Make No.1 – not having an Estate Plan or Will
The estate Plan is a legal document that will outline the steps to dispose of your Estate , that is, all your worldly items (home and other financial assets, such as your car, money and investments, and so on.) A Estate Plan tries to ensure that the beneficiaries you intend to leave get what you would like them to receive. In addition, it also seeks to increase what you can get from your estate through cutting down on taxes and other costs.
It is crucial to realize that even though an Estate Plan contains the Will as its primary document, it frequently employs different legal processes to achieve the goal mentioned above. An common Estate Plan may include trusts or property ownership, power of attorney, and other legal documents that will be discussed in the report.
In this moment, you could be tempted to “I don’t need a Will, my affairs are very simple – I am married and it will all go to my wife/husband”.
You should prepare your estate plan and write Wills for the following reasons:
First , by making a Will it eliminates any doubts regarding the intention of the spouse of your choice to receive the entire estate should that be your intention. Did you know that should you die without the Will (intestate) then the Laws of Intestacy say that the event you have children, your spouse only has the right to the initial PS250,000 portion of your estate and the rest split between your children.
It’s clear how this could create significant problems for you If you die without the formality of a Will which would leave your spouse possibly short of funds or perhaps needing to sell the home in order to pay your children.
If you’re not married, but you live together, your partner does not have the right to your assets in the event that you die. The law does not recognize as the law of inheritance as a ‘common lawful spouse’. Your partner may be forced to argue before the courts to claim the right to share in your estate when you die without the Will.
A third factor is if you don’t make an estate Plan you are also missing out on other crucial issues like the appointment of guardianships of your child. A lot of Wills I have seen do not deal with these crucial concerns, only addressing the basics, the family could be exposed to unnecessary stress and financial burden.
A mistake No.2 – There is no appointment of guardianship of children
We go through a variety of the existing Wills and one frequent error is when the Will was made many years ago, but has not been modified to reflect the client’s present situation. It’s common for instance to create an initial Will created when you purchase your first home at a time that you didn’t have children and your life was simple.
If your children are who are under 18 years old, you must choose a guardian who will be responsible for your children should you passing. While it is not common for parents to die prior to their children, it can occur, and we occasionally read of tragic events in which both parents are killed , and their children become orphans.
If you do not have a Will that names the person you want to be your guardian in your Will, it would remain with the Courts to decide who will be responsible for the care of your children. This might not be who you’d like to have. Your family will also need to pay for the cost of legal representation to be appointed guardians in case of dispute.
If you’re not married, it is also important to think about the legal question of parental responsibility in the event that the mother of the child passes away. The father doesn’t automatically have the rights to be the guardian of a child, but there is a possibility for parents to agree to the responsibility of parental care throughout her life by filing a claim to the Court and, more importantly, to designate the father as the guardian for the child/children she has named in her Will, so that his authority to take care of them following her death is clear.
Another option for parents is to choose one of their parents to look after your children should they die. death. If it were to happen, the Court could consider that a grandparent was too old to be able to take care of the child, but in the event that they are named Guardian in the Will,, the Court is not going to deny this designation.
Make-up No.3 The estate plan isn’t checked at least every 3 years
A lot of Estate Plans/Wills have been written and placed in an office drawer, only to be neglected. It’s as if we’ve taken a mental note of the fact that we’ve got the paperwork sorted and forgotten about it.
We look over a variety of such plans, and in the vast majority of the cases, something has occurred in the plan’s life that has invalidated their plan completely, or to mean that the plan if it was to be utilized, it wouldn’t be in line with their preferences.
Here are a few life circumstances that point to the should review and update your plan:
* You’ve been divorcing or getting married
* An executor has passed away or moved out of your home.
* You’ve made the decision to remove the person from your Will.
* You’ve had an infant or another child
If you have a grandchild or more
* Your spouse passed away prior to you were married, and you’ve been remarried or are thinking of getting married
* You’ve received a significant bequest from the estate of another
* You do not have the specific item that was a part of your will.
* You are worried about the potential consequences of fees for care homes on your estate
It is possible that your property has risen to the point of exceeding the threshold of inheritance tax.
* You want to provide to take treatment of your pet during the time of passing
* You want to nominate those who will be able to manage your affairs in case you should become physically or mentally disabled
* You wish to communicate your desires regarding medical treatment should you develop an illness that is serious.
* You’d like to plan out your funeral plans like cremation or burial and a secular or religious service and so on.
Because of these and other reasons, the estate plan can be a living document that must be reviewed on at least three times a year basis or more frequently in the event of a change, such as the examples above. So, pull your papers out of the drawer and determine whether they address any of the points mentioned above that you are strongly in love with.
A mistake No.4 Not IHT planning (IHT) planning
The present maximum inheritance tax threshold is of PS325,000. If your vehicle, home, property savings, investments vacation home or rental property or any life insurance policy not written in trust , etc. total more than this amount, the estate is taxed 40 percent of the amount that exceeds. If, for instance, your entire estate is worth PS425,000, the tax bill would total 40% of PS100,000.. PS40,000.
The bill must be paid prior to the estate is distributed. This will decrease the bequests you’ve given to loved family members. Each person has a nil rate bands (the PS325,000 exemption) and for civil partners, recent changes to the law have meant that it is possible for a single individual to pass their non-rate band to the survivor.
However, this transfer is not automatically and must be meticulously documented upon the your death so that it is able to be taken into the second’s estate. Be aware that the time between the two people dying could be many years. It is essential to seek assistance in this area when you are required to claim both bands of nil rate.
This change has put a lot of estates outside of inheritance tax that were previously liable in the past, since an individual’s first nil rate bands were effectively lost when they transferred everything they owned to the spouse in the event of a second death, only one band of nil rate was available. It is now possible for a married couple or civil partnership to jointly have an estate of PS650,000 and not be subject towards inheritance tax.
For couples who are not married, it’s not possible to take advantage of your partner’s nil rate band after the second death of your partner which means that giving the entirety of your wealth to spouse on first death can result in an IHT problem after the second death.
Another option is to transfer assets to an individual not your spouse on the first death. However, this may result in financial hardship or in a scenario where the bulk of your assets are in the form of property, it may be difficult to accomplish this.
You can also make use of one of the gifts allowances that can reduce the value of your estate however , it is essential to keep in mind that anything you offer to give away has to be a genuine gift and not one that is a “gift with reservation”. If you “give” your home to your children, for instance and you continue to reside there rent-free, it’s likely to be considered as a gift without reservation of benefit and will be reintroduced to your estate for tax calculation for tax purposes.
All lifetime gifts that aren’t categorized as exempt are classified in the category of “potentially exempt transfers” and can be included back to your estate for inheritance Tax purposes up to seven years following your date of initial gift.
There is also the option to make use of different trust arrangements to keep assets out of your estate, while having control over how funds are distributed to the beneficiaries. It is a complicated issue with tax issues to think about and it’s crucial to seek advice from a professional.
The allowances for gifts are regularly reviewed by the taxman. It is vital to stay up-to date especially if you’re planning to make any significant gifts that are not part of your estate.
For many individuals, if they’re in good health you can buy an entire life insurance policy, the proceeds of which are intended to pay any inheritance tax obligation in the event of a the second death. The policy is created on an “joint life, second death” basis, and is placed in an trust, in order to make the proceeds made available to the beneficiaries in order to pay for the tax liability.
It’s beyond what is covered in this document to discuss all aspects of planning for inheritance tax but it is crucial to recognize that transferring everything to one the other, and later to your children is not the most effective method to leave your estate as much as you can to your beloved family members.
Error No.5″Sideways disinheritance” not taken into consideration
It’s an emotional topic that we do not wish to contemplate, yet it’s becoming more popular.
Sideways disinheritance occurs when two people (married or not) decides to put together an estate plan that will leave their possessions to one another on the their first death with the assumption that when the second person dies , the remaining estate will be passed to their children.
Unfortunately life has a way of being more complicated than that, and nowadays it is increasingly common for a widow/widower/partner to marry again after the death of their other half.
If a couple marries, the Will is declared invalid. The spouse who is remarried is your primary heir and will inherit the bulk of the assets. In this case, the Laws of Intestacy come into play once more. This scenario becomes more complicated if the new spouse has children from an earlier relationship In other words, any inheritance that your children may get as the result of an estate has to be divided among their step-siblings.
How can this be prevented?
In creating an estate plan, you can ensure that your portion of your primary property, your home, is protected to benefit your children, regardless of the situation with your spouse following your passing away. With the help of an Property Protective Trust and possibly an easy change to the ownership of the property, it is possible to grant your spouse the ability to reside in your “share” of the home following you die for the rest of their lives, and part of your home will then be passed on to your own children.
Your spouse can give their portion of your property one of their preferred beneficiaries following your death – this could include the children of yours, or an upcoming spouse/children, and so on. This trust protects property can be incorporated into your will as part of your comprehensive estate plan. It requires an update to the documents you have in place if they are you have not included it already.
The trust could be a great way to protect the inheritance against the potential effects of divorce or the possibility of divorce for the children of one. assets may transfer to your ex-spouse part of an agreement.
Error No.6 Impact of Home Care Fees has not been taken into account
We’ve discussed the potential consequences of Inheritance Tax in the past, but for many people , a greater danger could be the one of having to cover your healthcare expenses in the later years of your life.
With one in four men and one in three women over 65 in need of residential care, the chances are low that it will occur to you or your partner and the numbers are expected to grow in the near future due to a variety of social factors , such as the increasing difficulty for children to to care for their parents.
The average care facility located in Northern Ireland currently charges PS538 per week. The first priority to the Local Authority to help meet the cost is your earnings. If pensions/investments etc. generate the care cost at least once a week, the fees will be paid by income, while the rest of your assets will remain unaffected if the cash arriving is sufficient to cover your costs for care on a regular basis.
If your earnings are lower than this as is typical for the majority of retirees and their assets, like your home could be at risk, and eventually might have to be sold to help pay for the cost of your health care.
If you are a couple and one of you is above 60 years old or is dependent on the other, the property will not be vulnerable when person who is the first becomes ill, but the most likely scenario that occurs is when the first one dies, leaving the property to the surviving. If the survivor requires residential care , the whole property may be in danger of being sold in order to help pay for their care because there isn’t an individual living with the home.
Your meticulous plans to transfer the estate of your children or loved ones could be disrupted because your assets be used to cover the care of you or your partner. There are many options to plan to pay for the costs of care or to protect against it, like to place assets into Trust and above what is required by the Local Authority care assessment.
The Property Protective Trust is effective to protect the share of the deceased partner of the house from paying expenses of the remaining partner should they require long-term residential care (as as per the Community Care Act 1990).
Alternately, you can choose a Family Settlement Asset Trust has similar advantages, and it protects the whole property instead of just a portion and requires an immediate transfer of the trust’s assets over time instead of your Will. To determine if one or the other trust is appropriate for your specific situation will require professional guidance.
The evaluation for having to cover your healthcare costs is based on a threshold of assets worth more than PS14,250 (2010/2011) which means you’ll be able to be sure that households are more likely to suffer from this tax than an inheritance tax charge for assets valued at PS325,000 or more.
It is evident from reports published in the media that the costs for care homes are becoming a major issue to Local Authorities and by extension and the Government due to an increasing population ageing in the UK that cannot be accommodated by a pay-as you-go system.
This is something is not something you can leave until in the final minute of your life to prepare for, particularly if you’re older than 50, you should to start thinking about this now. If you’re in a health condition that is likely to require residential care in the near future could be considered to be a ‘deliberate loss of assets’, as would any plans that are canceled to aid in the cost of your care.
Make a No.7 The absence of a plan to take care of your affairs if you’re incapacitated
Have you thought about what would affect your financial situation should you become disabled due to an accident, illness, or mental disease? Many of us believe that the State can fix the issue without much effort. However, this isn’t the case.
You may be shocked to hear that if you become mentally incapacitated (coma/stroke/dementia etc.) your bank will be required to shut down your account under the Banking Code Of Conduct. This does not only apply to accounts in your sole name, but also joint accounts!
The reason for this is quite simple. If you’re mentally incapacitated, the bank is bound by the obligation to protect the extent that you are unable to make decisions for yourself and must safeguard your funds until you have someone who is legally granted the power over your money’ control your funds. You’re right spouse, partner, husband or partner. does not automatically have this right regardless of whether they’re the co-signatory of an account.
Imagine the chaos that ensues if you’re disabled and your family is unable to afford their rent, pay bills, food, etc.
In order to be able to handle your family’s affairs, you will need to submit an application for the Office of Care and Protection (in N.Ireland) to be named the “Controller” over your finances. The process can take several months and may result in the payment of a legal fee and there is no GUARANTEE that your partner or spouse will be appointed as the controller. In certain situations, the Court can appoint an expert controller, such like an accountant, solicitor or who is in a position to bill an estate to cover the expenses for managing your affairs.
There’s a simple solution for this, which is that is known as An Enduring Power Of Attorney and all ought to have one to protect themselves from this issue. Even if you have a lot of finances , there is no harm to be appointed an attorney to apply for government welfare benefits for you in the event of a catastrophe.
The act of putting in place the legal document today that names the person or persons to oversee your affairs should you become disabled, it is easily accessible to your bank or other institution. Should the worst happen and should you lose mental capacity, the document is filed with the Court in a matter of days, not months, and is not likely to be challenged.
If you have a look at your Will or estate planning documents and find that you do not hold the Enduring Power of Attorney, and you hold any property in your personal and joint names this is something that you must take the time to sorting it out.
Error No.8 The life insurance policy is should not be placed in trust
There are two major motives why the life insurance policy must be placed in trust but our experience shows that the majority of trusts aren’t arranged in this manner.
In the first instance, if a policy that is solely yours (i.e. not joint) is not in trust, in the event of your passing, it is not paid to your spouse or partner instead to the estate of your deceased. This means that your second half won’t be able to access the funds until the probate process is completed which could take a few months. In that time, the bills must be paid and this may result in financial hardship for your family.
In addition, if you don’t put an insurance policy into trust, it is a sign that the the proceeds will become as part of your estate. It be taxed as inheritance. If for example, you have an estate of as much as the zero rate band of PS325,000 and a PS100,000.00 policy is paid and you are able to pay up to PS40,000 tax could be paid. This can be avoided by putting the policy into trust.
It is generally possible to place the policies you have in trust retroactively and it is recommended to do this when you realize that your policies aren’t arranged in this manner. It is important to seek advice however since there are a handful of circumstances in which it may not be advisable to place the policy in Trust. Trust.
Make No.9 Your funeral arrangements might not be fulfilled
It might surprise you to learn that the executors aren’t bound to follow your funeral wishes. They can choose to arrange whatever they feel is appropriate. Having said that it is better to record your wishes in this regard in your Will, rather than leaving it up to your family to guess as to whether you wished to buried or cremated, a religious service or secular/humanitarian, flowers or donations to charity etc.
More and more people are buying funeral plans that are pre-paid, meaning the funeral will be paid for in advance and will be scheduled according to your preferences.
If you’re arranging an arrangement like this, it’s crucial to keep the specifics of it alongside your Will’s paperwork and inform your executors of the plan know to ensure that they don’t organize a funeral separately only to discover at a later time that everything was planned.
Error No.10 The will isn’t valid
Each each year, in the UK approximately 17,000 Wills become invalidated because of any of a variety of reasons. In the event that your will is ineligible, it means that it’s as if you not written it or the laws of intestacy apply or, if a previous Will is found, it can be used in lieu!
This is the reason we highly recommend you hire an experienced will writer to assist you write your will, instead of taking an easy DIY or low-cost option.
Here are a few of the most frequent reasons to invalidate the will:
* The testator (person creating the will) signed the will prior to inviting a friend to witness the document at a later date.
It was signed by the Testator front of a witness, however the other witness didn’t sign until later date.
* The will was not executed by the Testator.
* The will was not executed by any witnesses
Testator as well as his wife signed the wills of each other in error
If you choose to go down the DIY method, you might expose yourself to accusations from beneficiaries you did not include following your death, of having signed the will under the “duress” or were not of’sound mind’.
Wills could be able to appear altered or altered, as well as the temptation include DIY Codicils (updates or amending) must be not be avoided. The presence of an eagle on the Will could result in the validity of the Will being extinguished at a later date since this could indicate that a codicil was taken away – i.e. the will was altered with.
There could be issues with the wording in your Will even if you don’t have it professionally written Any ambiguities are debated by potential beneficiaries who could benefit by the way the language is taken into consideration.
Many court cases have resulted from attempts to set in the proper order the issues surrounding the way in which
Wills, and many of them are based on how they were drafted, and witnessed and signed. Of course, court fees can reduce the value of any inheritance that is received from your beneficiaries, and these issues can take a long time to settle.
For more information, advice and assistance go to power of attorney.