In this episode, Fiona Taylor talks about probate and estate administration answering some of the most important questions such as:
- What should I do if I think my beneficiaries are going to argue about a certain item?
- What happens if I put someone in my Will, but then they can’t be found or they die?
- Can I giveaway all of my estate before I die, so my relative don’t have to pay IHT?
- What are Chattels?
Transcript
Paul Harvey
Hello and a very warm welcome to another podcast with Warners law, and today I’m joined by Fiona Taylor I’m delighted to say a partner in Warners private client team. Fiona welcome.
Fiona Taylor
Thank you.
Paul Harvey
Good to have you with us. Fiona, last time we covered what is the basic information on what is probate and how you obtain a grant of probate. Now, what topics are we going to cover today?
Fiona Taylor
Well, I thought it would be useful in this podcast to pick up on a few things that are a recurring theme that I see crop up time and time again when I’m administering estates. And ones that can cause quite a lot of headaches but a natural fact if you think about it now, they’re relatively easy to fix.
Paul Harvey
Okay, well I’ve heard a lot of people talk about chattels for example, could you tell us what they are?
Fiona Taylor
Another word for chattels is personal or household effects. They’re all your furniture, your jewellery, your clothes, your books, your cars, and garden equipment. All the things that are movable in your house and they are part of your estate and can be quite valuable. So, if you’ve got an antique table or exquisite jewellery or a designer watch, or a very posh car then they’re part of your estate.
All chattels whatever value have to be valued for inheritance tax purposes, that isn’t the problem that we come across because that’s relatively easy for us to advise on and put you in touch with some valuers.
The issue we have is people not quite knowing how to distribute their chattels so, very often in a will when people come and see us we’ll talk about this and we’ll point and they’ll say ‘oh, well I don’t know what I want to do, I’ve got too many things to think about now’ And we say why don’t you just say in your will ‘I’m going to leave my chattels to my trustees’ and they have to carry out any wishes that I leave or make know known on a piece of paper to them.
It’s called a letter of wishes, they’re very useful documents because if you go down that route and you actually do your letter of wishes you can change it, you can update it and you can keep that at home with you. You don’t have to come in a change your will, it can be very flexible as well because you can simply say that you want various different people to choose from. So, for example, four children, if you’ve got four children you could say well let’s take turns and swap an order so they get a chance to choose, or you might say I want my children to share everything equally, or I want them to sell everything, or I want my friends to choose a book or something like that.
But the problem comes often if people don’t actually do one of these because then the executors are left scratching their heads, so my first tip is if you’re going to have a clause in your will with a letter of wishes do bother to do one because it really helps everyone else.
Paul Harvey
Good advice, and what about if I think my beneficiaries are going to argue about a certain item?
Fiona Taylor
Well, sadly that does happen and sometimes chattels can really fan the family flames of emotion. I would say if you know there’s going to be a dispute then put it in your will because that is legally binding, so you can put a clause in your will that says I give my diamond ring to Jane, my clock to Peter, and my picture to Claire for example. But the thing is to make sure you describe it properly, some lucky people have for example three diamond rings and there’s no point saying ‘my diamond ring’ to so and so if you don’t actually describe it properly. So, photos can be a good idea as well if you’re going to start putting specific items in your will then it can be a good idea to have some photos somewhere, perhaps stored with your will at home so that people know what’s going on. But bear in mind that if you put a specific item in your will and then by the time you’ve died it’s lost or been sold then generally that person misses out on that item so that’s something to watch.
Paul Harvey
Do you know something that comes to mind is the antiques roadshow when suddenly Granddad’s Rolex watch is valued at £25,000, and you can picture the beneficiaries sitting up in their seats with interest when this information comes across.
Fiona Taylor
Exactly, and I think the thing is that if items are valuable then sometimes it can be very useful to discuss that with a solicitor because people might then say ‘actually I want a clause in the will that makes it very clear that if I’ve still got that watch it needs to be sold’ rather than someone receiving that as an extra bonus.
Paul Harvey
Now what happens if I put someone in my will but then they can’t be found, or they sadly die?
Fiona Taylor
Yes, sadly that does happen, a lot of us want to leave a list of legacies to our friends, to old school friends, to people that we’ve been socialising with, children, nieces, nephews, and you dutifully put them in your will with their name and address and then they change their name, or they move house. Then when your executors come to write to them at that address the letter comes back as ‘addressee unknown’. Tracking people down can be really time-consuming and costly because you can sometimes have to use tracing agents. In the past, everyone had their address book, but a lot of people dutifully updated, and if you can find that address book that often acted as a useful way of tracking these people down. But now in a more digital age, I think the address books are fading out and of course, you need to find the actual book.
So, what I would say is if you have a list of legacies in your will, keep the addresses up to date and that doesn’t mean coming back in and changing your will with us. That means leaving an up-to-date address with a copy of the will you have at home or even better writing or emailing the lawyer who prepared your will at Warners and we can always store that information with your will.
Paul Harvey
Fiona, can I give away all of my estate before I die so my relatives don’t have to pay Inheritance Tax?
Fiona Taylor
Ah yes well, a lot of people are very keen to make sure that they plan their estate efficiently, so they don’t pay any more inheritance tax than they have to. We see a lot of people who when they come to see us when their executors after someone’s died, we say to them ‘well what about any gifts that the deceased might have made’ because they are included in an estate if they are within 7 years of someone’s death. And they look at us and say, ‘oh yes she did use to make gifts’ or ‘yes I’m sure they used to give us some money each year’ and it is one legal way of giving money to your family before your death.
I’m not proposing to go into the details of what you can and can’t give, that’s a subject for another day. But you do have to declare gifts for inheritance tax and executors are under a strict duty to make full inquiries of these. For example, some of the HMRC guidance confirms that they view going through the deceased bank statement for the 7 years prior to their death as something you should do to track down gifts. So, it can be really time-consuming to try and track down gifts if no one is sure, or if you think people aren’t declaring gifts when they should do. So, what I would say is if you are making gifts then keep a list. It really doesn’t have to be anything particularly fancy, a list that is just titled gifts and has simple columns with the date, the amount, and the name of the person who’s receiving the gift is enough. Sometimes people send a letter or an email and keep a copy of that with their will, but HMRC really does focus on gifts and so will make the administration of your estate much easier for your executors. Trying to establish gifts after someone has died is often really time-consuming.
The other thing to watch out for is if you can prove to HMRC that you have excess income that you don’t need for everyday living then during your lifetime you can gift that on a regular basis inheritance tax-free. Now the rules on this are really quite complex as to what is and isn’t allowed, so I’m not proposing to go into those details now but what I’d like to think about is the paperwork that you could leave to make this part of your estate easier to deal with because the form the HMRC asks your executors to complete after your death is extremely detailed. You have to give a full breakdown of your income and your expenses for each tax year as well as listing out the gifts that you’ve made. So, trying to do that after someone’s died is always very difficult and really time-consuming.
Trying to work out income isn’t normally too difficult using someone’s tax return but bear in mind it’s also ISA income that is included and that can often be the point that we have difficulties with. And so, the real point is trying to work out someone’s annual expenses to prove to the revenue that they had excess income, so sometimes we do have to analyse 7 years of bank statements. So, what I would say is if your considering making these types of gifts then come and see us because we can check if we think you’ll qualify for the exemption and we can give you some suggestions on how you make record-keeping easier for your executors.
Paul Harvey
And I guess all this is digital now, isn’t it?
Fiona Taylor
Yes, a lot of people keep their records in a digital format now but equally if someone wants to keep it on a piece of paper or in a notebook it really doesn’t matter. The main thing is that it’s accessible.
Paul Harvey
An interesting area. Now I know quite a few people who don’t have a will, and what would happen to their estate if they died before they have made one?
Fiona Taylor
Well, this is a very common scenario so when someone dies without a will it’s known as dying intestate and the law will then decide who inherits and who is entitled to administer the estate and various other things. So, if you have minor children, it doesn’t cover who is going to act as their guardians it doesn’t cover what age the children will inherit, it’s an automatic inheriting at 18 which a lot of parents don’t particularly want. So, whatever stage of life one is at, whenever I see a client grappling with no will in existence it makes matters so much worse for the family because their already bereaved, juggling bereavement with work, family life, and general day-to-day living. And then they’ve got this big question mark because they haven’t got any guidance as to what their relative wanted so a lot of people are thinking ‘is there a will?’ or ‘oh I’m sure they mentioned it’ or ‘did they mention it’ or ‘might it be here’ and there are huge searches in the house to try and find the will.
So, if you end up with an intestacy then I would say come and see us because we can advise on who is entitled to act and who is it that inherits. But I really would stress that it is so much easier if you make a will. I know that a lot of people and a lot of clients come to me, and they say, ‘that was much easier making the will than I thought it would be, I really wasn’t looking forward to that.’ I think people often delay making the will because they really don’t know how to deal with their family issues, so they might have a family dispute, or they might be on a second marriage and want to divide things between their second spouse and their children from the first marriage. They might want to divide assets unequally if one of the children is in the family business, they have an estrangement, and they might not want someone to inherit at all. Again, my message would be to come and see us because these are all scenarios that we’ve seen and advised on, so we’re used to saying these are the options open to you. We can always find a solution which means we can put a will in place that will hopefully make life easier for your relatives and your executors.
Paul Harvey
Advice is essential, isn’t it? The DIY will aspect is fraught with problems I would have thought.
Fiona Taylor
Well, yes. People do sometimes do that, and I would always say to clients come and see us. Solicitors have legal training but not just legal training in wills and probate law they will have been trained in all aspects of the law. So making a will encompasses a lot of different strands in your life because a lot of people have businesses assets, and most people have a house so it’s really important to come and see someone who is able to bring all those strands together and give you the best advice so that the will is the best will that you can possibly have.
Paul Harvey
Sure, absolutely. And to kind of finalise this discussion do you think we should maybe elaborate on our favourite topic of record keeping?
Fiona Taylor
Yes, none of them like that. My heart sinks if I have to come home and I see a huge pile of envelopes to deal with, but we all have to deal with it, and it doesn’t matter whether you do it on paper or digitally or however you do it. Having had the experience of going into someone’s house where we’re an executor and having to work out their filing system, I think if you can keep all of your paperwork shall we say in one place and keep it updated then that really helps people.
So, if you had a building society and you’ve closed it then write closed on it and keep it separately from all the active stuff. If you’ve bought some premium bonds then don’t file them in the kitchen behind the toaster thinking ‘I must take that upstairs’, try and put it with all the other paperwork because it’s really helpful to your family if they are looking through your affairs after you’ve died to be able to know that everything is in one place. Some clients will actually say ‘it’s alright I’ve told my children everything is in that chest of drawers or that filing cabinet and that can really help people. Also, having a list of what everything is so this is where my bank is, this is my investments, this is my salary or my pension and then going on looking at mortgages, household bills, or insurance as well as who to contact can always really help people but keeping it up to date is crucial.
The other thing I would say is as and when you make your will, always check with your executors that they are happy to act. You don’t need to tell them what is in your will but it’s really useful that they know that they have a role in the administration of your estate after your death.
Paul Harvey
Thank you, Fiona, you’ve made it all very clear actually I have to say and if anyone wants more information about the administration of their estate how can they get hold of you?
Fiona Taylor
Well, have a look at our website we have a whole team of lawyers who are happy to help, and my email is [email protected] but anyone of the private client lawyer would be happy to assist.
Paul Harvey
Thank you very much. Well, Fiona, that’s great I’ve had the pleasure of being joined by Fiona Taylor today a partner in Warner’s private client team.