Webinar Notes – Renaissance

Why might it be of interest?

We all need to plan for the future – in this case about what happens to our assets (money, property, etc) on our death.  When there is a vulnerable young person in the family it is even more essential to have a will and potentially a trust to protect their financial situation and to protect them from being taken advantage of when you are no longer here.

This is a complex area of law and the law changes quite often.  It is essential to use a specialist legal firm for disabled or vulnerable people.

We recommend the hour long webinars by Renaissance Trust on wills and trusts; decision making; and benefits.  Renaissance provide specialist services, sharing with charities (they are the consultants for both Mencap and NAS on their wills and trusts information) and working with other legal firms where further expertise is needed.

You can find out about upcoming webinars here:  https://www.renaissancelegal.co.uk/event-seminar/

The Renaissance blog has useful information on many topics and you can find it here:  https://www.renaissancelegal.co.uk/blog/.

Wills and Trusts

I made notes when I attended the webinar on11 September 2024.  We recommend all the Renaissance webinars to our clients.  I redo each webinar about once a year to keep up with the content and any potential changes to law that might affect our families.

I must stress again that these are my notes and they have not been checked by Renaissance or any other legal specialist.

Renaissance use an example of a family with 2 children, Chloe and Zach.  Zach has ASD.

Avoid making an outright gift:

• Does the yp have capacity to acknowledge receipt and to manage the money
  • If not, who will deal with it?
• Could the young person be susceptible to financial abuse?
• A financial gift can affect means tested benefits and LA funding (now or in the future)

Don’t leave money to other family members to ‘look after’

They could:

• Go bankrupt
• Die without leaving instructions for the money for your young person
• Divorce – anything in their name is fair game even if it’s not really theirs
• Family fall out

Where will your young person live?

• Can they manage property – the finance, upkeep, etc – of the family home?
• If not in the family home where else might they live
• Is there sufficient money to support the young person

Why make a will?

Without a will Intestacy Rules apply:

Where there is a spouse or civil partner and child or children:

The spouse or civil partner receives:

• Personal chattels
• First £322,000 of value assets
• Half of the remaining value

The child or children receive:

• The other half of the remaining value at 18

If there’s no spouse or civil partner the child(ren) receive everything at 18

Inheritance Tax

You might be affected

• The Inheritance Tax Nil Rate Band is £325,000 (ie your personal allowance before IHT kicks in)
• The Inheritance Tax Residence Nil Rate Band is £175,000 (an additional amount for the home you live in if put into a specialist trust or left to a direct descendant)
• This has been set by the government until 2028
• A gift to a spouse, civil partner or charity is IHT free
• The IHT rate is 40%

So you can pass on £500,000 to your partner, which is added to their own allowances, making £1 million that between you can be passed on without incurring IHT.

IHT is paid on an estate before the assets are distributed

Usual format for a will

• Revoke previous wills – best to destroy them so there can be no mistake
• Funeral wishes – keep it to burial or cremation
• Details of the service, etc are best left to a letter of wishes
• Name Executors and Trustees
  • Executors execute the will – probably up to a year
  • Trustees act in relation to a trust – this is ongoing
  • Trustees can be family, friends, professionals – or a mix
• Guardians – only for minors
  • Have a letter of wishes to express, for example, the type of place your child should live if not with family
  • Avoid being too specific as the guardians may not be able to comply with very specific wishes
• Gifts
  • Don’t include them in the will
  • Use a letter of wishes with details
  • Includes personal items, cash gifts, gifts to charities
• Residue – clean assets
  • This is what is left after debts have been paid, IHT has been paid, any costs of administering the estate and any gifts

Gifts to charities are free of IHT

Use the charity number rather than the name to be clear as this is unique

Why use a Trust?

• You can provide for someone who does not have capacity to manage assets themselves
• You can protect a vulnerable person
• You can protect their means tested benefits
• Tax planning
• Protection of assets for separate families on second relationships

There are some exceptions to assets in trust but in general anything, money, property, etc, can be left in a trust (ISAs are an exception, for example)

Trusts have 3 elements:

• Trustees – this is an active and ongoing role
• Beneficiaries – must be named or described clearly, eg grandchildren
• Assets

There are many types of trusts but for our purposes there are 2 types of trust that you are most likely to use:

• Discretionary
• Disabled persons trust

Discretionary:

Assets are used at the discretion of the trustees

• Who: more than one beneficiary and layers of succession
• When: determining when trust money/assets are used or not used
• What: what assets are used for

Using Zac as an example:

• If he has children then trust assets devolve to them on his death
• If he doesn’t have children then trust assets devolve to Chloe on his death
• Other relatives might benefit, eg nephews and nieces
• Or charities

Assets can be used for the benefit of other beneficiaries so Trustees must be picked carefully and understand that this trust is primarily for Zac’s benefit

What can they use the trust for:  a home, equipment, a holiday

Anything that meets Zac’s needs

In general trustees should buy things for Zac rather than give him money

In law anything in trust is not counted as Zac’s money for benefits purposes

There is a tax burden on discretionary trusts

The trust is taxed as its own entity

Approximately at 45%, capital gains at 20%, potentially IHT every 10 years if assets are more than the nil rate band

Disabled Person’s Trust:

More favourable tax treatment but limits how much other beneficiaries can benefit

Tax is calculated at the tax rate of the vulnerable person

No hard and fast rules as to which trust is best but:

• £100,000 or less use a discretionary trust
• £280,000+ the tax burden is more penalising

To be able to set up a Disabled Person’s Trust the person must be disabled by definition of law.  There is no specific test but in general a person must qualify for:

• DLA care at middle or high rate or
• DLA mobility at high rate or
• PIP, either component, at either rate

Other beneficiaries can benefit by no more than the lesser of £3000 or 3% of the value of the trust fund.

Trustees:

• An active and ongoing role
• Managing and running the trust
• Managing investments (potentially)
• Working with the person’s care team

Letter of Wishes:

Guidance to the trustees

Should be reviewed annually and kept up to date

It should give guidance on the use of the trust, eg:

• Where should the person live
• Education
• Therapies
• Fun – things that improve quality of life

When?

You can set up a trust now or in your will

• You may have assets that don’t pass under a will, eg a pension
• You may have family or friends who could leave money to the young person
• Start the conversation with family