Understanding the Basics:

A will is a legal document that outlines how a person’s assets should be distributed following their death. Having a clear and comprehensive will is essential to ensure that your partner is properly taken care of and that your wishes are respected.

In many jurisdictions, if there is no will in place, the law dictates how assets are distributed. In the UK, this falls under the Intestacy Rules. This default arrangement may not align with your intentions, particularly when it comes to non-traditional family structures. Therefore, a will allows you to have control over who inherits your assets, including your partner.

Choosing the Right Executor:

An executor is the person responsible for carrying out the wishes outlined in your will. When selecting an executor, consider someone you trust implicitly, as this role involves handling financial matters and ensuring the proper distribution of assets. It is crucial to discuss this decision openly with your partner and ensure they are comfortable with your choice.

Guardianship for Children:

For couples with children, clearly stating your preferences for guardianship in your will is vital. This becomes especially important for same-sex couples, as legal recognition and protection for non-biological parents may vary. Clearly defining your wishes can prevent potential disputes and ensure the well-being of your children.

Protecting Your Partner:

In many countries such as the UK, marriage equality has granted same-sex couples the same rights as heterosexual couples. However, it is essential to stay informed about local laws and regulations, as they can vary. With global mobility on the increase and many people moving abroad for work or other considerations, this may potentially affect one’s place of relocation. If marriage is not an option or does not provide sufficient protection, legal documents such as a will or power of attorney become even more critical.

Regularly Review and Update:

Life is dynamic, and circumstances change. It is advisable to review and update your will periodically, especially after significant life events like marriage, the birth of children, or the acquisition of new assets. Ensuring that your will reflects your current situation will help avoid complications going forward.

Conclusion:

In the pursuit of love and happiness, legal matters should not be overlooked. Same-sex couples, like any other, can benefit greatly from thoughtful will and succession planning. By taking the time to understand and navigate these essential legal steps, you not only safeguard your partner’s future but also ensure that your wishes are respected and your legacy is preserved.

Sherrards is part of an international alliance of legal and accountancy firms, Alliott Global Alliance, represented in 96 countries and we can connect you with advisers if you are looking to move abroad.

To find out more, contact Nicole Marmor. 

The event brings together Trust and Estate Litigators from across the globe to network and learn about recent contentious proceedings and updates.

This year, the Trusts & Estates Litigation Forum will take place 4-6th February 2024, and will be hosted in the city of Marrakech, Morocco.

Charles Burrell, Senior Associate and Head of Contentious Trusts and Estates will be in attendance and representing Sherrards.

Charles said “It is a pleasure to be attending the Forum on behalf of the firm. I am excited to connect with fellow professionals and build relationships with my peers across the globe..”

If you are attending the Trust & Estates Litigation Forum and would like to meet with Charles while you are there, please reach out to him on the details below.

As part of The Sherrards Training Academy, we have asked our Legal Assistants and Trainee Solicitors to write articles to support their learning, and also to ensure they start to build on their own personal brand. This article has been fact-checked and proofread by Head of the Private Wealth department, Nicole Marmor.

Introduction:

In the realm of estate planning, Lasting Powers of Attorney (LPAs) hold equal significance to Wills as tools by which individuals can safeguard their autonomy and ensure their wishes are honoured.

The Powers of Attorney Act 2023 received Royal Assent on 18 October 2023 and signifies a milestone in the law surrounding LPAs. The legislation is poised to take effect in early 2024 and will usher in substantial changes to how LPAs are registered and safeguarded.

The Act comes in response to concerns surrounding complexities and inefficiencies permeating the current LPA system and aims to promote accessibility by enabling online registration.

What is a Lasting Power of Attorney?

An LPA is a legally binding document enabling the donor to designate a trusted person (or persons) as their legal representative. The attorney is authorised to act on the individual’s behalf in situations where they are unable to do so.

There are two types of LPAs, one pertaining to financial matters and the other to health and well-being. Many choose to have both in place. Both documents need to be registered in order for the attorney(s) to act. By registering a power of attorney, you ensure that you retain control over how your affairs are managed in the future, irrespective of your personal circumstances.

How will the Powers of Attorney Act change the current landscape?

The Act’s primary objective is to streamline the LPA process, making it more convenient whilst reducing the clerical errors traditionally associated with wet ink LPAs. LPAs will be able to be created and registered online which will (hopefully) significantly reduce the processing time.

Nevertheless, it’s not all ‘laissez-faire’ when it comes to the Powers of Attorney Act, considerable safeguards have been put in place with the aim of shielding vulnerable donors from potential fraud and abuse, attorneys are now being required to provide more comprehensive information regarding their relationship with the donor. Furthermore, to ensure compliance with these new measures the Office of the Public Guardian (OPG) has been granted increased authority to assess and challenge LPAs and a new criminal offense of LPA fraud has been introduced to fortify the measures.

Forecast for the future:

Cloudy with a chance of LPAs …

It is anticipated that there will be a surge in the number of people wishing to register an LPA due to the convenience of the digital registration process. Private Wealth solicitors are poised to play a pivotal role in facilitating this process, offering guidance on the recent amendments and potentially undertaking reviews of existing LPAs to ensure compliance with evolving legal standards.

The OPG is expected to provide online training specifically tailored to acquaint legal professionals with the new digital LPA registration process. Solicitors may consider integrating online resources and video conferencing services to streamline access to their LPA-related advice, adapting to the changing legal landscape to benefit their clients.

Inheritance tax

As a general rule assets of a deceased over the value of the nil rate band (currently £325,000) are chargeable at 40% inheritance tax.

The Acceptance-in-Lieu scheme (“AIL”)

Since 1910 the UK government has encouraged those administering estates, responsible for ensuring that the tax is assessed and paid, to consider offering works of art and important heritage objects to the nation in lieu of inheritance tax.

In addition to the advantage of being able to meet a tax liability in kind, the scheme offers a financial sweetener (known as the douceur) to provide an even greater incentive to make use of the scheme.

The criteria

The art or objects must be ‘pre-eminent’: in other words, of particular historic, artistic, scientific or local significance, either individually or collectively, or associated with a building in public ownership. A very wide range of objects is accepted each year as may be seen in the annual reports published by the Arts Council.

The art or objects must be in an acceptable condition.

The process

Offers must be made to the Heritage Team at HMRC. Those offers must be approved by the Secretary of State for Digital, Culture, Media and Sport (or the appropriate Minister in the devolved governments in Scotland and Wales) who is advised by Arts Council England’s AIL Panel. The AIL Panel consists of independent experts who seek specialist advice on the art or objects offered.

Key elements of any offer will be a valuation and justification for that valuation (generally independent opinion from more than one source is helpful); an explanation of why the object is considered pre-eminent; digital images and details of where the object can be inspected; evidence that the offeror has good legal title to the object (and details of its ownership between 1933-1945).

The douceur

In order to attract some of the finest works into national ownership the government offers a financial incentive to those administering estates. The sweetener consists of a 25% “cash-back” calculated against the inheritance tax that would normally have been due.

Example: Mr Gombrich’s estate contains an important Modern British work on paper. At date of death the piece was valued by an independent expert at £100,000. Mr Gombrich’s son is the sole residuary beneficiary and executor and decides to offer the painting in lieu of the inheritance tax liability of £40,000. The AIL Panel confirm the piece to be pre-eminent and agree a value of £100,000. The douceur is calculated as 25% of the inheritance tax due on the painting: 25% x £40,000 = £10,000. Gombrich junior receives £70,000 for the piece, the tax liability is cleared and the nation gains a pre-eminent work for the public to enjoy.

Conclusion

Every case will be different. The scheme offers an opportunity to make a not-insignificant tax saving whilst also having the benefit making the item(s) available for the appreciation of the general public. At the same time do bear in mind that there will be occasions when an item might achieve a better overall result (tax liability included) when sold on the open market (or indeed by a private sale). If you are considering your options I would be very pleased to advise.

What is the Chamber & Partners Legal Directory?

A Chambers & Partners ranking indicates that your Firm, and departments within it, have excelled in their area of legal expertise. A band one ranking is the top level and, means the Firm is highlighted as one of very few Firms with a similar level of expertise.

In order to retain her Band one status, Nicole was assessed on the following qualities:

• Technical Legal Ability
• Professional Conduct
• Client Service
• Commercial Astuteness
• Diligence
• Commitment

Within the directory, one client commented that “Nicole was a great pleasure to work with. I felt that I received a high level of service from a very knowledgeable expert in her field.”

Nicole says: “This is a great accolade which helps to show talent and clients alike that Sherrards continue to be at the top of our game. I am so grateful for such a supportive, close-knit team who continue to ensure we rank highly in the legal directories.”

A huge thank you to our referees for providing commentary on Nicole and her team, and the private wealth team for working hard to achieve this ranking in the High Net-worth Guide. 

Click here to see the ranking on the Chambers and Partners website.

With the wedding season upon us, it is worth reminding ourselves of several key considerations when entering into marriage or a civil partnership from a succession and inheritance tax perspective.

 

1. Under English law, marriage/civil partnership automatically revokes a Will. This is a quirk of English law – it is not applicable in Scotland and in other European jurisdictions.

   It means that if you have made a Will prior to getting married and your Will was not made in contemplation of your marriage, then following your marriage, your estate will pass under the Intestacy Provisions.  This may not be what you would like especially if you are entering into marriage with different levels of assets.  You may already own a property jointly with another person such as your sibling, and, in the event that something should happen to you, you may wish your share to pass to your sibling rather than your new spouse.

2. If it is not your first marriage, you should ensure that any new Will is carefully drafted to protect any children from your first marriage. If you leave everything to your second spouse, you cannot guarantee that they will look after your children as well as their own.  This could mean that your children may have to bring a claim on the estate of the second spouse – a costly and stressful process!

3. There is no such thing as a common law spouse under succession and tax laws (including both IHT and CGT). Therefore, if you have been in a long-term relationship but are neither married nor in a civil partnership, unless you have made a Will, your partner is not entitled to any of your estate.  Furthermore, there are no tax exemptions for assets passing to your partner even if you have made a Will.  For example, if you own a property together as joint tenants so that on your death your half share automatically passes to your partner by survivorship, if your half share is worth more than £325,000 (the current IHT exemption), then the balance would be subject to tax at 40%.

   As clinical as it may sound, one of the best ways of saving inheritance tax is to get married/enter into a civil partnership.  The latter can be both a same sex or opposite sex relationship.

   If you have not made a Will but were maintaining your partner, then he or she would have to bring a claim against your estate for financial provision.  However, they can only do so if when you died you were domiciled in the UK.

5. Prenups have been recognised in the English Court following the Radmacher Case and they may be worth considering if one party comes to the marriage/civil partnership with substantially more assets.

6. Finally, many people will be considering making cash gifts to the happy couple. Whilst there are a number of exemptions available for gifts from an individual on marriage/civil partnership including £5,000 to a child; £2,500 to a grandchild/great grandchild; and £1,000 to any other person, anything above those figures, after taking into account the £3,000 annual exemption, will be subject to the 7-year rule for larger gifts.

   Bear in mind that if you are making a gift other than cash, there could also be CGT implications. 

The above is not an exhaustive list but highlights a few matters worth considering.

If your children are under the age of 18, have you thought about who should care for them if both parents passed away?

According to research, seven out of ten parents in the UK parents do not have a legal guardian in place to care for their children in the event of their deaths.

If both parents with parental responsibility die and a guardian is not appointed in the will, then the courts will decide who looks after your children. There is no guarantee the court will appoint the person or people you would have chosen as guardians, so it is important to make the decision yourself.

Whilst a mother automatically has parental responsibility, unless the father is married to the mother, listed on the birth certificate, or a has court order bestowing parental responsibility on him, he will not automatically become the legal guardian if the mother dies.

A common misconception is that any children will automatically go to grandparents. This is not the case.  In the absence of a will appointing the grandmother/ grandfather as guardian, it may be necessary to apply to court to formalize this appointment. In some scenarios, there is even the risk that children are taken into care while guardianship is clarified.

Additionally, while godparents can have a crucial role in the lives and upbringing of children, they have no legal rights in respect of children in the event that their parents die. If you wish your children’s godparents to also be their legal guardians, you should ensure such an appointment is made by will.

Deciding who the guardian(s) should be is a difficult decision, so when appointing the guardian(s) here are some things to consider:

• Do your children know the guardians? If so, what is their relationship like?
• Do the guardians have the financial ability to raise your child if your estate cannot cover all the costs?
• Do the guardians have similar beliefs, values, and outlook in life as you do?
• Where do the guardians live?
• What are the guardians ages?
• Are the guardians likely make similar decisions to those that you would have made yourself for your children?

Also bear in mind, if each parent appoints different guardians the guardians must agree on decisions relating to the children, and if they can’t, it will be for the court to decide.

Finally, it is worth noting that your chosen guardians do not have to accept the appointment, so it is important that you discuss it with them, and they accept the responsibility, before appointing them.  However, providing your guardians are willing to accept the guardianship, you’ll have peace of mind you have done as much as possible to protect your children, even if you’re no longer around.

The intestacy rules (when you die without a valid will) are set by law and can be summarised as follows:-

• Married/civil partner with no children. If you die without a Will everything goes to the spouse or civil partner
• Married/civil partner with children, and you die without a Will assets up to £250,000 and personal possessions (not land) go to the spouse or civil partner. Assets above that limit are split 50/50 between the spouse and the children.
• Unmarried, living with someone, with or without children, if you die without a Will the cohabitee receives nothing. Where there are children and/or grandchildren, they get everything. Where there are no children, the deceased’s assets go to their siblings and parents.

Where there are no children or other dependants, no parents, grandparents, siblings, cousins, nephews, nieces or aunts and uncles (blood relatives not relatives by marriage), the whole estate goes to the Crown. To have share in the estate the cohabitant would have to make a formal claim under the Inheritance (Provision for Family and Dependants) Act unless all other potential beneficiaries were over 18 and agreed that some assets passed to the co-habitant.

What does all this means for inheritance tax

One of the key inheritance tax perks is that spouses/civil partners can bequeath any amount to each other tax free. However giving assets to children will trigger an inheritance tax bill if the gift exceeds the “nil rate band” or threshold of £325,000 per person plus an additional sum (currently £125,000 as long as the whole estate is not worth more than £2.2Million) in relation to homes passed to direct descendants.  If everything passes to a spouse/civil partner, then on their death, the first spouse/partner’s tax free threshold can be added to their own – thus doubling what can pass before tax. Everything that passes down above the tax free allowances is taxed at 40% of that value.

Avoiding the intestacy rules, is not the only reason it is a good idea to make a Will. With a Will:-

• You leave clear instructions about how your estate is to be distributed.
• You choose your own executors – the people who manage the estate.
• You appoint guardians to look after your children if they are under 18, until they come of age. You can also make financial arrangements for their benefit.
• You can make specific gifts to friends or family. These can range from items of jewellery to sums of cash.
• If you have remarried, you can ensure any children from your first marriage get a share of your estate.
• You to make gifts to charities
• You may avoid family disputes.

And just in case you were wondering, making a Will does not bring forward the date of your death!

Contact Nicole for more information.

In 2018, Prime Minister Theresa May announced that heterosexual couples will be able to enter into civil partnerships, giving them substantial tax benefits. It could open the way for cohabiting siblings to also receive the same treatment, pending a proposed change in the law.

Ms May’s announcement follows a Supreme Court ruling in June this year to allow Rebecca Steinfeld and Charles Keidan to have a civil partnership instead of a marriage. Before this, only same sex couples were allowed such partnerships.

A couple in a civil partnership is entitled to the same beneficial treatment in terms of tax, pensions and inheritance as married couples. The ruling therefore aims to provide greater security for unmarried couples who have formalised their relationships, and for their families.

But some siblings who have been cohabiting for years believe they should have the same rights too.

Sister Act inclusion

Two recent cases have highlighted the issue. Both involve sisters who had lived together for over 30 and 43 years respectively.

In both cases, each sister wanted to leave her estate, including her share of the jointly-owned home, to the other. Both homes, over time, had risen substantially in value. However, on the death of the first sister, her estate will only benefit from the £325,000 tax free allowance and not any of the extra benefits that married couples and civil partnerships now receive including the extra inheritance tax allowance introduced in April 2017 in relation to the family home. This currently allows an extra £125,000 to be passed tax-free to children and grandchildren. Siblings are also excluded from the right to pass assets to each other free of inheritance tax.

This means that, in the case of these cohabiting sisters, there would be substantial extra inheritance tax to pay. In one case, the surviving sister would be forced to sell their home of 23 years.

Both sets of sisters want the law changed to give legal recognition to ‘sibling’ couples who have decided to spend their lives together, in jointly owned homes until parted by death. The Civil Partnership Act bans ‘prohibited degrees of kindred and affinity’, which includes siblings. Lord Lexden has proposed a bill to include siblings in the Act. The bill received its second reading in the House of Lords in July but has yet to reach committee stage.

So a change could be coming soon. But in the meantime, the death of a co-habiting sibling could leave the survivor with the only options of selling up, borrowing money, or using an equity release scheme.

Contact Nicole for more information.

The Civil Partnerships, Marriages and Deaths (Registration etc) Act 2019 comes into force on 26 May 2019 allowing both same-sex and opposite-sex couples to choose either marriage or civil partnership.

It has taken well over a decade to achieve equality in this area.  In December 2005 the Civil Partnership Act was implemented.  This enabled same-sex partners to have their relationships officially recognised for the first time in England and Wales, affording them equivalent rights to married couples.  Whilst this was a step in the right direction for equality, same-sex partners still weren’t on an equal footing as they could not marry.

The position changed when the Marriage (Same Sex Couples) Act 2013 came into force in March 2014, with the first same-sex marriages taking place on 29 March 2014.  Once again this failed to level the playing field; same-sex partners had the choice of a registered civil partnership or marriage, with opposite-sex partners being unable to form a civil partnership.

Equality works both ways, and it has long been argued that to achieve this everyone should be able to formalise their relationship as they choose, either through a civil partnership or marriage. This has recently been tested in the Supreme Court which concluded that the failure to offer civil partnerships to opposite-sex couples is incompatible with articles 8 and 14 of the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950.   Article 8 is the right to respect for private and family life, whilst article 14 is the right to enjoy Convention rights and freedoms without discrimination on grounds such as sex and sexual orientation.

As a result of the judgement, the Government had the choice of either withdrawing civil partnerships or making them available to opposite-sex couples.  They chose the latter and the Civil Partnerships, Marriages and Deaths (Registration etc) Act 2019 comes into force at the end of this month.

It’s not yet known what the take up will be for opposite-sex couples wishing to register a civil partnership, watch this space. But remember, for anyone getting married or forming a civil partnership, any existing Will you hold will be revoked unless made in contemplation of the ceremony.

Get in touch with our  Wills, trusts and probate team and tick this off your to do list before you say “I do”.

Warm congratulations to all however you choose to celebrate your relationship.

To find out more, please contact Nicole.