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Here you will find the answers to many of the most common Wealth Protection questions
A Lasting Power of Attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘Attorneys’) to help you make decisions or to make decisions on your behalf.
This gives you more control over what happens to you if, for example, you have an accident or an illness and can’t make decisions at the time they need to be made (you ‘lack mental capacity’).
A Lasting Power of Attorney is a completely separate legal document to your Will – although many people put them in place at the same time as getting their Will written as part of wanting to plan for the future.
There are two types of Lasting Power of Attorney available:
A Property and Financial Affairs Lasting Power of Attorney (LPA) which allows you to name Attorneys to deal with all your property and financial assets in England and Wales. The Lasting Power of Attorney document can be restricted so it can only be used if you were to lose mental capacity, or it can be used more widely, such as if you suffer from illness, have mobility issues, or if you spend time outside the UK.
A Health and Welfare Lasting Power of Attorney (LPA) which allows you to name Attorneys to make decisions about your healthcare, treatments and living arrangements if you lose the ability to make those decisions yourself. Unlike the Property and Financial Affairs LPA, this document will only ever become effective if you lack the mental capacity to make decisions for yourself.
There are two different types of Lasting Power of Attorney:
Property and Financial Affairs Lasting Power of Attorney. This allows your nominated Attorney(s) to take decisions on your behalf relating to money and property. This can include paying your bills but may also give them the power to make bigger decisions such as selling your home.
Health and Welfare Lasting Power of Attorney. This allows your appointed Attorney to make decisions on your behalf relating to your medical treatment and social and nursing care.
The two LPAs exist independently of each other and you can choose to make one or both. In addition, you do not need to appoint the same Attorneys for both LPAs, although most people do.
Once you have a Lasting Power of Attorney in place you can have peace of mind that there is someone you trust (someone you have chosen) to look after your affairs if you became unable to do so yourself during your lifetime. This may occur, for example, due to illness, disability, old age or an accident.
Many people aren’t aware that their spouse, partner, children or next of kin have no automatic legal right to manage their affairs without an LPA in place and this can leave the next of kin unable to make the necessary decisions or access assets, manage investments or sell property, when this action is needed.
You can only make an LPA when you have mental capacity. If you lose capacity then, in order for someone to obtain legal authority over your affairs, that person would need to apply to the Court of Protection and the Court will decide on the person to be appointed to manage your affairs. The person chosen is appointed your ‘Deputy’. This is a very different type of appointment which is significantly more involved and costly than being appointed Attorney under an LPA. The Deputy will need to submit a yearly account to the Court and there are yearly court fees to pay as well as an insurance bond. The Court of Protection process currently takes around six months, during which time no one can use your funds to pay for things you may need.
When you make an LPA you can appoint more than one person as your Attorney. If you have more than one Attorney, then you can specify whether they should act together or independently and there are pros and cons to both options. You can also appoint replacement Attorneys who can step in if your main Attorney becomes unable to act for any reason.
A trust company can also be appointed as an Attorney. Although this type of appointment will incur some costs, having a trust company as an Attorney is very beneficial in certain circumstances as it provides a professional and independent approach whilst ensuring a person is never left without a capable Attorney in place.
Your LPA can impose restrictions on your Attorneys or simply give them guidance that will not be legally binding.
All LPAs need to be signed by a Certificate Provider who is an independent person confirming that you understand the document you are making and that no one has put pressure on you.
The document needs to be registered with the Office of the Public Guardian before it can be used and people choose to do this at different times, depending on how the document may be needed. The registration fee is £82 per document.
If you wish to have peace of mind that a particular person will have the legal authority to look after your affairs and you want to make matters easier for them and the process less expensive, then you should strongly consider making a Lasting Power of Attorney.
A Lasting Power of Attorney enables you to choose who you wish to have the responsibility for managing your affairs if you become incapable of doing so yourself. In addition, within the body of the LPA you can provide guidance on how you want your affairs to be managed if you were to become incapable of managing them yourself.
It is appropriate for a person of any age to consider making an LPA. Illness or accidents can strike at any time and render you incapable of managing your own affairs. Should the unexpected happen, it is a wise precaution to have the legal mechanisms in place in order for people to step in and make decisions on your behalf should you be unable to do so.
It becomes especially important to consider making a Lasting Power of Attorney as you get older. Although advances in medicine mean that people are generally living longer, doctors cannot always prevent declines in a person’s physical or mental state as we age. Having an LPA in place means that people you trust can begin to manage your affairs in accordance with your wishes if you become unable to make those decisions for yourself.
A Lasting Power of Attorney allows people you trust to manage your affairs in your best interests during your lifetime.
Anyone over the age of 18 can act as an Attorney. In the case of the Property and Financial Affairs LPA, the Attorney must not have been declared bankrupt.
When deciding who you want to act as your Attorney, it is important to nominate someone who you trust absolutely to manage your affairs. This can be a close family member or friend. Sometimes people choose to appoint professional advisors as their Attorneys.
Yes, absolutely. Many people choose to appoint their spouse as their Attorney, together with one or more of their children, relatives or close friends.
If you appoint more than one Attorney, you need to consider whether you want them to act “jointly”, which means they must do everything together, or “jointly and severally”, which gives them the power to act individually as well as together.
It is also wise to consider appointing replacement Attorneys who would step in to act in place of your first named Attorneys, should they become unable to act.
Your Attorneys have the following general responsibilities:
There are certain things that your Attorney will not be able to do;
make decisions on your health and welfare, unless you can be shown to have lost the mental capacity to make those decisions for yourself
A LPA can only take effect after it has been registered with the Office of the Public Guardian. It is important to note that it cannot be used at all until it is registered. The power can be registered at any time. If it is registered immediately after it has been completed, it is stored and only used at such time as it is needed. Alternatively, the power can be registered at the time that the need to use it arises.
Absolutely not. You can carry on making your own decisions despite the fact of registration, until such time as your capacity to make those decisions is lost.
A person is deemed to lack mental capacity if they have an illness, injury or condition which impairs their ability to make specific decisions. It is possible to have the capacity to make some decisions but not others.
A wide range of professionals could be involved in assessing mental capacity such as solicitors, doctors, psychologists and social workers.
If you have mental capacity to do so, you can cancel your LPA. You need to revoke the power formally. Simply altering the original document is not sufficient for this purpose.
If one of your Attorneys is your spouse or civil partner, their appointment is automatically ended by a divorce, annulment or dissolution, unless the LPA expressly provides otherwise.
A Deputy will have to be appointed to act on your behalf by the Court of Protection [hyperlink to COP page] if there is no Power of Attorney in place.
If your loved ones have to apply to the Court to appoint a Deputy, this could lead to a lengthy, stressful and costly process for them. The Court may not appoint the person(s) you would wish to make decisions on your behalf. It is far safer and potentially cheaper to plan ahead and set up an LPA so that it is already in place at such a time as it is needed.
The lasting Power of Attorney gained in England and Wales is only effective in this jurisdiction. If you have property outside of England and Wales, you will need to seek Power of Attorney (or equivalent) for the location of the property.
Lasting Powers of Attorney have replaced Enduring Powers of Attorney (EPA). EPAs are still valid provided they were made before October 2007, however, it is no longer possible to make a new Enduring Power of Attorney.
The main difference between the old Enduring Power of Attorney and the new Lasting Power of Attorney is that an EPA only grants powers in respect of property and finances and not health and welfare.
There is no age limit or restriction in setting up a Home Protection Trust. However, they are usually better suited to those over 60 and in their last or last but one home.
Yes, whilst the property is legally owned by the trust, you are the beneficiary of the trust for life. You have a guaranteed right of residence and under no circumstances can the trustees evict you from the property during your lifetime.
You also retain the power to direct the trustees to sell your current property and purchase a new property of your choosing. In the event you purchase a more expensive property then advice should be sought.
You can use the trust to provide an opportunity to formally recognise the contribution, love, care and/or sacrifice which a family member or other person has made for you without the risks involved with an outright gift.
You can have the pleasure of seeing arrangements put in place to pass your property to your children or other beneficiaries during your lifetime.
You can have peace of mind in knowing that your assets can be preserved and passed on to your chosen beneficiaries after your death. The beneficiaries and terms of your trust can be directed and approved by you and the trust will already be set up before you die.
You can ensure that your property can be sold or transferred without the need to obtain a Grant of Representation or without the need to have the lengthy wait for a Grant of Representation to be issued. The Trustees can sign all the paperwork to make the transaction smooth and straightforward.
You can avoid problems and disputes relating to the distribution of assets on death. Claims against estates are on the rise so taking your property out of your estate can help avoid your property being caught up in any future litigation after your death.
You can feel reassured that any paperwork relating to property ownership will be dealt with by your trustees. This is hugely beneficial if your mental capacity becomes compromised.
You can ensure that you are able to remain in your property for long as you wish. If you wish to relocate or downsize your property then you can. You are not restricted in any way.
If your property is sold or if you no longer live there, you are entitled to any income produced from any proceeds of sale or any rental income.
Your property will not personally belong to your trustees and it does not form part of their estates. You can be assured that the property will not be available to their creditors or any other claimants they may have against their estates in the future.
Yes, a Home Protection Trust is applicable to both married couples and single owners.
There are a number of potential risks of gifting a property including:
There are a number of ways to save time and money during probate by using a Deed of Variation. Some beneficiaries will use this to redirect their inheritance directly to their children, so that the inheritance skips a generation and is only liable for Inheritance Tax once.
A Deed of Variation can also be used to change the way the estate is divided and potentially save Inheritance Tax in that way. This might include donating a certain proportion to charity, for example.
The effect of a Deed of Variation is such that the original beneficiary can redirect the legacy or entitlement to a third party without any tax consequences for the original beneficiary.
This allows the terms of the Deed of Variation to be written back into the Will (or alter the Intestacy rules) for Inheritance Tax & Capital Gains tax purposes as though the new gift had been made by the deceased.
There are a number of reasons one might wish to make a variation, for example, to make provision for someone who was excluded from the Will, to take account of differences in the financial position of beneficiaries, or to simply pass assets on to the next generation. Of course there may also be fiscal reasons for considering a variation. Although death itself is a certainty its timing is far less so and, if a number of years (and Budgets!) have passed since a Will was put in place, it is entirely possible that the Will may be far less tax efficient at death than it was when originally done.
The variation must be in writing and, although HM Revenue and Customs suggest a letter would suffice, a formal deed is usually prepared. There are many strict conditions to be met for a Deed of Variation to be valid. Some examples are:
The retrospective treatment, from death, of a variation is an obvious advantage and an effective form of estate planning. However, a variation also affords a beneficiary a degree of control if, say, family circumstances have materially changed since the Will was made and they wish redirect all, or part, of their entitlement in an estate to benefit another or, perhaps, a charity or a trust.
Deeds of Variation do, of course, have their place, but it is important always to be mindful of changes not only in your family circumstances, but also in current tax laws, both of which may trigger the need for you to review your Will.
Inheritance tax (IHT) is a tax paid on the estate of a person who has died. The estate includes all assets like property, money, investments and possessions.
In the UK, the threshold for paying inheritance tax is £325,000. However, if your estate is worth more than this, you will need to pay tax at the rate of 40% on the excess amount. If you are worried about leaving a large IHT bill for your loved ones, Price Slater Gawne can help you to decide which inheritance tax planning strategies are right for your individual circumstances.
Inheritance tax starts when the value of the estate left by the deceased person exceeds the threshold, which is currently set at £325,000. This means that if the estate is worth less than this amount, there will be no IHT to pay. However, if the value of the estate is above the threshold, IHT will be due at a rate of 40% on the amount that exceeds the threshold. For example, if the estate is worth £500,000, IHT would be payable on £175,000, which is the amount above the threshold. There are certain exemptions and reliefs that may be available to reduce IHT liability, which is why it’s important to discuss your circumstances with professionals.
If you are worried about leaving a large IHT bill for your loved ones, there are various inheritance tax planning strategies that you can use. These include:
Probate is a legal process that takes place after someone has died. It involves getting permission from the court to administer the deceased person’s estate, which includes their money, property, and possessions. The purpose of probate is to make sure that the estate is distributed correctly and that any debts and taxes are paid.
When someone dies, their assets are frozen until their will is validated or the court determines how to distribute the assets according to the law. Probate is the process of applying for the legal authority to deal with the estate of the deceased person. This can involve:
Probate is required when a person dies and their estate includes property, savings, shares or other investments and is worth more than £10,000.
The process of probate can be lengthy and complex, depending on the size and complexity of the estate, and there may be various legal and financial issues to address. The exact length of time will depend on the size and complexity of the estate, but it will generally take about a year.
Whether or not you need to apply for probate depends on the circumstances of the deceased person’s estate. Generally, you will need to apply for probate if the estate includes property, shares or other investments, or savings and is worth more than £10,000. However, there are some exceptions, such as if the assets are jointly owned or held in trust. If the deceased person left a will, the executor in the will is responsible for applying for probate. If there is no will, the next of kin or another family member may need to apply for probate.
If the deceased person left a will, the executor named in the will is responsible for applying for probate. The executor is the person appointed to carry out the wishes of the deceased person as outlined in their will.
It is possible to obtain probate without a will in the UK, although the process may be more complex and time consuming than if there was a valid will. If there is no will, the next of kin or another family member can apply for ‘letters of administration’ instead of probate, which involves a similar process.
If a deceased person has left a Will, Personal Representatives (PRs) will be the Executors appointed by the Will: they will then distribute the estate in accordance with the terms of the Will. The document issued by the court which establishes their right to deal with the estate (the grant of representation) is a Grant of Probate. If there is no Will, the PRs are Administrators and the Court will issue a Grant of Letters of Administration. The distribution of the estate will depend on the statutory intestacy rules.
Throughout the administration, it is the PRs who are responsible to third parties, including creditors, HM Revenue and Customs and the beneficiaries for the proper administration of the estate. The beneficiaries’ entitlement is a right to have the estate properly administered: they do not become entitled to the Deceased’s assets until ownership is handed over to them by the PRs.
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