Preference Trusts & Wills Ltd - Essential Reading

Essential Reading

What is involved in being a Trustee?

A Trustee’s role is to manage and distribute assets held within a Trust within both the terms of the Trust and the various applicable laws and regulations. The role includes planning, meetings with co-Trustees, decision making, recordkeeping, correspondence and preparing accounts for and paying relevant taxes to, HMRC.

A Trustee is required to undertake the role on behalf of the Trust and for the exclusive benefit of the named beneficiaries of the Trust.

It is a very important role for which a Trustee is both responsible and accountable.

Although the general equitable rule applies in that a Trustee is only liable for his/her own breaches of Trust and not those breaches committed by co-Trustees: A Trustee cannot avoid liablility by pleading ignorance or by not fully participating in the administration of the Trust.

A Trustee would be liable for the breaches of their co-Trustees to the extent that he/she was negligent or if his/her conduct fell below the standard levels of prudence required of them in monitoring their co-Trustees conduct or any other matter pertaining to the Trust.

The Civil Liability (Contribution) Act 1978 gives the Court a discretion to apportion the share of liability to each Trustee according to the relative individual responsibility for any loss.

In certain cases a Trustee, though he/she may be directly liable for a breach of Trust; may demand that his/her co-Trustee indemnify him/her against any compensation he/she must pay.

The effect of this is to make the Trustee who did not directly commit a breach of Trust, solely responsible for the loss.

It is of vital importance to you and the successful achievement of your objectives that you choose your Trustees very carefully. It is also of vital importance that your Trustees are given the opportunity to be advised upon their potential role and all it involves.

It is also of vital importance that the quality of advice provided when a Trust is created for you is of the highest standards and that an adviser has Full Professional Indemnity Insurance in advising on such matters.

You can rest assured that when you consult Preference Trusts and Wills on such matters; these issues are covered in sufficient depth and detail.

You can also rest assured that both our advice to you and any provision that we may put in place for you is backed by full Professional Indemnity Insurance for £2 million – per client!

If you have written a Will or set up a Power of Attorney arrangement: Have you selected a Professional to act as Executor, Trustee or Attorney?

If you have, you have, almost certainly, given said Professional the right to charge very large fees for undertaking their role/s. These fees are deducted from your Estate before any assets are paid to your selected beneficiaries.

Professional Executor and Trustee services can cost between 3 and 6% of your Estate. The value of your Estate is the combined value of all your assets including life assurance and some pension funds and most business assets at the time of your death.

500,000 Estate x 5% = 25,000 net of VAT. Do you know that this is what you may have agreed to?

On many occasions there is a clause within a Will that includes the choice of a Professional Executor or Trustee; or within a Power of Attorney arrangement that includes the choice of a Professional Attorney, that gives such Professionals the right to manage your Estate in whatever way they feel is best 'with no liability to loss'. Have a look at your Will and Power of Attorney documents and read what it says.

Due to the recent changes in legislation in respect of the Mental Capacity Act 2005 in respect of Powers of Attorney, it is difficult to assess the average fee levels that these Professionals would charge for the role of your Attorney. However, as the responsibilities placed upon Attorneys is greater and their actions more heavily scrutinised by the Office of the Public Guardian, it is likely that such fees would also be very high.

Furthermore if you do not have a Power of Attorney arrangement in place, the Office of the Public Guardian may select a public official to act for you in the event of you losing Mental Capacity. Such a public official also has the right to be funded from your assets.

Choosing a Professional to act for you and obligating your Estate to fund them in this way is entirely unnecessary. Having a public official acting as your Attorney is also entirely unnecessary. Having a Professional service as a fall back is good advice but only as a wish and not as anything legally binding.

We recommend that your selected Executors, Trustees and Attorneys are all close family and/or close friends. As part of our service, we visit the Executors, Trustees and Attorneys of our clients should they need to undertake their roles in order for them to be helped to undertake such roles effectively

By having the right clauses in your Wills, associated Trusts and Powers of Attorney, you may save you and your family thousands of pounds .and we can help you get this right.

Having the wrong clauses can cost you and your family thousands of pounds.

Should you have any queries about this matter or any other matter that you think we may be able to help you with feel free to contact us and remember that we will charge you nothing to review your current arrangements.

If you have an illness or accident, who would take care of your money and your property and your business and your personal welfare?

If you do not have a valid Enduring or Lasting Power of Attorney arrangement in place, there is no way of knowing who will take care of your affairs if you become mentally incapacitated as a result of an accident or illness. No body would have access to your financial matters or your business affairs. No body could make any business decisions for you and this could have a terminal affect on your business and create vulnerability in respect of any assets that you own. One of your family members would probably take up the responsibility of applying to the Office of the Public Guardian for authority to do so and this would be costly and time consuming. If no body that you know is willing or able to apply for such authority, the Office of the Public Guardian will appoint someone to act for you, who is in effect a Civil Servant. In this event, they have the power to be funded via your assets. The same applies to all Personal Welfare issues such as access to medical records or decisions about the care that you receive, although your Medical Practitioner would take responsibility for some of these issues. The only way of avoiding this mess is to have the appropriate Power of Attorney arrangements in place ready to be registered with the Office of the Public Guardian, in the event of such a misfortune occurring. We can help you create this provision to ensure that matters would be handled in accordance with the any legally binding conditions and non legally binding (Less restrictive) guidance you would wish to include. You would not be granting any power to anyone today. Just giving the powers you select to the Attorneys, you select at the time that they may be needed.

You can also alter your arrangements in future, subject to you retaining the mental capacity to do so.

Perhaps you now understand the necessity of having such arrangements professionally drafted for you and the peace of mind our clients have after having done so.

How can you make sure that your children will inherit, even if your spouse/partner marries or cohabits with another party after your death?

Most people we meet who are married or living together, have children and have written a Will have left everything to each other and then everything to their children in the event of both their deaths. It seems logical doesn’t it? However, what they don’t realise is that by leaving all the assets directly to each of them without any Protective Trust arrangements, they are potentially disinheriting their children unintentionally. If the survivor remarries and does not seek professional advice to modify their arrangements, the survivor's new spouse may be the main beneficiary of all the assets accumulated during the first marriage. Thus disinheriting the children from the first marriage. Many Widows, Widowers and Divorcees are in this position and they don’t even realise it. Mature children or representatives of children (If such children are minors) approach us very often, after the death of their parents asking us what they can do. The answer is that they can challenge the distribution of the Estate. This is very costly, very time consuming and potentially very damaging to the relationships of all concerned. There is also no guarantee of success. The position is similar, and sometimes worse, for those parents who have not written a Will.

We can help create the right Protective Trust arrangements in the event of the first parent’s death, to help ensure that a proportion of the estate is secure from claims from any future spouse, future partner or indeed other creditors of the survivor whilst still allowing the survivor access to such assets during their lifetime.

Every family should at least consider such arrangements, as many of our clients have.

Who will look after your children if you died whilst they were still children?

If the parents of a child have been married at any time, then they both have what is referred to as Parental Responsibility for their child. This means that they are both considered equal Legal Guardians of the child, except where there are Residence or other Court Orders in place to change such automatic rights. Therefore, in the absence of such Court Orders amending the rights of the parents, in the event of the death of one parent whilst the child is still a minor, the surviving parent is automatically the Legal Guardian even if the surviving parent lives elsewhere and has not seen the children for some time. However, in the event of the death of both parents, whilst the child is still a minor and in the absence of a valid Will, no body has the legal right to look after the children and no body has the legal right to look after the assets that may be left for the child. This situation creates some of the most damaging disagreements within families as to where it is best for the child to live. Ultimately, the Courts will decide who has the right to look after the child and who has the right to look after any assets left for the benefit of the child. If the family cannot agree, the Courts will appoint a public official to take on such roles.

All this can be avoided by the parents choosing and documenting in a professionally prepared Will who they wish to look after the child and who they appoint to look after the assets for the benefit of the child. Even when we see clients who have made such provision, they usually choose the same people for both roles, yet as the roles potentially conflict with each other, a professional will advise a client to separate the roles and choose different people. We also see that sometimes people choose a couple as the selected Legal guardians. This again is something a professional would advise a client against. Imagine if the selected Legal Guardians were to separate and disagree about whom the child was to live with?

All these issues can be resolved with the right professional advice and an effectively drafted Will.

How can you build a Family Trust, which can benefit your children but also pass on to your grandchildren and future generations?

We very often see that grandparents have been very wise in organising their affairs. However, what is not considered is that once their assets have passed to their children, such assets are vulnerable to claims from a spouse or partner of their children and or other business or personal creditors of the children, as well as being potentially liable to Inheritance tax upon the death of their children. In other words, the grandparent’s assets could be taxed twice before they reach the grandchildren!

These issues can be very largely avoided with the creation of a professionally drafted Protective Discretionary Trust arrangement which can pass assets held within it, for the benefit of the grandchildren without attack from outside creditors and with a large reduction in potential future tax liabilities.

The grandchildren may well be able to pass the assets held in the trust for the benefit of their children too, with the same protections in place, subject to the length of time that passes between the death of the grandparents and the death of the grandchildren.

If you have written a Will: Is it still legally valid? Does it still meet with your objectives? Does it reflect the changes that have undoubtedly occurred in your life since it was drafted?

Most Wills are successfully challenged because they were not attested (Signed and witnessed) properly. Many people have Wills that they do not realise will not be valid because of this alone. In addition to this issue, your life may well have changed since the time that you drafted the Will making its effects out of line with your current objectives. In addition to these points there have been many changes in legislation recently which could directly impact on the effectiveness of a Will written as little as two years ago.

We visit our clients to supervise the signing and witnessing of their documents and we also review our clients' affairs every three years.

Remember, it does not cost you a penny to have us review your Will and other arrangements and you only need to call us and then travel to your front door to allow us the opportunity to do so.

Do you have Critical Illness Protection, Income Protection, Private Medical Insurance and/or Waiver of Premium Benefit on any of your Policies?

If so, under the new Mental Capacity 2005, which came into effect on 1st October 2007, if you were diagnosed with an insured critical illness, total and permanent disability or other illness or accident that results in a loss of mental capacity (For example being temporarily unconscious in hospital after an accident), it is very difficult to claim the insured benefits.

This is because at the time you would not possess the mental capacity to do so.

No body else would be able to claim for you unless you have authorised them to do so via a Lasting Power of Attorney arrangement, put in place before the event.

Of course, there is the alternative of somebody applying for similar powers to be authorised by the Office of the Public Guardian after the event; assuming of course that there is somebody who wishes to take on such a responsibility at the time.

However;

1. They may not be the person whom you would have selected.

2. It may take up to six months for them to gain such power after the event.

3. It may cost over £2,000.00 for them to gain such power after the event.

4. If no-one puts them self forward to act, the Office of the Public Guardian will appoint their own Attorney to act for you and in such circumstances; the Attorney would have the power to be funded by your assets.

The best solution for you if you have single life Critical Illness policies, PHI policies or other income protection policies, Private Medical Insurance policies and/or Waiver of Premium Benefit in respect of any policies or plans (Including Personal Pensions), is to have a Property and Affairs Lasting Power of Attorney arrangement in place as a minimum to ensure that you choose who would look after your affairs and manage such a claim on your behalf and to provide the legal authority for such a selected person to act on your behalf.

Furthermore, if you wish to use the proceeds of your insurance to fund any medical care and/or if you have clear views in respect of how you would like to be cared for in such circumstances, you also require a Personal Welfare Power of Attorney arrangement in place for the same reasons.

If you have Critical Illness policies, PHI policies or other income protection policies, Private Medical Insurance policies and/or Waiver of Premium Benefit in respect of any policies or plans (Including Personal Pensions), get in touch.

We can then guide you through and create the most appropriate Lasting Power of Attorney arrangements for your purposes.

Also, as part of our service, we certificate your Power of Attorney documents and we also make contact with your selected Attorneys to ensure that they are aware of their responsibilities and to answer any questions that they may have.

Meeting us and discussing this area or any other matters; will cost you nothing and will not place you under any obligation to proceed with our recommendations.

Please note;

Preference Trusts and Wills Limited are Wills and Trusts specialists, regulated by The Society of Will Writers’ Code of Conduct and Practice.

Preference Trusts and Wills Limited are not Financial Advisers authorised by the Financial Services Authority and therefore do not offer any advice in respect of any Financial Products or Services where authorisation by the Financial Services authority is currently required.

We only advise on the subject of Wills, Trusts and Powers of Attorney and not in respect of the suitability or other wise of any financial products or services that require financial advice authorised by the Financial Services Authority.

If you require authorised financial advice in respect of your financial services or products, we would strongly recommend that you seek financial advice from your adviser authorised by the Financial Services Authority

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