Coronavirus: dealing with your financial and family affairs

Transcript

Hello, I'm Kate Anderson and I'm a Chartered Legal Executive in the private client team at Wright Hassall. And I'm talking today with Tracy Ashby who is a Senior Associate Solicitor in the team. We are just having a talk about the coronavirus pandemic and any thoughts that you may be having about your financial affairs and how they might be dealt with if you become, or are, self- isolating.

Tracy:  So, I'm aware that we've been talking a little bit about what the solutions may be for those who are ill or self-isolating and the concerns that they may have at the moment about how to manage their own affairs and how their assets are going to be protected. Part of what we could consider is a Power of Attorney and there are two types of Power of Attorney.

There is a general Power of Attorney, which a lot of people will know as an Ordinary Power of Attorney and it allows someone to appoint one or two people to deal with their financial affairs at their direction or sign things on their behalf while they have mental capacity. The benefit of a general Power of Attorney is that it doesn't need to be registered with the Office of the Public Guardian like a Lasting Power of Attorney which needs to be registered before it can be used. So, a general Power of Attorney can be effective as soon as it has been signed and will continue until you either revoke it or you actually lose mental capacity. A Lasting Power of Attorney works along the same lines, allowing you to appoint one or more people as your attorneys to deal with financial or welfare matters on your behalf. However, this one can continue if you were to lose mental capacity.  So, if there needs to be an element of protection for somebody, this document does need to be registered with the Office of the Public Guardian or the OPG (as most people tend to refer to it) before it can be used.

Unlike the general Power of Attorney, which can only cover financial affairs, there were two types of Lasting Power of Attorney. There's one for health and welfare decisions which can only be used if you do not have mental capacity. For example, under normal circumstances you'd want to make your own decisions about your medical care and treatment, where you live, who's allowed to visit you and what you wear. However, if things become quite serious for you, this document would allow you to appoint attorneys that you trust to make decisions for you, including whether you have life sustaining treatment or not.

There is also a Lasting Power of Attorney for property and financial affairs. And this one, like a general Power of Attorney can be used with your permission as long as it's registered with the OPG. This one covers payment of bills, access to bank accounts, or even going to collect your pension because people don't automatically have the right to have your bank card in order to access your money for you.

Kate: So, should I be thinking about making a Lasting Power of Attorney or a general Power of Attorney?

Tracy: As with a lot of these things, it does depend on your own circumstances. So, at the moment we've got unprecedented times and a lot of us are self-isolating. We've got vulnerable groups who are not able to just pop out and deal with things themselves. So, a general Power of Attorney is likely to be quite a good practical solution for those people because they might not need something longer term. When this is all over, they will want to deal with their own financial affairs again. However, you may feel at the moment that it's a good time to carry out some future planning future because given that this pandemic was on us pretty swiftly anything can happen which does help to concentrate our minds.  

So generally, I would say my advice at the moment would be to put a general Power of Attorney in place if it's required and probably think about putting a Lasting Power of Attorney in place too.

Kate: how long will it take to make either the documents?

Tracy: With the general Power of Attorney, I would estimate around a week. It will probably be sooner than that, but by the time somebody considers who are they are going to trust as their attorneys, the documents completed and ready for signature, I would say maximum of a week. And, as already mentioned, it's effective as soon as it's been signed and witnessed. With the Lasting Power of Attorney, a longer timescale is needed to prepare the document and get it signed by all the attorneys. It then needs to go to the OPG for registration.

And, at the moment, the OPG is advising that their best service levels are around 40 days for registration. However, that could change given that they may be inundated with requests to register Powers of Attorney.

Kate: Would you be able to help me with these documents?

Tracy: We would - the team at Wright Hassall can prepare either a general Power of Attorney or Lasting Power of Attorney, or both of them, and we have steps in place to get these prepared as soon as possible. We're also able to discuss the witnessing requirements because we appreciate in these times if you're self-isolating, it's very difficult to find a witness who's probably a disinterested, or an independent, witness - as we would call them - who can actually see you sign the document without putting you at risk.

Kate: And is there anything else that I should be thinking about this time? Maybe my will?

Tracy: We would also suggest that as part of thinking about our own futures and planning for what may or may not happen thinking about wills is something that's probably paramount in a lot of people's minds.

Kate: Next we're going to talk about the six steps that you should be thinking about when we are writing a will and then we'll go into the specific details.

Tracy: We all know that writing a will is important. I will just run through the six steps that we should all be thinking about when we are considering making a will.

Step 1: value your state. In short, your estate is what you own when you die, minus any debts that need to be settled and any inheritance tax. Most wills will refer to this as the residue of your estate. Your estate may include some or all of the following:

• your property, which could be your home, a holiday home investment properties, even share in another property with anyone else.
• your savings, which might be in bank accounts, building society accounts or premium bonds.
• personal belongings such as your jewellery, furniture, heirlooms, cars, motorbikes and other vehicles.
• insurance policies such as an endowment policy, a life insurance in place.
• private pensions investments such as stocks and shares, investment trusts,
• digital assets such as photographs, your online accounts, and cryptocurrencies.

So that's what your estate is likely to include. Some people will also have debts which might include loans, mortgages, credit card balances, or hire purchase agreements for instance on any of those vehicles that we've mentioned above, and even a bank overdraft. So, Step 1 is to ascertain how much your estate is worth.  

Step 2: Tax. The main tax that occurs when we're talking about wills is inheritance tax which is payable on any assets that are not left to any exempt beneficiaries, which I'll outline in just a moment, at 40% over the inheritance tax allowances. It's important to note here that if you leave anything to your spouse or to charities, these are exempt from inheritance tax. And that's why the amount of inheritance tax payable on your estate is dependent upon who you actually leave your estate to. And we would always guide you through those relevant factors so you don't have to do lots of homework before you, you consider making your will.

Step 3: This is a little bit easier than the one above and is for you to decide how you'd like to actually divide your estate. You need to consider who you'd like to benefit from your estate and when they are likely to do so, you can, say, include specific gifts. For instance, you might have an item that you'd like to leave to somebody in particular, or you might have charities that you'd like leave as a set legacy to. The main part of your estate is the residue of your estate so you would need to decide on how it should be divided and who is to benefit from it. Your home is likely to be your largest asset and how you own that property will affect whether it can be left in your will. If you own your home outright, for example, with a partner or your spouse, then different rules apply relation to that ownership.

You may hold it as a joint tenancy which means that it automatically passes to the survivor, or you may be tenants in common. Quite a lot of people opt for the latter because their financial contributions may have differed, for instance in the amount put down for a deposit, or they might just want to safeguard their assets and leave them to somebody else. So, if you own as joint tenants, your will is unable to control where that property goes on death because your share automatically goes to your joint tenant automatically by survivorship. If you own the property as tenants in common - and we can easily change that around if that's more suitable for you - you can leave your share of that property in your will to whom you wish. It's important to note that how you own your property does affect what you can do in your will.

Step 4: For those with young children, you can appoint a legal guardian in your will who will be responsible for looking after your children whilst they're under the age of 18. You may also want to consider that person being able to control any financial arrangements for your children in the future.

For many people, pets are also a key part of their family as well. You can name a specific person to take care of your pets or you may want to ask that a charity re-homes them for you. You can even leave a sum of money to whoever may look after them just to make sure that they're perfectly safe.

In addition to that, you might want to include some instructions about your funeral arrangements. So, while not legally binding, it just outlines what your wishes may be. That might be as simple as a burial or cremation, or you may have more detailed instructions that you'd like to leave so your loved ones don't have to make these types of decisions at a very difficult time.

You can also consider leaving a letter of wishes with your will, which might need to explain the reasons why you've made some decisions about the distribution of your estate. And this would particularly apply if you need to exclude someone from being a beneficiary, who might be expecting to receive some monies from you.

Step 5: Choosing your executor. Your executors are the people that you trust to carry out your wishes in your will. You need to think really carefully about who you would like to appoint because the role is responsible one that can involve a lot of work. You can have more than one executor and if you were struggling to find someone, or a couple of people who were suitable, you can always have a professional executor if you would rather the responsibility rests with somebody who does that job every day.

Step 6: Writing your will. If you now decide that it's time to write your will and you've thought about what you would like to happen, it would be sensible for you to collate some of the following information:  your personal details, details of your financial accounts and your property address(es), your proposed executors, your beneficiaries including their names and their dates of birth. And, if it's applicable, details of the legal guardians who would be appointed for your children, carers of your pets, and any funeral arrangements.

Kate: So why should a client write a will?

It is important to have a will, and I can just outline perhaps 15 reasons why:

1. You have control over what happens with your money, possessions and property when you die. For example, who's going to receive what from your estate,
2. You get to choose your executors who will handle and distribute your estate according to your wishes. You can choose people that you trust and in whom you have confidence and who would act responsibly.
3. Without a will you die intestate and the intestacy rules will decide for you who will benefit from your estate, which may be completely contrary to your wishes. The intestacy rules also determine who will deal with your estate.
4. You can name a legal guardian if your child is under 18 so you know who will be making decisions for them if both you and their other parent die. If you don't have a legal guardian appointed for them, there can be complications as that decision could be made by the family courts which is time consuming, costly, and very stressful for everybody. By doing something as simple as naming that legal guardian in your will, it can avoid a lot of distress at a later date.
5. You might want to provide financial support for your children, your dependants, your loved ones or your pets through your will. For example, you might decide to create a trust with expressed instructions as to how the money can be used. For example, depending on your beneficiaries, the money may be set aside for maintenance fees, education, a house deposit, or just held for them until they reach a certain age when you think they are able to make sensible decisions.
6. Without a will, only your spouse or blood relatives may inherit from you. And even in those circumstances, it is not as straightforward as you may expect. It is not always guaranteed that everything that you own will go to your spouse. And particularly if you want to provide for an unmarried partner or stepchildren, foster children or other loved ones, you do need a will to be able to do this.
7. If you own your family home outright, your unmarried partner or step children will not automatically inherit from your estate meaning they could lose their home. A will provides the right for them to continue living in the property or you can pass on your share of the home to them.
8. A will can help your family avoid disputes and arguments concerning your estate. Contesting a will or making a claim against an estate when a will hasn't been made, or is out of date, can be expensive and very stressful. It will often break down family relationships. This can be avoided with a professionally drafted and up to date will.
9. Your existing will may no longer be valid. If you've remarried since writing your will or the will hasn't been executed correctly, it could be invalid. If this is the case, your estate will then revert to passing under the intestacy rules.
10. Your will may still be valid when you don't actually want it to be. Say, for example, if you are in the process of divorcing or you have separated since writing your will, that will still stands. You always need to ensure that your will reflects your current situation. Otherwise, a previous partner may benefit from your estate even if you don't want them to.
11. You might need to change, or even rewrite, your will if something happens to one of your beneficiaries before you die. This may also be the case if an executor has died before you.
12. You may actually be able to reduce, or avoid, the amount of inheritance tax that's payable on your estate by the use of a will. The amount depends on several factors, including the value of your estate and who you leave it to. An estate left to your spouse or civil partner is automatically exempt from inheritance tax.
13. You can leave instructions to your executor. For example, you may have specific funeral arrangements you want, might want someone to care for your pets or protect your digital assets.
14. You can choose to support a charity or charities by leaving a gift or donation in your will. This also has an added benefit that it may reduce the amount of inheritance tax payable on your estate.
15. Having a will reduces the worry, the work and the stress for your loved ones who will be going through a difficult time following your death. This is probably one of the most important points I can make - everybody would know what they have to do and a professionally drafted will can offer a result in a cheaper and quicker administration of your estate.

Kate: How can clients put these provisions in place at this time?

We've put a lot of thought into ensuring the safety of our clients and ourselves in the current situation while still providing our usual level of service. We would discuss your will with you by telephone, video call or email, whichever suits you best. We would then take those instructions from you, draft your will, which we can send to you electronically, or by post if you prefer, for you to read through and then we would discuss the arrangements for your will to be signed correctly. At the moment, there is no need for you to attend our office, or see us face to face, or anything that might put you, or us, at risk, We can still put everything in place for you that you need.

There are very strict witnessing requirements for wills which could be subject to change in the event of emergency legislation, However, at the moment we are able to provide all the necessary support to ensure that your will will be correctly witnessed. We have alternative arrangements in place so we can talk through what is required with your witnesses present with you (and that can be health care workers, if more appropriate if you're extremely vulnerable). We will make sure that we keep everyone as safe as we possibly can while complying with the current guidelines.