Private Client
LOOK AFTER YOUR ESTATE... Whilst you have been building your assets Horwich Cohen Coghlan has been building its expertise and together we can work to protect your assets and enrich your family.
Whether you are simply seeking to review your financial arrangements or you or your loved ones have suffered an event that prompts you to seek legal advice such as bereavement, relationship breakdown, serious illness or personal injury, we have the people and the skills to give you a first class personal service. Our Private Client department advises on:
- » Wills, Trusts and Pensions
- » Probate and Administration of Estates
- » Will Disputes
- » Lasting Power of Attorney
- » Court of Protection
- » Financial Settlements on Divorce, or cohabitation breakdown
- » Cohabitation and Prenuptial agreements
- » Pension and Trust assets
- » The Use of Pilot/Spousal By-Pass Trusts» The Use of Pilot/Spousal By-Pass Trusts
- » All Family Matters
DON'T WAIT TO BE PROMPTED Contact:
Pamela Wilson
Head of Private Client
0161 830 4672 email pam.wilson@hccsolicitors.com
Cohabitation and Prenuptial Agreements
Whilst consultation has been taking place and moves made to put couples who cohabit on an equal footing with those who are married or have entered into civil partnerships the reality remains that those who cohabit do not have the same rights and responsibilities. This can be particularly noticeable when it comes to resolving financial matters following separation.
An agreement entered into between the parties could carry weight should separation occur. Likewise those entering into marriage may wish to consider putting in place a prenuptial agreement which could be given weight on a subsequent divorce. There are complex areas where we can assist.
Court of Protection
We advise on the making of applications under the Mental Capacity Act 2005 to the Court of Protection. We fully endorse the principles of the Act that people should be supported and helped to make decisions. Should it be necessary to apply to the Court we can guide you through the procedures involved
Financial Settlements on Divorce or Cohabitation Breakdown
We advise on all aspects of the breakdown of a relationship and have particular expertise in areas where the financial position is complex, in particular where there are trusts in place or pension assets which need to be fully understood before any settlement can be contemplated.
If a settlement cannot be reached we will be firm in acting on your behalf to ensure the best possible outcome for you and your family. As the common law husband or wife does not exist in the legal framework, it is particularly important that those who live together without marriage or civil partnerships take advice at an early stage and consider the merits of entering into a cohabitation agreement. Our advice on family matters encompasses children related matters, injunctions and domestic violence.
Lasting Power of Attorney
On 1st October 2007 Lasting Power of Attorney replaced the existing Enduring Power of Attorney. Whilst Enduring Powers of Attorney made prior to 1st October 2007 remain effective, new powers come within the provision of the Mental Capacity Act 2005. Lasting Powers of Attorney can be made to deal with property and affairs and to deal with personal welfare issues.
Much concern has been expressed in relation to the cost of setting up a Lasting Power of Attorney compared with its predecessor but the cost of application to the Court of Protection could far outweigh those costs should incapacity occur and no prior provision has been made.
Everyone therefore should consider putting in place a Lasting Power of Attorney particularly when making a will, or when taking out a critical illness policy or prior to undergoing medical treatment. It is still possible to make an advance medical decision, often described as a living will, but it is important to take specialist advice on these areas.
Pension Death Benefits and the use of Pilot Trusts
Many people have heard the expression "pilot trust" or "spousal bypass trust". Either term is commonly used in the context of members of pension schemes directing by way of nomination death benefits into a trust thereby enabling that scheme member, by the careful choice of trustees, to retain some control over the monies and benefit a range of persons according to their needs.
Further, where necessary, this planning means that the monies can be kept out of a specific dependant's estate for inheritance tax purposes. This is achieved by the scheme member setting up a lifetime trust for a nominal amount, say £10.00, and nominating the pension death benefits into that trust. The trust would normally be a discretionary trust and it would lie dormant until receipt of the death benefits.
Whether or not a nomination can be made into a trust arrangement in this manner will depend upon the scheme rules, but in most circumstances the scheme rules will allow this type of arrangement.
Lump sum, or capital, payments on death from a pension scheme, can come from insured arrangements or the value of the pension fund itself where that fund has been built up by the member's contributions. The area of pension law is complex but most pension schemes do provide for a capital payment to be made on the death of a member, under the age of 75 years, prior to that member having taken benefits.
Many pension schemes also provide, particularly personal pension schemes, for capital payments to be made on death after the member has taken benefits, but subject to tax charges.
Where a member has taken benefits from a pension scheme which under its scheme rules allows a dependant to continue to take pension after the member's death, it is important to provide safeguards in terms of a nomination into a trust so that there is an option for the dependant to continue to take pension income payments rather than a lump sum payment where these circumstances suggest this is appropriate.
Many pension nominations are in favour of a spouse and it is always therefore worth considering whether a nomination of the whole of or part of those death benefits into a trust arrangement, where spouse and children can benefit, could be more flexible and meet the family's particular circumstances.
Whilst a discretionary trust, or any type of trust, has its own taxation regime upon which advice is required, in many cases it is certainly worth looking into this type of arrangement.
Where the member's pension scheme is one where that member and his family have interest also as trustees, e.g. in a small self-administered scheme, the member could provide an Expression of Wish to the scheme trustees asking them to declare a trust of the death benefits on the member's death rather than setting up a lifetime pilot trust. There is however more certainty about the terms of the arrangement where the trust is set up beforehand.
Once the trust is in place, where the terms of that trust allow monies to be loaned to a beneficiary, e.g. a spouse, those loans could be made from the trust rather than capital distributions which could have the result of reducing the spouse's estate on their death as there would be a debt due to the trust from the spouse's assets.
If you are interest in looking into this arrangement more then contact Pamela Wilson on 0161-830 4600 or direct dial on 0161-830 4672 email p.wilson@hccsolicitors.com
Pension and Trust Assets
We have a depth of experience in relation to the technical and practical workings of pensions and are able to advise on pensions in the context of estate planning and where issues occur within divorce proceedings.
Pension and Trust legislation is extremely complex and the practicalities surrounding the workings of pension and trusts can be daunting.
Probate and Administration of Estates
When someone close to you dies it can be a very distressing time. We can assist you in sorting out the formalities relating to the administration of an estate, whether or not there is a will.
We are also experienced in those cases where matters are not straight forward and where action needs to be taken in relation to the will, whether by way of a deed of variation or through court proceedings including where a claim needs to be made under the Inheritance (Provision for Family and Dependants) Act 1975.
Private trading businesses and the use of Pilot/Spousal By-Pass Trusts
The Spousal By-Pass Trust (or more commonly known as the Pilot Trust) whilst being clearly relevant for those situations where an approved pension fund will pay benefits on death, it is also a relevant and effective estate and inheritance tax planning device for the owners of private trading businesses or farms.
Shares in a trading company or interest in a trading partnership usually qualify for 100% business property relief. Where 100% business property relief is available this means that there is no limit on the amount that can be transferred to other than the surviving spouse of civil partner inheritance tax free. For example shares could be transferred into a spousal by-pass trust. This is useful where partners or co-share holders have in place arrangements for the purchase of the business interest of a deceased owner. This common arrangement has the effect of ensuring that the surviving business owners receive the shares of the deceased and the family or other beneficiaries of the deceased receive cash. This is usually funded by life assurance held in trust and provided for by virtue of a double option agreement. Without a spousal by-pass trust the terms of a double option agreement would mean that the policy proceeds would buy the deceased’s shares from his personal representatives who would then pass the funds to the widow. As a result, the co shareholders are left in complete ownership of the business and the widow would have a sum of cash. The cash, unlike the business interest, would not qualify for business property relief and thus inheritance tax could become an issue in respect of the cash on the widow’s death.
As an alternative, the deceased could have put in place a spousal by-pass trust, either in his Will or during his lifetime with a view to leaving the business interests subject to it on death. Should such a trust be in place then the shares would pass directly to it on the deceased shareholders death and there would be no inheritance tax to pay regardless of their value provided they qualified for 100% business property relief. Under the double option agreement the policy proceeds would be used to purchase the shares from the trustees of the trust with a result that the proceeds of sale would be held inside the trust and not in the estate of the widow. However under the terms of the trust there would be a wide class of beneficiaries including the widow who should she require funds these could be made available to her by way of advancement or preferably by way of an interest free loan. The making of loans rather than outright capital advancements can be effective from the point of view of inheritance tax planning.
This type of arrangement was often incorporated in wills where husband’s and wife were making use of a nil-rate band discretionary trust on the first death where the Will provided that any shares attracting 100% business property relief would pass also into that trust arrangement, thereby boosting the value of the nil-rate band trust in circumstances where the shares were turned into cash, either as a result of the existence of the double option agreement and the life cover or by the widow simply deciding to use available cash in order to purchase the shares, thereby replacing the shares with cash in the discretionary trust.
As there are tax issues to be considered in any type of trust arrangement or transfer it is important that legal advice is sought and again in relation to the drafting of any trust arrangement to ensure that it meets its objectives.
Will Disputes
Sadly disputes arise following death where a will is in existence but where there are issues regarding its validity or interpretation or where it is felt that the will for some reason does not seem to reflect the deceased's wishes, it may be that there are questions as to whether the deceased had mental capacity when the will was made or whether the deceased has unreasonably not made provision for a person or persons who should have been in his or her mind when the will was being drawn up. We can advise on this sensitive area.
Wills, Trusts and Pensions
In preserving and protecting your family wealth we can advise on suitable wills and trusts.
We have the expertise to advise upon and draft all types of wills and trusts, whether in connection with financial planning, personal injury settlements or for charitable purposes.
Whether your affairs are simple or complex we will work with you to provide the most suitable arrangements for you and your family to ensure that your assets pass in accordance with your wishes and in the most tax efficient manner.
Often pensions are forgotten in terms of death benefit planning but it is extremely important to ensure that the pension is structured in the most appropriate way. We have considerable expertise in this area
Benefits of a Will
Having a will means that you decide who benefits from your estate on your death but also the way you make your will could save significant amounts in tax especially for married couples and civil partners.
What happens if you die without a valid will
The law dictates who inherits, known as the intestacy rules. If there is a surviving spouse they receive a legacy of £125,000 from the estate if you also have children and £200,000 if there are no children but there are parents and/or brothers and sisters. A consultation paper has proposed increases in these amounts to £350,000 and £650,000 respectively but this has not yet taken effect What happens to the remainder depends on whether there are children. If there are children, they take one half of the remainder outright (or on statutory trusts if under age 18). The surviving spouse gets a life interest (right to income) in the other half with the capital passing to the children on the spouses death. If there are no children, other relatives in a prescribed order take the rest. It is therefore a misconception that a husband and wife are automatically entitled to the whole of each others estates on death. Further remarriage revokes a previous will whilst a divorce removes from the will reference to the divorced spouse.
Practical reasons for making a will
- Those you wish to benefit will in fact benefit after your death
- Your estate can be distributed faster and often with fewer costs
- Where there are children under age 18, you can specify guardians for them in your will and you can control the terms of the trust under which the monies are held and who will act as trustees
- If you wish to specify successive interests, for example, someone to have an income for life and after their death for someone else to benefit this can be done by way of a trust in your will
Tax reasons for making a will
In general terms Inheritance Tax (IHT) is payable on an estate with a value in excess of the "nil rate band" (currently £300,000) if it passes other than to your spouse (or charity). The setting up of a trust within a will can avoid an estate passing into the estate of a beneficiary and adding to their IHT liability or being frittered away or becoming assets under attack in a divorce situation. Whilst the government have doubled the spouses nil rate band to a current rate of £600,000 thereby removing the necessity for the nil rate band will for IHT purposes there are still tax advantages in the use of a trust following the death of the surviving spouse Therefore do not hesitate to take advice with a view to reviewing your will and or putting in place a valid and suitable will Contact.
Horwich Cohen Coghlan on 0161 830 4600 or Pamela Wilson direct on 0161 830 4672
email p.wilson@hccsolicitors.com
Pension Death Benefits and the use of Pilot Trusts
Many people have heard the expression "pilot trust" or "spousal bypass trust". Either term is commonly used in the context of members of pension schemes directing by way of nomination death benefits into a trust thereby enabling that scheme member, by the careful choice of trustees, to retain some control over the monies and benefit a range of persons according to their needs.
Further, where necessary, this planning means that the monies can be kept out of a specific dependant's estate for inheritance tax purposes. This is achieved by the scheme member setting up a lifetime trust for a nominal amount, say £10.00, and nominating the pension death benefits into that trust. The trust would normally be a discretionary trust and it would lie dormant until receipt of the death benefits. Whether or not a nomination can be made into a trust arrangement in this manner will depend upon the scheme rules, but in most circumstances the scheme rules will allow this type of arrangement.
Lump sum, or capital, payments on death from a pension scheme, can come from insured arrangements or the value of the pension fund itself where that fund has been built up by the member's contributions. The area of pension law is complex but most pension schemes do provide for a capital payment to be made on the death of a member, under the age of 75 years, prior to that member having taken benefits. Many pension schemes also provide, particularly personal pension schemes, for capital payments to be made on death after the member has taken benefits, but subject to tax charges.
Where a member has taken benefits from a pension scheme which under its scheme rules allows a dependant to continue to take pension after the member's death, it is important to provide safeguards in terms of a nomination into a trust so that there is an option for the dependant to continue to take pension income payments rather than a lump sum payment where these circumstances suggest this is appropriate.
Many pension nominations are in favour of a spouse and it is always therefore worth considering whether a nomination of the whole of or part of those death benefits into a trust arrangement, where spouse and children can benefit, could be more flexible and meet the family's particular circumstances.
Whilst a discretionary trust, or any type of trust, has its own taxation regime upon which advice is required, in many cases it is certainly worth looking into this type of arrangement.
Where the member's pension scheme is one where that member and his family have interest also as trustees, e.g. in a small self-administered scheme, the member could provide an Expression of Wish to the scheme trustees asking them to declare a trust of the death benefits on the member's death rather than setting up a lifetime pilot trust. There is however more certainty about the terms of the arrangement where the trust is set up beforehand.
Once the trust is in place, where the terms of that trust allow monies to be loaned to a beneficiary, e.g. a spouse, those loans could be made from the trust rather than capital distributions which could have the result of reducing the spouse's estate on their death as there would be a debt due to the trust from the spouse's assets.
If you are interest in looking into this arrangement more then contact Pamela Wilson on 0161-830 4600 or direct dial on 0161-830 4672 email p.wilson@hccsolicitors.com
If you would like to request a quote for having a Will prepared please download one of the following forms into your own word area on your PC, print and complete. Then either post back in the external mail to
Pam Wilson, Horwich Cohen Coghlan, Quay House, Quay Street, Manchester M3 3JE or email the completed form to pam.wilson@hccsolicitors.com:
Review your Nil Rate Band Will
Many married couples have carried out will planning in order to utilise their individual inheritance tax allowances. They have made use of sophisticated will planning involving the use of a trust arrangement, known as a "nil rate band will trust".
This arrangement effectively ring-fences on the first death within a trust environment an amount equivalent to the nil-rate band whilst enabling the surviving spouse to have the benefit, where required, of the trust assets.
Such an arrangement, however, can appear complicated to anyone unused to trust arrangements and particularly so where the main value of the estate lies in the marital home. Even those couples who have been made aware of this tax planning via their lawyers, accountants, financial advisors or otherwise, do not in all cases take up this planning, not only because of its complication, but also because of the costs involved.
As a result of the Government's pre-budget report of 9 October 2007 it would appear that these trusts will not be needed in order to make full use of both parties nil-rate band allowances. This is not to say a discretionary trust within a will already drafted may not be useful for other purposes, such as protection of assets and inheritance tax planning further down the family line, but nonetheless the main purpose for which these trusts were put in place no longer applies.
A spouse will be allowed to transfer any unused part of the nil-rate band to her surviving spouse and the initial indication is that this will be automatic and therefore will benefit those couples who have not hitherto had the benefit of professional advice.
Accordingly, those who have entered into this type of nil-rate band planning may wish to review their wills in the light of this change and whilst the change is welcome, unfortunately the need to review the wills comes on top of the April 2006 legislation in relation to trusts which has already led those who have trusts included in their wills to review them in the light of those changes.
It is still necessary and relevant to plan wills effectively and as it has been suggested that more than 50% of people die without a valid will in place, the need to address estate and death benefit planning cannot be underestimated
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