[speaker001:] talk started some many years ago. It says legal aspects as you can imagine the chances of dealing with all the possibilities of legal aspects in retirement is is is nonexistent. So in fact I've always concentrated and what people have wanted is some specific direction namely wills dying and what happens if you haven't done something about it. [LAUGHTER]
[speaker002:] Now that was said many years ago Oh well the last thing anyone wants to do when they're going on a retirement course is to talk about dying. But as you may discover at the end of your course you'll have a questionnaire to say how found it, how it's gone on... and of course in the past people have filled in questionnaires saying what they want to know about the legal aspect is all about wills. So wills is what you're going to get mostly.
[speaker001:] [LAUGHTER]
[speaker002:] Now we've got a good long a session and hour and a quarter and tea afterwards. So er I don't mind at all being interrupted if anyone has questions as we go along please shout them out it gives me a little breather with me voice and gives a chance to deal with things in the right place if need be. If you can't hear me at the back because my voice drops from time to time then shout away because I'm not always aware of how well it carries. Er and er we'll see how we go. Now you are actually going to be guinea pig for me because I've been doing these for about ten years and I've decided for ten years is getting perhaps a little stale. I've heard myself say it an awful lot of the time, so one of my colleagues who's done one I've I've nicked his er I'm gonna give his lecture or his talk which probably means I shall get my my tongue in a twist an an an and not quite see where I'm going. So if I sort of stumble and start now and again you'll get an idea of what the problem is. So wills. Firstly what's a will, we all think we know what a will is. In practice it's a piece of paper that's been written out by you or at your direction to say what is to happen to all your goods and chattels and property when you die. Of course although we're talking about dying and nobody wants to think about dying let's remind ourselves it's the only certainty in this life. We're all going to go off one day and there's nothing better than planning for it. And making will is planning for your eventual demise. Now the good reasons for making a will. First one is to avoid the intestacy rules. As you can imagine if you don't what's going to happen to what you've got somebody else is going to say for you. In this case the somebody else is the law, the law provides what is to happen. The problem is that the law makes its intelligent decision as to what it thinks should happen which may accord with your wishes. But if you haven't said so we don't know what your wishes are and the law will come along. And the law does things a little bit differently to what some people imagine.... How many of you Can I just ask hands up, think if you die everything you go Everything you have goes to your spouse? Husband or wife. Sorry you're wrong. Erm it's a common mistake and people think Don't need to make a will it'll all go to me wife. It's not true and of course wife might not survive. Who gets what depends on who you leave and how much you leave. And we've got a little chart here... which I shall go through. I know you may not all be able to see it but reasonably clear. First of all who you leave. Whether or not you leave the surviving spouse makes a different. Whether or not you leave children makes a difference. If you've got a spouse and children then the spouse is going to get household goods and personal effects, the ordinary everyday things in the house and the first seventy five thousand pounds. And a life interest in half the residue. The half of the residue is going to go to those issue, children grand children whatever. And when your surviving spouse has finally run his or her course and the life interest comes to an end then the remaining half will go to the children as well. Now as you can imagine it depends what you leave and where you leave it as to how effective that is going to be on how er distressing that's going to be. There's been an article in the paper very recently saying they're going to bring out some proposals to change those intestacy rules shortly after easter they haven't come out yet. As it says in the article You own house and live in Surrey your surviving spouse is not going to get a great deal of the house. If you live in Grimsby then okay cos the house isn't going to be worth seventy five thousand pounds. So that's a critical point. What's the house worth? I'm dealing with two estates where no will has been made and the house was in the name of husband alone who died without a will and the net result is that on on law on intestacy neither of the those surviving widows is of right entitled to the house and in both cases there are children and as you can imagine there is a certain amount of anguish about it.... If you haven't got any issue but parents or fore brother or sister or the issue of that say it's your nephews or nieces and you've still got a spouse of course, she still isn't get She or he is still not going to get the whole lot. She gets a bit more a hundred and twenty five thousand pounds now and an absolute interest in half the residue. And it's only if there is no spouse that matters go rather more as might expect, namely firstly always the children or the issue if they aren't any of those to your parents brothers an sis er issue of parents therefore brothers sisters nephews and nieces. None of those back as far as grandparents and issue of grandparents so uncles and aunts cousins. That's as far as it goes. [cough]. Excuse me. None of those and the chancellor of the exchequer is rubbing his hands and saying Goody goody th there's money for my coffers cos he is the one who is going to step in and take it all, so the people will argue the obvious ones are, firstly somebody you live with but are not married to. Secondly the child of perhaps a second husband or wife so your stepchildren if you have any. You may treat them as your children since they were two years old but if they're not a blood relative of yours they won't be inheriting anything anyway however close they may be. And the third o category that come into mind are your husband or wife's nephews and nieces. The people because you don't have children who are very close to you because they're your spouse's nephew and niece but they're not your nephew and your niece. And I've had some instances where those entirely. There's your intestacy rules that's what the law's going to say about it all and that's what will happen if you don't make a will.... Pause to check notes.
[speaker001:] [LAUGHTER]
[speaker002:] Done the intestacy bit. Erm there is to give you a little bit of an idea of hoe those rules would apply and who comes into it A well known family tree for you just to look at. And see how wide it can be and also in some respects how remote it can be. These are the sort of people who come in the Queens family tree. Move that up a bit so... a little better. Those are the people who would have benefited or taken in to account should the Queen have died without a will. And you get quite remote as you can see people you hardly know you know er fairly distant cousins er but you also get fairly close people who don't get consideration at all. Just an indication for you there.... Now we've all seen the intestacy there's another little bit I like to deal with at this point er which is to do with inheritance tax. Or taxes generally. [clears throat]. The reason I throw that in is because it doesn't conveniently come under wills anywhere, but it's relevant to you. You've seen you've seen figures for intestacy. Inheritance tax has different figures.... And exemptions and allowances. And there's a little table telling us about inheritance tax. Now that usually alters every year. The intestacy rules and the figures don't. The last time they were altered was I think about nineteen seventy nine or nineteen eighty one. Tax, [clears throat] exemptions, reductions, everything to your spouse is exempt. Gifts to charity are exempt. Reductions they've actually altered those in the last b budget, er which has benefitted particularly the business property element. But essentially with agriculture woodland works of art and so on you have re reduced values to put in your estate. Once you've taken those into account, there's a nasty figure at the bottom. Forty percent. Which is not as nasty as it was ten or fifteen years ago, but it's still a lot of money if you come into this bracket. Forty percent above a hundred and fifty thousand pounds.
[speaker001:] [clears throat]
[speaker002:] Now the chancellor's being very nasty this year, he's not increased that limit at all. It was a hundred and fifty thousand pounds last year, a hundred fifty po thousand this year and whether he will put the breaks on it next year cos he needs the money, I don't know. Reaction of most people is to say What a lot of money, we don't get anywhere near that. Why am I bothered about inheritance tax. Answer sit down and work out what you're worth, not alive not what you can spend. Which is what we like to know about, but what you're worth when you're gone. And of course if it's a husband and wife, the two of you together should be thinking of this sort of information because you can do something about it in your will. You got your house it'll be paid for won't it by now? Or hopefully. You've got those insurance policies, they're coming good soon, you're going to spend them on your world cruise I know, but you might not quite make the world cruise. And then there's things that come in like superannuation may be, pension payments if you're in a scheme, lump sum repayments the sort of things that you can't spend but if you're not here they may be going into the pot. So before you decide that you're not worth a hundred and fifty thousand pound do actually sit down and work it out. There are few people I think who've been rather surprised at the amount concerned. Again I'll mention the two cases I'm dealing with where there've been no wills and surviving spouses who are not getting anything. In one of those two cases we've had inheritance tax to pay. So it was over a hundred and fifty thousand pounds in total. And that again was a bit of a shock to the family concerned. They really didn't understand or realize that they were worth so much. So think of your tax because when you make a will you can something about that tax. you can make use of exemptions and just a charity. Husband and wife again particularly to plan a will so that it all ends up with the children if that is eventually what you want with no tax payable or a a a reduced amount of tax. Now this comes into sort of preparing what you ought to have ready when you're about to make your will. Now I hope you're going to see a solicitor to make a will. I shan't force you to but erm it's an important document and the biggest problem about wills is that... when anybody gets to look at it you're not around to say what you meant. And if you haven't made it clear what you meant erm either the court will have to decide or somebody else will decide that it's different to what you intended. So it's a document well worth taking professional advice about. So if you're going to that have a clear picture in your own mind as to what you want. You can tell the solicitor and he will say or she will say to you Good I understand that or Have you thought of this or No you can't do that as the case may be. And you may not have realized this but these many misunderstandings can be sorted out while you're still here to to agree 'em. You need to know what you've got, not precisely the solicitor doesn't want to know that you've a house and three insurances and two bank accounts and a building society. He wants you to know that you've got those and you've got a fair idea of how much you're leaving. And who of course you're leaving it to.... How large is it? Your estate that is of course your estate in this context is everything you own. Your house your land your property your money, everything is going to come in to be dealt with via your will. If you and your wife or husband between you are worth more than a hundred and fifty thousand pounds this is where a bit of estate planning can come into effect in your will. Now you may want to leave everything to your surviving spouse and then on to the children, that's natural. If it's worth more than a hundred and fifty thousand pounds between you at the moment and you leave it all to your surviving spouse then when he or she dies in due course and if those figures haven't altered they'll be inheritance tax to pay. Say it's a hundred and sixty thousand pounds. ten thousand pounds over the limit not on your death but on your spouses death remember. Tax at forty percent, four thousand pounds to the chancellor of the exchequer, he'll be delighted, your kids will be wishing that they didn't have to pay it. they not really paying it themselves but they get four thousand less than they would. Now let's presume that you've got a couple of children and on the death of the first of you, you leave ten thousand pounds between those two children and the rest to your surviving spouse. Now that spouse is only worth a hundred and fifty thousand pounds when he or she dies not a hundred and sixty thousand pounds. Amount of duty, none. Hundred and fifty thousand pounds is the exempt limit so there's no inheritance tax to pay on the death of the survivor. Tax to pay on your death, none because you yourself are worth a h less than a hundred and fifty thousand pounds and your will have ten thousand pounds, free of tax. And it's as simple as that, all you have to concern yourself is does the surviving spouse have enough left to live on? And well most people manage with a hundred and fifty thousand pounds one way another. There's pensions coming in in any event. So that a little bit of simple planning is a way round inheritance for the benefit of the children and it's usually the children that people in the end want to benefit.
[speaker001:] May I ask a question?
[speaker002:] Of course, please do.
[speaker001:] Is there a limit to the amount you can leave to the children at that point?
[speaker002:] Erm you're effect erm limited to well no you could leave anything you like. But your own death, if your the death of the first of you and your spouse, have its own exception a er its own limit of a hundred and fifty thousand pounds. So if for instance you're quite well off and you have two hundred thousand pounds in your own estate that you want to leave, if you make it all to the children there would be an exemption of the first hundred and fifty thousand pounds and there would be tax payable on the fifty thousand. If you left hundred and fifty thousand to the children and fifty thousand to your spouse, there would be exemption gifts to spouse no tax on that, exemption first hundred and fifty thousand pounds to the children no tax on that, so on your death no tax. Your spouse would have her own estate plus the fifty thousand pounds that you left her. So if she's still worth under a hundred and fifty thousand pounds there'd still be no tax on her death either. If she made her estate more than a hundred and fifty thousand pounds there'd be some tax payable, so it's a question of how much you've got and both estates have got that exemption of a hundred and fifty thousand pounds.
[speaker001:] Would the receipt of that money, as a beneficiary affect my children's tax position?
[speaker002:] Erm th in certain ways. If it's inherited from an estate that of itself er attracts no tax, so there tax position would only be the income that they received from it would be subject to income tax and it would be added to their own assets so that when they die in due course then they've inheritance payable there. But there's no other tax er effects, there's no capital gains tax for instance on that... transfer. Were you to transfer it during your life than there are certain possible tax er consequences depending on how long you live, but it's fairly rare for people to transfer substantial amounts during their life.
[speaker001:] Isn't it seven years?
[speaker002:] Up to seven years in practice. There are reductions up to four years, but again it would depend on how much your size of your estate is at the end of the day, when you do finally go as well.
[speaker001:] three years. Am I right in giving three thousand per year?
[speaker002:] You can give 'em three thousand a year to... er in total to anybody you've got all the exemptions like two hundred and fifty pound in any one gift erm and you've got things like five thousand pounds on marriage of a child that you can give, and all these add up little cumulative bits here there and everywhere which helps you to dispose of an estate. Also if it's within your own normal income you can give anything, in other words if you don't reduce your capital. And you happen to live frugally but have a good income you can give the spare income away without subject to any tax. So there are plenty of ways of disposing of little amounts Every bit you dispose of from your capital every hundred pounds saves forty pounds in tax, if you're at that sort of level.
[speaker001:] Could you tell me, if you and your spouse are both killed at the same time
[speaker002:] Yep.
[speaker001:] and your estate's worth a hundred and sixty thousand
[speaker002:] Mhm.
[speaker001:] pounds, and you've willed it to go to your children after your spouse,
[speaker002:] Mhm.
[speaker001:] I presume they would have to pay tax?.
[speaker002:] Yes because in practice what the will would say is that the spouse would have to survive for twenty eight days,th the usual phraseology. If not erm then if your spouse died the day after you for instance, you had a road accident or something like that and you've left it all to her, she'll take it all and then it'll add it would be added to her estate it as well and make the inheritance tax bill bigger. But if you've made a twenty eight day clause then yes it'll go to the children a hundred sixty thousand pounds and there'd be tax payable on ten thousand pounds. But that's the same as if you willed spouse had died before you for instance, and you were the second of two to die and she hadn't or she might have everything to the children and you still got a hundred and sixty thousand pounds, you can't avoid the inheritance tax in those circumstances.
[speaker001:] at Dunkirk, he was killed in a car crash with his wife both killed instantly.
[speaker002:] Right.
[speaker001:] any sort of... implications there?
[speaker002:] Oh yes, Oh yes.
[speaker001:] He had retired he'd retired about ten years.
[speaker002:] Depends what and how... this is where we get husband and wife survivorships.... What happens depends on whether or not you made a will to start with. So if you don't know who's died first and there's intestacy, I E no will made, neither survives the other. The husbands property will go to his side of the family, the wife's property will go to her side of the family, which doesn't matter if there are children cos obviously the children are both. It matters much more if you haven't got children you're talking about brothers and sisters and all their children. If you've got a will however, the elder dies first which is why we have these twenty eight day clauses, you know the man is sixty, the wife is fifty five and they're both killed together. There's a will and the man left everything to his wife, she will get it all if if we haven't put in this clause which technically says, Leave it all to my wife if she survives for twenty eight days. It's to cover just these circumstances where there can be something like a a car crash. But does it matter as when you think that she may not have made a will, because then everything will go to her er next of kin as one says, intestacy rules. And if it's for instance a second marriage husband's side of the family could be missing out all together. Even if it's a first marriage the husband's side of the family would miss out altogether. But then you've got that bit at the bottom. Property owned as joint tenants goes to the younger. Now joint tenants is a legal term sensible place to describe it as it's come up... which is what husband and wife often own property as. Buying a house husband and wife will usually
[speaker001:] [cough]
[speaker002:] As a joint tenancy, it should be explained to you. The alternative way of holding property is as tenants in common. The best of describing it is If you are joint tenants, say it's a house... and there's of you, you both own all the property. One of you dies, the remaining one still owns all the property cos he or she always has done so and therefore it belongs to that person. If you're tenants in common, you will each own half the property or such proportions as been agreed. One of dies, the other one still only owns half the property and therefore the half of the one who's died can be left by will or go under an intestacy. If it's something like a bank account, the indication is Who can draw it out. You have a bank account where either of you can sign, one dies the other can still sign and therefore it belongs entirely to that survivor. If it's a bank account where you've both got to sign before you can draw the money, one dies the other can't draw it out because you can't have two signatures so it's tenants in common and it would be split in accordance with whatever the agreed proportions were. So there's a goodly complication in that. Easier to have wills.
[speaker001:] Just going back to the intestacy thing you started with.
[speaker002:] Mhm.
[speaker001:] If it's... the joint ownership of the first type you described there
[speaker002:] Joint tenants, yes.
[speaker001:] Yeah and also joint bank accounts.
[speaker002:] Yes.
[speaker001:] Does the seventy five thousand only operate on stuff beyond that?
[speaker002:] Yes, if you have Well it's the same whether it's an intestacy or a will. If it's jointly owned property as joint tenants it will pass to the survivor. Therefore y it does not matter whether there is will or not because it passes to the survivor independently of what a will may say. Whether it's a will whether it's an intestacy the survivor takes because the survivor can deal with it, in the way that I've described. And therefore it doesn't matter what the will may have said erm I mean it doesn't matter what the intestacy may be er that survivor takes it and it goes to the survivor outside of the will and you do not deal with it. The er I I shall pull back slightly on that comment in that, if it's jointly owned property it's outside the will you therefore don't have to prove the will to deal with that property, but if it is a large estate and you are dealing with other assets, when you do your inland revenue account you also have to refer to property you may have had the power of dealing... while you were alive and that would include jointly owned property. So if you're doing an inland revenue account for the tax man in other words inheritance tax and you've got the bank account in joint names with thirty thousand in it. He'll want to know about half that bank account, fifteen thousand pounds. But if you don't have to contact the inland revenue, because you don't need to prove the will because the estate is too small then you don't have to tell him about the jointly owned property. It's erm an area where two elements of the law... don't quite meet tidily and For instance if you worth... four hundred thousand pounds big figure, and you had a hundred thousand of it in your own name and three hundred thousand jointly with your wife, wife die er you die, your estate for probate purposes is a hundred thousand pounds. That's what you've got to prove a will for, the three hundred thousand pounds has gone to your surviving spouse as a jointly owned property. Hundred thousand pounds you do not have to submit an inland revenue account, therefore you don't need to tell them about the three hundred thousand pounds and therefore you won't pay inheritance tax. But if your figure was above hundred and twenty five thousand pounds you'd have to fill int an inland revenue account. You'd put your hundred and twenty five thousand pounds down, you'd also put down half of the jointly owned property because you could have dealt with that while you were alive and you'll end up paying large amounts of inheritance tax. And th it's a it's a it's a strange situation but if you've got a smaller estate you'll get away with it, and if you've a larger one you've got to tell them about it. And there's absolutely no provision for erm correcting that. It's just a fact. Right we preparing.
[speaker001:] How does the inland revenue police the system whereby if your estate is to
[speaker002:] Mm.
[speaker001:] small to need to go to them.
[speaker002:] Yeah.
[speaker001:] Who decides it's too small?
[speaker002:] There are specific l l l levels. When you apply for a grant, be it by way of proving a will or of administration which is when there is an intestacy, part of the er documentation is an oath where you swear as to the size of the estate. You have to swear usually that it's under a hundred and twenty five thousand pounds. If that is the case you don't have to complete and inland revenue account. If it's above a hundred and twenty five thousand pounds you do have to complete that account and you won't get the grant from the probate registry until you have done that. On top of that they have a random check system whereby a number of estates are sampled. Essentially they will send a form out saying You've recently got a grant estate, you've said it's worth say twenty five thousand pounds, we're checking up please let us have a list of assets and liabilities. So it's a sort of spot check to see how things go.
[speaker001:] Who swears the oath?
[speaker002:] The executor or administrator. If it's a will it's the executor or the one executor of the number of them who are proving it. If it's an administration I E there's no will it's the er next of kin which in this context is the person next entitled to the estate so surviving spouse or surviving children if there isn't a spouse.
[speaker001:] And if the solicitor got it wrong it's the executor who... takes the blame.
[speaker002:] It depends what it is that's wrong. Erm it's the executor's job to... administer the will... but if it's known that there's a mistake of course the executor on behalf of the estate can sue the solicitor. mistake is obvious like... one estate I'm dealing with which is a half home-made will I E it wasn't made by a solicitor, I suspect it was made by a barrister I suspect it was a barrister who was born abroad
[speaker001:] [LAUGHTER]
[speaker002:] and it left three halves of the residual estate.
[speaker001:] [LAUGHTER]
[speaker002:] Since we can't find out who did actually make it we can't sue anybody for all the costs that that involved in trying put it right. But if a solicitor had made it and put three halves we could... take an action against that solicitor or the executor could to erm for the costs of going to court to find out what on earth the will meant.
[speaker001:] [whispering] National Curriculum Key Stage One [LAUGHTER] [] [LAUGHTER]
[speaker002:] . Not good ones I hope. And so you've going to see a solicitor, you know what assets you've got, you know who your family and dependents are. In theory you can leave your estate to who ever you like. Cats' home, your mistress round the corner, one of the children and not the others, however you like. In practice if you don't take proper account of who is entitled erm there will be proceedings after you've gone. You've got to have in mind Who are your family and dependents? If you're keeping your spouse because you have the assets and he or she doesn't, there's no good leaving nothing to the spouse, unless that spouse is rich in his or her own right Rich in comparative terms, then there may be good reasons not to live him or her anything because you'd rather leave it to the children. Again we're saving the inheritance tax as I mentioned. That'll be okay.... Children [sigh] it's usually safest to leave it to children but not every family warrants that there are circumstances that mitigate against. The classic one of the unmarried daughter who stays at home to look after parents for instance. That's an unmarried daughter that you should be giving due recognition to for the efforts that she may have put in. You may have a handicapped child who has special needs who er has a requirement for extra resources, you should think of that. Erm you shouldn't forget the children round the corner that your wife doesn't know about or your husband doesn't know about.
[speaker001:] [LAUGHTER]
[speaker002:] They're young and you're still maintaining them when you're alive you can't pretend that they don't exist when the will comes along. Because if they don't know about it the mother or the father of that child will no doubt be coming along screaming I've been getting twenty five pounds a week for the last ten years and I've child on my own now. Er it's surprising how things come out in wills that have been kept quiet
[speaker001:] [LAUGHTER]
[speaker002:] during the lifetime of the deceased. These people all need to be given thought. If you've given thought to them and excluded them, that's fine as long as you've made it clear. Husband or wife do get excluded for instance because the marriage has not been a particularly happy one erm and... there would therefore be no particular one why the deceased would leave anything to spouses erm but it's worth saying so if that's the case, to prevent an action coming along and saying Oi why am I not being there, why have I been left out? You also need to have in mind, having decided who's getting everything, who's going to do it all for you. Your will tells y the world what your wishes are, somebody's got to carry your wishes out. That person or persons are your executors. Difference between executors and administrators I've mentioned it briefly before, executors are carrying out the will, administrators are dealing with an estate where there is no will.... You can have anyone you like as your executor. It's not a position where A number of people have the idea that it can't be a beneficiary, it can, it often is a beneficiary for the obvious reason that if the beneficiaries are getting the goodies, why not make them do the work necessary to get hold of them?
[speaker001:] [LAUGHTER]
[speaker002:] simple as that. but there are often good reasons why the beneficiary and the executors are not the same. First of all of course is your spouse. Why not appoint him or her? that may be sensible, the younger you are, the more sensible it is. When you come to retirement age, whilst not suggesting that you are past it, you are planning ahead for the time where you may not be quite as capable as were. If your not your spouse may not be either. So yes your spouse might be getting all your assets, but if you're going o be seventy five or eighty by the time you've gone and your spouse is seventy four or seventy nine or whatever, he or she may be a little bit past the running around that's necessary the actual practicality of it. If you've got children let them do the work survive the parents, erm as long as they're the sensible sort who can do it and aren't going to fall out with parents and are going to be round. But that's the sort of thing you have in mind, have someone who's a bit younger than yourself. Erm because it is an onerous task, erm onerous in terms of the time that needs spending doing the job even if it's relatively simple in terms of what needs to be done it still takes time and there's still running around to do.... Not everyone unfortunately has children... so you may have to cast around for other members of the family. Brothers sisters, they're the same age as you more or less, not necessarily a good idea. Nephews and nieces might be a better bet erm those are the sort of people have in mind. You might have to go outside the family, it could be next-door neighbours, or friends from work or social club or wherever. When you're getting outside the family you've got to be careful to make sure that they are people that are prepared to do the job, that they understand what's involved because you cannot force anyone to be an executor. Just by naming them doesn't commit them to do anything, they may say Well he never asked me I'm not doing that. And you've got difficulties because there they are appointed executor they're not doing their job, nobody else there to do the job, somebody's got to sort that out. So do... think of that. And then at the end of the day not everybody has even friends or neighbours that they'd want to... impose on? Or be involved in. They don't think that they'd want to know. Or should want to know. You may need to turn to professional advice. Solicitors, accountants... banks perhaps. I'll go through those. If you've got a business you've probably got an accountant. A sensible choice simply because he or she will know a lot about your financial affairs in any event, and therefore is going to know what to look for and how to deal with it. Solicitors well they will know something about your affairs possibly, because of hav to dealing with houses, other difficulties you may have come across form time to time. Banks, yes you deal with banks and er they know a lot about your affairs because you've got your bank account and it goes through their hands and the know all about that. But then banks is expensive Banks is. Steer clear of banks is my advice. I don't how many of you have seen or heard reference to the recent Which report about... estates and managing that. It's typical Which, Problems with Wills I think it was called and then it came in the paper as Where There's a Will there's a Bill.
[speaker001:] [LAUGHTER]
[speaker002:] Nice headline isn't it? It Rings if there wasn't a will there wouldn't be a bill perhaps? Where as in fact if there isn't a will the bill is usually bigger. And in the typical sort of way that lawyers get knocked these days erm we get lumped in with other people and the mud flies. Er reading this article or at least the heading from it and the bit in the paper, you got the impression that solicitors were as bad as banks. Read it in detail and you find that most of the examples given related to banks, and there was one relating to a solicitor. I'm sure that they could have found other examples where solicitors were not doing the job very well and were charging a lot of money because let's be realistic there are good solicitors and there are bad solicitors and I wouldn't pretend otherwise. I meet some of the bad ones er and see the work tat they do and I agree tat things aren't quite as they should be. But I've not yet met a bank who's good at it.
[speaker001:] [LAUGHTER]
[speaker002:] Not necessarily in terms of the way the job is done, but in the cost banks really are expensive if you're minded to use a bank they do publish their tariff, they say they give them out to people, I suspect that it gets forgotten sometimes the principle is there the isn't. Study their rates and then decide to throw them into touch and get somebody else to do it. Because I used to say a solicitor would only cost half what a bank would. Looking at what the examples given by Which are concerned the solicitor was only charging about thirty percent of what the bank would. And it may have still seemed a lot of money at I think one thousand seven hundred and fifty pounds, I can't comment or not not having seen the size of the estate, but it compares quite well with the five thousand one hundred and sixty sixty pound Five hu Five thousand seven hundred and sixteen pounds that the Midland bank charge on the particular estate. Looking at this lot Barclays six thousand and seventy two. Lloyds five seven six, Midland four six two nine, Nat West four six four nine seven, solicitor one seven fifty. Well one thousand seven hundred and fifty might seem like a lot of money, but there actually is quite a lot of work in dealing with an estate. And I wouldn't say that that was an unreasonable... charge. Erm it suggests that you should never appoint a solicitor or a bank for the reasons of cost.... There... I can't say that that is right you should never appoint a. Occasionally I even recommend a bank if you should work for a bank you can get the job done for practically nothing I understand and it might be worthwhile. Er and solicitors well they're there the point is about the solicitors among other things they can er mediate when you have the sort of family who are going to fallout and I'm afraid people do have families that are going to fall out. Not everybody does but there are some who do. if you've got an independent person doing the work they can say Well, we don't mind what you're doing falling out among yourselves the will says this and this is what we're going to do. And they can make sure that the wishes are properly carried out. They will of course charge for doing the job, but if you appoint somebody else as an executor and that person goes to see a solicitor the solicitor will also be charging for the job. the mere fact that they are appointed executor does not of itself increase the size of the bill. On the one hand you're giving them extra responsibility so yes the bigger might be bigger for that reason. But on the other hand they're not having to deal so much with another executor there isn't there hasn't got to be so much to and fro correspondence and therefore the workload will be somewhat less and that's likely to balance the extra responsibility element. So that the bill I would es estimate, if you have a solicitor as executor would be the same as if you had a private person as ex as executor who went to see that solicitor. What those costs may be I'm afraid I can't give you a good guide because depend on the amount of work. If you leave a complicated estate with lots of bits here there and everywhere and your affairs in mess and the solicitor's got to sort out he's going to have to do a lot of work for it. Whether you leave a lot of money or not. the size of the estate is a relevant consideration but no the only consideration. A big estate will cost you more than an identical but small estate because there is the responsibility element of it. There's the fact that if he gets it wrong he's lost more money and therefore his, you might say insurable risk is a higher one. I'm not saying that he will get it wrong or that he'll lose you the money, but that's the responsibility of.
[speaker001:] Can I ask another question?
[speaker002:] Mm.
[speaker001:] If in the course of erm... a will being proved and
[speaker002:] Yeah.
[speaker001:] things coming to fruition,
[speaker002:] Mhm.
[speaker001:] and to raise money say to pay erm this forty percent tax
[speaker002:] Mhm.
[speaker001:] share holdings have to be sold. If they made a sale at a certain price.
[speaker002:] Right.
[speaker001:] And just a couple of days later shares are fluctuating
[speaker002:] Yeah.
[speaker001:] and they sold at a very low price and
[speaker002:] Mhm.
[speaker001:] a few days later there they were at a very high price.
[speaker002:] Mhm.
[speaker001:] Is the person doing the selling guilty of any irresponsible acts?
[speaker002:] Erm right.
[speaker001:] If it's known that they're up and down like
[speaker002:] Yeah.
[speaker001:] this.
[speaker002:] First thing is that they wouldn't actually be able to do that for the reasons you've stated. Shares would be in the name of the deceased, therefore can't be dealt with until you've got the grant to prove that you can deal with them. Therefore you can't sell them to raise the money to pay the tax because you've got to pay the tax before you can get the grant. So in that context the argument wouldn't arise, therefore any sale of the shares would take place after you've got hold of the grant and it may be necessary for other reasons like you've got bills to pay or a mortgage to discharge, whatever the reasons. Erm the answer would be no, they've got to be sold at sometime and nobody knows what the market is going to do. In practice if there are beneficiaries who are capable of being consulted, it's likely that one will say to those beneficiaries Right we need to raise some money, there's only the shares to do it with, we're proposing to sell them... do you agree with that or would you prefer to have the shares and gives us some money? And then you've consulted somebody else and if the say no go ahead and sell the shares and if two days later they've gone through the roof it's unfortunate. It's just a fact, nobody could predict it and there for nobody would be liable.
[speaker001:] If they didn't consult?
[speaker002:] They would leave themselves open to... criticism. Yes
[speaker001:] Just in time.
[speaker002:] they'd leave themselves open to some criticism... erm because the beneficiaries of whoever otherwise may be entitled to the shares may have said I would like to have those shares. But they do actually have the power, presuming that the will is appropriately worded, to sell for any of the assets. And as long as their not acting in bad faith or er knowledge of a likely increase
[speaker001:] .
[speaker002:] you're unlikely to be able to do anything about it. Yeah. It happens erm I've handled a case myself where shares were valued at a particular amount on the death and er in due course they needed to be sold as part of the administration unfortunately they'd gone down er a fair amount in the mean time. Erm b but there was no reason why we should sit in wait in case they might go up... because they might have gone down further. Beneficiary didn't want the shares so we sold the shares and there's no good time... you know unfortunately none of us has crystal balls where the market is concerned.
[speaker001:] Good point then. You say you've got to pay tax before you get the grant of probate, but you might need the grant of probate before you can pay the tax.
[speaker002:] Yes.
[speaker001:] So what happens then?
[speaker002:] You've consulted a solicitor by now I hope.
[speaker001:] [LAUGHTER] [whispering] [] [LAUGHTER]
[speaker002:] Erm if you're trying to do it yourself and in theory you can just. Erm it's one of life's conundrums, there are of course answers which solicitors should know about. Number one is that if there are National Savings of any sort, they can be utilized to pay tax. Erm you have to be in touch with the National Savings and they send the money direct so you don't actually get your hands on it. But that's one way round that's possible. Then there are the banks who will always be ready to lend you money to can it up so that it can pay. They may want security, er one case I've been del dealing with they wanted the share certificates depositing by way of some security for instance. But banks unfortunately do charge, negotiating fee and then interest at exciting rates, erm solicitors will do it sometimes, we've done it for clients where we know that it's not too large an amount and we know that there are assets easily obtained because that way the client saves the banks administration fee. We still charge the same interest rate that the bank would do because of course it's costing us that from from the bank on our own funds. But done it up to two or three thousand pounds for an estate, knowing that it [tape change] evaluation. You always need a residuary gift. One rather exciting will home made will I hasten to add I dealt with last year, the lady of some who was not getting on with her husband and I think although I'm not absolutely sure that the handwriting is that of her sister... and we have this form filled in and it mentioned the... bank or special savings account and it mentioned the premium bonds and it mentioned everything in the back bedroom and the linen in the linen and the linen cupboard because she'd brought all this lot... and it failed to appoint an executor and it failed to deal with the residuary estate it meant that technically there was a partial intestacy, as there was a partial intestacy the rules applied to that, first person to inherit? Her surviving spouse, the one she'd obviously done everything to make sure he didn't get a penny.
[speaker001:] [LAUGHTER]
[speaker002:] Second thing was that having covered absolutely everything she wasn't any estate, or at least didn't appear to be any so the surviving spouse wasn't very interested in taking out a grant anyway cos it wasn't going to get him any funds, so we then have the job of doing what's called debarring him and basically he renounced his right to be of the administrator and we then had to go under the rules to find the next person which was one of the specific beneficiaries I E the sons. In fact we turned up some gas shares on the way, but er and a bit of cash, but that wasn't enough to pay the funeral accounts and she made no provision for paying any of the bills so I sold the gas shares towards paying the funeral account and then got shouted at by the er beneficiary children because I hadn't consulted them about selling the gas shares and I said Well, they have to be sold because there's bills to pay and there is no way of dealing with that. In the end part of there specific bequest had to be used to pay the balance of bills but there was a complaint about how long it had taken to sort out, and it taken long to sort out because it was a home made will that didn't make all the right provisions. Er a a and with a family row in in it as well you can imagine the work involved was a bit more than initially might have been expected and I got criticized because the bill was bigger than I had first estimated cos I didn't expect there'd be trouble from the father.
[speaker001:] [LAUGHTER]
[speaker002:] So all that for the sake of paying thirty pounds or thirty five pounds to go and see a solicitor and make a will.
[speaker001:] Is it any reason why you shouldn't express it in percentage terms say twenty percent to this, thirty percent to that... ten percent to
[speaker002:] In theory there isn't, in practice it depends how you word the rest of it. Er we're talking about residuary estate here and if you've made specific er gifts. Say you are leaving some to a named person, you have left that person, say ten percent. you've got to make provision if that person doesn't survive you... because if the person doesn't survive you, ten percent of your will's not been dealt with. So you would be intestate towards the ten percent. What you actually do is not put it in percentage but in shares. So if you gave that person ten shares, gave ninety shares to somebody else it's a hundred percent in total, but if that person then dies cos you don't want any of his relatives to have it then there's only the ninety shares remaining and ninety shares will be one hundred percent. Because you don't know how big a share is until you know how many people are sharing it.
[speaker001:] I see.
[speaker002:] So you get away with that way but percentages is a phrase to avoid very in a will shares
[speaker001:] I though my granddad's will was that, yeah
[speaker002:] percentages you know
[speaker001:] exactly that.
[speaker002:] percentage of a fixed got there. Shares is a How many people are there dividing, a share is ... big or small depending on whether it's between two people or twenty people.
[speaker001:] Thanks.
[speaker002:] And that's the way around that little er Again it's something that you'll Doesn't occur to you until it's come upon you, you've dealt with it and you've realized it is a problem. And that's what solicitors should be doing.
[speaker001:] Erm. If you have more than one executor,
[speaker002:] Yeah.
[speaker001:] can you have an either or? Suppose you had three
[speaker002:] Mm.
[speaker001:] and can you make it so that two out of the three can deal with it. I'm thinking of people someone shall we say er Well I I've got two sons one lives locally and one lives a long way away.
[speaker002:] Mm.
[speaker001:] An
[speaker002:] You c You can er you can in fact have up to er you can find in you ex in your will as many people as you like but no more than four executors can prove at any one time. Erm so what I have to is an executor appointed provided he lived in the country for instance because his address was abroad at the time. What you would do in your case with children is probably appoint them all and then they don't all have to prove so they would hopefully discuss this at the time and say Well you know I'm a long way away why don't you two get on with. Or the fall out about it they could still all three prove. So you should make the decision in the first place. If they're abroad I suggest you leave them out, if they're still in the country I suggest you can leave them in. A lot of it's done through the post anyway.
[speaker001:] mm. Well I was taking your point about... You know o o wives, about being the same sort of age.
[speaker002:] Yeah.
[speaker001:] Erm suppose I parted my wife and two children
[speaker002:] Could do.
[speaker001:] Erm but any two out of that.
[speaker002:] Yes what I It's usual to say is that I I desire or direct that no more than two should prove it. Erm I put that in In practice it's... a bit unnecessary because it is not enforceable.... And even if it were enforceable and there's three how would you decide which two of the three could do the job. The either they're all going to agree and there's no problem anyway, or they're not going to agree in which case you saying they've got to be two rather than three isn't going to help the situation. Er but yes you could put your wife and two children and if your wife is fit to do it she can do it, if she isn't the two children can do it instead... or her and one of the children to help each other out. It's always a good idea ti have more than one executor because you don't know that your executor is going to survive you.
[speaker001:] Mm.
[speaker002:] Even if it's one of your children. Children die before parents... unfortunately and have wills I let everything to my mother, Mother I leave everything to my son. Son died first the mother died five weeks later, we had wonderful fun getting that one sorted out.
[speaker001:] [LAUGHTER].
[speaker002:] Just another example of how things can go. One thing you can put in your will as well is your funeral arrangements. Some people are concerned about it and want to put specific details in. Although I do put details of funeral arrangements in will in connection with buried or cremated, in practice it's much better that you tell your intending executors what's intended, because sometimes the will isn't even opened until after the funeral. And if you haven't told people it may get [LAUGHTER]
[speaker001:] [LAUGHTER]
[speaker002:] One or two points now about the practicalities of making a will. If you've got some better idea of what's going to go in the wills. Straight forward thing is you need to be of sound mind, that's not difficult. Er
[speaker001:] [LAUGHTER]
[speaker002:] Seriously it's not difficult. You've practically got to be committed under the mental health act... before you're not sound enough to make a will. That or so er suffering form senile dementia or loss your memory, that you can't remember who you ought to have in mind. You can be schizophrenic and still make a will that. All you really have to do is to know what you have in terms of assets, and to know who you ought to have in mind in terms of your nearest and dearest. On my experience dealing with people is however forgetful they get you know nursing homes or residential homes or whatever and they can't really remember from one corresponding conversation to the next they still remember that they've got two children and that they own a bank account. good enough to make a will. The children can't make wills cos in law they're not of sound mind until they're eighteen and adults so any will supposed to be made by somebody aged fifteen which isn't going to be a will. It's in writing because it's... got to be identified by somebody and your not around to say. It's no good telling the children You can have the grandfather clock when I go, it's with the will. And indeed as people get old or ill I find again from personal experience that they tend to give things to several people.
[speaker001:] [LAUGHTER]
[speaker002:] comes along and come along I was promised this Oh I was promised this as well. Tough it's not in the will and neither of you were getting it. It's no good until it's written down. Written and signed by you and it's witnessed by some independent witnesses. Now these are very important. They must be independent, not mention in the will you can't have a beneficiary who's a witness, you can't have a husband or wife of a beneficiary as a witness either because not I'm told very first clause there aren't, to get a duplicate made bungalow or something like that he might be missing out on the bungalow and the was The course leader at the time told me the story that saw him and he wouldn't tell me who it was I want my ten percent commission.
[speaker001:] [LAUGHTER]
[speaker002:] put it down to just a useful. Erm so witnesses er can't be beneficiaries and they must be there at the same time. They've got to see you sign the will or at least acknowledge it and in practice see you sign they don't need to know what's in the will they just want to see you sign but they've got to be there it's no good up the road as one witness did for... not for me to her husband who was working in his shop witnessed the signature afterwards. I only found that one out by mistake because there were two dates on the will check it out when it was done. And they just happily told me that Oh I just took it up the road for my husband to witness the signature and that totally invalidated the whole will. will and that didn't please some people I can assure you.... Er wills are revoked. Marriage revokes a will, divorce doesn't revoke a will, but divorce does have consequences. Divorce has unfortunate consequences because of the way they worded the act. the parliamentarians can't get a straight piece of legislation through. It says in the act something like Divorce any gift to a spouse, quote is of no effect, unquote. But there are big problems that arise there because of this practice of having leave it to my spouse if she survives twenty eight days. That's a conditional gift... divorce makes it that that gift is revoked but she may still survive therefore the condition would apply and therefore the subsequent... er provisions that you've made in a will don't apply because they can only apply if the wife survives twenty eight days but that's ignored! And that's that's that's an effect of of statute so if you are getting your divorce, make a new will. It's the easy way round that one. But marriage revokes it entirely and the law is straight forward on that. new marriage, new spouse intestacy rules, spouse is the nearest and gets the first lot so it presumes that having got married you want that spouse to have what you've got. of course it may not be the case cos spouse may be well off, but you need to make a new will. more or less with what's a good will and who you have to have in mind and disposing of the estate and being tax effective so that that. Er if you get it wrong erm there's the inheritance provision for family and dependence act nineteen eighty five, which is the... statutory provision allowing you spouse who left nothing to all those children who left nothing to make applications to the court. They've got six months from the grant to do that.... Executors we've dealt with and expenses, alterations I've just dealt with er Oh if you want to change you mind, and remember a will is only a piece of paper until you die, you can change your mind as often as you like I have made a will in the past Four wills in one year for one of my clients, his right he's perfectly entitled to do that er and it's better that you alter it frequently if your circumstances change than that you don't be aware of how things go in the way that you don't want them do. But what you can't do is cross things out or add things one, they won't be effective. Any alterations to will a will have to be executed in the same way as the will itself. So you've got to witness it sorry you've got to sign it you've got to have your signature witnessed. It's therefore nearly always better to make a new will. If you're crossing somebody out even if you er alter it and initial it, someone will know they've been crossed out. If you make a codicil leaving somebody out, they'll still see the original will somebody will know that you've changed your mind. It's better to make a new will then they don't know what you had in before and nobody's there to argue or question it. If for any reason you need to revoke your will urgently, and there are occasions when it comes about, you need to destroy it. Burn it tear it up... or both. Don't just put a line through it saying revoked, that's not good enough. Er and rush off and make a new will as soon as you can as well as.
[speaker001:] What about?
[speaker002:] Sorry?
[speaker001:] What about the?
[speaker002:] A copy is not of itself a will and therefore even if the copy is kicking around er that won't effect the matter. The only problem will arise if somebody thinks you've simply lost a will, which does occasionally happen, and then they turn to the copy to try and prove it. So if you've a copy you ought to destroy that, if it's with the solicitor you should notify them. but again if you make a new will you've got new dates on that problem is less likely to come about. Now time is nearly on us but I'm just going to rapidly refer you to procedures on death.... Actually I see another little bit that I haven't covered for us who's going to make a will but I think I've dealt with that. Do see a solicitor, cost is likely to be thirty pounds, upwards. Upwards depends on how complicated you want it to be. Husband and wife together sixty pounds, upwards. Thirty five for an ordinary one you know everything to my spouse or most of it to the spouse with bits to the children er well r we usually run to about thirty five pounds. not a lot of cost, compared to what it will cost if you don't make a will and there are complications or if you make a home-made will and there are complications. Putting it right will cost always a lot more than making your will. Making a will with a solicitor also has the advantage of that you'll have a copy, he's likely to look after it for you if you want him to. Your copy will say where it is, less likely to get lost, people will know because he'll have a copy and can tell your beneficiaries to go an see a solicitor. All that for a very modest price. Erm probates Or rather procedure on death because probate is proving a will, in the Latin if there's no will it's letters of administration which is a similar procedure, except that the will speaks from death and therefore your appointment of the executors is effective from death and therefore your appointment of executors is effective from death, they can do certain things even before they've proven the will Which administrators can't do cos they don't have the power until they've proved that they're the people entitled. Check that the will is valid of course. Find out all the details of the assets. Assets are frozen, you can't get your hands on them on the whole until you've got your grant of probate or you've made declarations if it's a small will. Apply for your grant, I've dealt with that. Inland Revenue accounts. Er swearing the papers basically saying who you are that this is the will er that er the person's died of course er a and that you're the person entitled to be a. Having got that grant it goes round everybody, banks building societies insurance companies and so on, and they'll send declaration forms or withdrawal forms to the assets, the assets and pay the liabilities It's your job to that. It's your job to deal with tax. Inheritance tax, income tax as well is often a return that you needs making. More often than not you get a refund cos of course you have personal allowances for a whole year but you've not er not er lived a whole year as often as not and therefore there usually spaced over the twelve months and you've paid a bit too much tax if you've died in the course of the twelve months. Pay the debts. That's an executor's responsibility. So you need to make sure you know about all the debts which is why if you ever read the papers some Never understand why people read the public notices columns but they are read and you see notice about so and so who's died. That's so that a e anybody who's owed money by that deceased person they can put in a claim. Cos if it's been advertised and they haven't put in a claim the executors are safe to distribute the estate. Legal costs come out of the estate they're not an executor's personal responsibility, but on the other hand an executor is not entitled to charge for the work that he does. Or she. Er reimbursement for expenses so petrol, postages that sort of thing, but the time of running around you can't get back, which is one of the factors that back to the old Which magazine they never deal with this say yes you can deal with it and I read some person that says it only took me forty hours, yes forty hours at legal rates, well that would be a big bill. If a solicitor took as long as forty hours over it. So executors can't get their own er time paid for. And that really I think is about it unless there are Interpretation of As much as I'm going to. Unless there are any other questions that I've not dealt with yet.
[speaker001:] Who's liabl Sorry. Who's liable to pay the funeral expenses?
[speaker002:] The funeral expenses are
[speaker001:] not enough money to
[speaker002:] If there's not enough money Social Services. You connect them and they have arrangement with funeral directors to get them on the cheap. Er they're still proper funerals but they basically bulk buying so the cost will be Typically about
[speaker001:] [LAUGHTER] [LAUGHTER]
[speaker002:] No no I've been on one and they do do it properly. Erm private arrangements
[speaker001:] [LAUGHTER]
[speaker002:] But it is a first charge on the estate. Er and it's one of the things that people still worry about.
[speaker001:] Could I just come in there and I do know an undertaker and this subject did come up in conversation.
[speaker002:] Yeah.
[speaker001:] And he said Oh he says Never worry about that He said nobody in my. [LAUGHTER] .
[speaker002:] of course. Now they they they don't like bodies lying around unattended so the incinerators are always open for that.
[speaker001:] Yeah I There's been some correspondence in the financial papers about the family trusts er and particularly with regard to inheritance tax and so.
[speaker002:] Yeah.
[speaker001:] Are they worth while for relatively small sums you know you talked about ten thousand over the hundred and fifty.
[speaker002:] No no. Family trusts are the latest moves by er financial advisors and insurance people to sell you policies. Essentially you pay for f funds into a a trust and create a family trust whereby you or your spouse can be beneficiary and so can children. It's so written so that it's discretionary, it doesn't form part of your estate and therefore it avoids inheritance tax that way. Erm but of course if you die within seven years it could indeed be added back into your estate so I think that they also build a certain amount of life insurance against that and essentially what you do is you you One of the schemes is you pay insurance against the amount of the tax bill seven years. Er if you have a lot of money they can be a good idea er in that it takes capital out of your estate to provide income say children or spouse. But if you haven't got that amount of capital it takes capital out of your hands and you can't spend it in five years time if you need it because you've given it away effectively forever. I mean you can't claw the money the back if you get a bit short in five or ten years time.
[speaker001:] I've heard some solicitor say He's a great believer in your looking after yourself the kids will understand.
[speaker002:] I put it stronger than that sometimes I say You know why worry about them? Erm you've given them a good start in life, it's your money, enjoy yourselves with it. That's what you worked all your for you've not worked to pass on that amount to your kids. You know if you die and you've from the bank says you'll get buried anyway.
[speaker001:] [LAUGHTER] [LAUGHTER]
[speaker002:] Spend it on yourselves. Your will is only for those which you can't get rid of because you can't get rid of everything. Er but yes people worry about leaving it to their children, don't bother. You know they're either set up now you've given them an education and thrown them on the world squandering it now they'll only squander it when they get their hands on it you might as well squander it on yourselves, let the kids squander it for you....
[speaker001:] [LAUGHTER]
[speaker002:] If you do have any other questions I'm stopping for a cup of tea so do... please approach me quietly if you need some
[speaker001:] on that rather delicate level. [LAUGHTER]. [recording ends]