initially designed to separate legal ownership from beneficial ownership – i.e. to separate who controls the decisions and who benefits from the decisions. To ensure equitable justice vis a vis the guardians of wealth and those who were entitled to benefit from it but could not guard it for whatever reason. Perhaps they should be more tax neutral, neither privileged nor penalised so that they can still be used for the purposes which they were initially invented. Perhaps, by bringing in see through provisions to enable the self-protective trust to be taxed as if the trust property had remained in the settlors hands and by ending the penalty on inter vivos gifts if they are subject to trusts. Then, we can root out the use of trusts for illegitimate purposes. WHAT IS A TRUST MOST LIKELY TO BE INTENDED TO DO IF NOT TAX AVOIDANCE?

20 A personal injury trust is a trust fund set up out of damages or compensation as a consequence of personal injury There is no reason that such a trust could not be used for the benefit of someone coming back from Afghanistan or another war zone with injuries. For example, an injured soldier may receive a large interim compensation payment which will rule him out of receiving means-tested benefits. Instead, a personal injury trust can be set up by the soldier within 52 weeks of an interim or final payment, but it can be even better if the cash is not received by the injured individual but paid directly to the trust. Assuming the damages are paid directly to the personal injury trust and it is structured as a discretionary trust so that the individual has no automatic right to the funds, the monies are not treated as an individuals capital for the purposes of means tested benefits. If the compensation is paid direct and the injured party meets certain criteria (as set out in the tax acts), e.g. being in receipt of certain disability benefits, there is also no tax on the transfer. Many people ask:- is the money still mine? The correct answer to this that you have the benefit of the money but the trustees (of which you can be one) are the legal owners of the money. PERSONAL INJURY TRUSTS

21 A personal injury trust requires two or more trustees, one of whom can (but need not) be the injured person. Further interim payments or the final payment of compensation can be added to the fund. It is important to think long term when a compensation payment is received and to consider setting up such a trust if, for example, the recipient might need state benefits at a later date or require long term care. Personal Injury Trusts have other uses as well as ringfencing a claimants capital from a means-tested benefit assessment. Many people are unaccustomed to handling large sums of money and managing its investment. Some may be worried in case their compensation is dissipated on divorce and would like to see it protected. Others will want to ensure that what is left of their award can be used for the benefit of their dependants, as well. Some may be left with mental capacity issues, post war, and therefore need the help of trustees to control and manage their fund on a daily basis.

22 If discretionary in nature, the discretionary trust itself will still be subject to tax: with income returns taxed at 50%, capital gains at 28% and the usual 10-yearly charges of up to 6%. So, these higher tax rates need to be considered before a larger award is committed outright. However, if the discretionary trust is also eligible to be a disabled trust – which depends on the beneficiarys entitlements to state benefits – the disabled individual can reclaim the tax. There is no one size that fits all, so these should be established with caution, and you do need to bear in mind that the injured and their families could be locked into this structure for some time. But, at least it is a mechanism for preserving the compensation payment for life, which is what it is intended to do. TAXATION OF PERSONAL INJURY TRUSTS:-

23 Helen Freely Private Client Partner

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