Law Corner

Last Updated on Thursday, 15 November 2012 19:13

CURRENT ARTICLES

Grandparents: their role in 21st century families

Grandparents denied contact take heart…

Where There's a Will There's a Way Round Care Home Fees

Scottish Courts provide easier access for concerned grandparents - (Please note this article refers to Scottish Law only)

Trusts – Do they work?

Court Rules in Favour of Adult Daughter Excluded from Late Mother's Will

How to prevent Grandchildren wasting their inheritance…

Grandparents have rights too

Lawyers Support the Proposed Change in Rights to Grandparents

What is Special Guardianship?

It's All a Matter of Trust …

Wills & Probate: Are you Up To Date?

Will Contact Orders now have more teeth?

Pensions and Grandchildren

Inheritance Tax and Grandparents

Investing For Grandchildren

There is nothing certain in life except death and taxes

New Power of Attorney Laws

Grandparents denied contact take heart…

Grandparents denied contact to their grandchildren after parents separate should take heart from a recent Court of Appeal decision.  At first blush, the case – Re M - seems concerned with alternative families since the dispute was between two mothers and a father (all of whom were gay) about the role the father should play in his son’s life.  However the judgment also has wider implications and resonates in situations where children are denied a meaningful relationship with important adults in their lives because of adult agendas – a prime example being grandparents.

In Re M the mothers aspired to limit the father’s involvement in the child’s life, desiring the child should be brought up in what they described as a “two parent lesbian nuclear family”. However, the Court of Appeal cautioned the desire to raise the child according to a particular family archetype, observing:  “… such desires may be essentially selfish and may later insufficiently weigh the welfare and developing rights of the child that they have created.”

The fact the Father’s Appeal was upheld is a timely reminder that the court’s focus must always be the outcome that best promotes the welfare of the child, rather than upon what the adults want.  

This latest judgment follows on from the Family Justice Review (“the FJR”) final report in November 2011 which also touched upon the involvement of grandparents in children’s lives following parental separation.  Currently, most grandparents will require the court’s permission before they can even make an application for contact to their grandchildren.  The FJR considered whether that initial hurdle ought to be removed, but concluded it ought to remain, to the disappointment of a number of interest groups including the Grandparent’s Association.

But the report was not all doom. The FJR recognised the essential role grandparents should continue to play if parents separate, saying the importance of children’s relationships with extended family members should be emphasised in parenting classes, parenting agreements and other solutions designed to move the resolution of disputes away from the court arena.  

Where proceedings are inevitable, the Children Act 1989 provides a roadmap for how courts must resolve applications by grandparents for permission to pursue contact and other orders.  Reported cases about such permission applications show that the permission stage is intended to be a filtering mechanism to prevent hopeless or vexatious applications. Where an application has merit, permission is usually granted.

So all in all grandparents who are concerned they will be shut out of their grandchildren’s lives after parental separation should take heart.  The existing infrastructure is sophisticated enough to ensure that a grandparent with a sound application for contact can bring it before a court, where it will be judged on its merits.  Alternative dispute mechanisms will help focus adult minds on the vital role that grandparents must play in children’s lives when relationships end.  And Re M reiterates that, whatever the adults might perceive as the paradigm family model for them, adult ideals will always place second to the arrangement that is best for the child at the centre of the dispute.  This will apply as equally to attempts to exclude a grandparent from a child’s life as it did to the father in Re M.  

Kingsley Napley LLP represented the Father in Re M

Contact:  Jane Keir, head of family law at: jkeir@kingsleynapley.co.uk or 14 St Johns Lane London EC1M 4AJ or telephone: 02078141200  (website: www.kingsleynapley.co.uk)
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Where There's a Will There's a Way Round Care Home Fees

Government plans to raise the proposed lifetime cap on care fee contributions by the elderly to £60,000 have been met with a storm of protest, but those who wish to provide for care in retirement are being encouraged to take steps to protect their assets now.

Funding for care home placements has been means tested since 1948. The principle being that those who can afford to pay should do so, with a safety net for those who do not have the means.  In 2011 the Government commissioned a report on the issue of long term care, chaired by the economist Andrew Dilnot.

And last week it was widely reported that the Government was considering increasing the proposed lifetime cap on home-based and residential care services from the £35,000 suggested by Dilnot up to £60,000. The level of capping has been fiercely criticised by campaign groups like the Pensioners’ Convention, who must now wait to see the final detail when the White Paper on social care and a progress report on funding options is published in April, which is also expected to include an updating of the means testing criteria and limits.

Under the current system, anyone who requires care must pay all the fees out of their own money, unless and until they qualify under means testing. They only get benefits from the state to help with the fees when their capital has been reduced to £23,250. This system has been criticised for apparently penalising those who have saved for their old age, and because the longer an elderly relative lives, the less they have to pass on to their children.  The new proposals would place a lifetime cap on the contribution towards care.  The capital limit is likely to rise also – with £100,000 currently being proposed.

The Government hopes the changes will encourage more people to take out insurance or other solutions to cope with a known maximum sum of care and residential home fees as part of their general financial planning strategy.  If they were then to require care, the insurance company would pay the fees up to the cap, after which the person would become entitled to state benefits to cover the ongoing costs.

Whatever the lifetime cap and the asset limit, with rising house prices the means testing is likely to force many people to sell their home to fund fees.  But by planning in advance, there are circumstances in which at least part of the value of the family home can be ring fenced and kept out of the means testing equation.  This is particularly useful where remaining assets will be less than the limit.

Said Clare Wills, Partner in the Wills & Probate department of North London based solicitors Vanderpump & Sykes: “In April the Department of Health is due to issue a White Paper on the future of social care and this will shed more light on what we can expect.  But no matter what comes out of that, there is much that we can all do to manage the risk.  Anyone with property should start with a well-drafted will, which puts shares in the family home into trust.  This is a simple, safe and proven method of limiting one’s liability for residential home fees.”

She explained: “Most couples buy property as "joint tenants", which ensures that when one party dies, their share goes automatically to the other. But by changing their ownership of the property to "tenants in common", each party can leave their share to who they like, which opens the way to leaving their half of the house to their children, or, better still, to place it into a trust.  If this is done, half the value of the house will be ring-fenced if the surviving spouse needs nursing care.”

Clare Wills is Head of the Wills & Probate department and a member of Solicitors For the Elderly (SFE). Clare can be contacted on: 020 8370 2874 or email clarewills@vanderpumps.co.uk.

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Scottish Courts provide easier access for concerned grandparents - December 2011.

Grandparents have been cheered by a number of court decisions and Government consultations over the past few months in their efforts to enjoy a much fairer deal in ensuring the right to see grandchildren living in England and Wales.

In particular, it was good to read Margaret Hatwood’s article in the Spring issue of grandparent times, with its stories of success for grandparents in the Courts - given that a million grandchildren are currently denied the right to see their grandparents.

However it is vital to stress that Scotland takes an entirely different approach, and one which is far more amenable to the equitable treatment of grandparents.

No doubt many grandparents are put off applying to the Courts south of the border to see their grandchildren because of the requirement to ask the Court for leave even to apply for contact.  This can be a costly business and legal aid in England and Wales is very restricted indeed in these, as in all family cases.

But if your grandchild is in Scotland, no matter where you yourself may live, then these difficulties will not arise.  There has never been any requirement for a grandparent to seek the leave of the Court to apply for contact – and there are no plans, as far as I am aware, to restrict the availability of Legal Aid in Scottish family law.

If you grandchild is in Scotland the Court will apply three criteria to your case – and only three.

• The first is that the welfare of the child will be regarded as paramount.  In other words, no one deserves contact by their own merit or lack of fault – no one has the right to any specific contact, even if they have full parental rights and responsibilities – and no one’s interests will be given greater prominence than those of the child.
  
  
• Secondly, the Scottish Courts have a Minimum Intervention rule – in other words if you are actually exercising contact every Saturday from 10am till 4pm and you ask the Court for an order to that effect you will lose, because the order is unnecessary in the interests of the child.
  
  
• Thirdly, the child’s view is taken in to account if the child wishes to express a view and has sufficient maturity and understanding to do so.   Children have no veto over the Court but their views cannot and should not be ignored.

If a child is subject to the order of an English Court then you are usually not allowed (without special permission) to take the child out of England during a contact visit – even to Scotland.  The converse does not apply – if the child is the subject of a case in the Scottish Courts there is no automatic provision against removal to England during contact – removal from the UK is a different matter, as you would expect, but a visit to grandparents in Newcastle or Leeds or Taunton doesn’t present any major legal difficulties as long as that is seen as being in the child’s best interests.

I am proud that this firm and its strong family law team is now the only Scottish Lawyer Member of the Grandparents Association.  I wish the Association and all its members continued success in their work towards better solutions for grandchildren wherever they may be.  They are the important ones in any dispute and it will often be up to the grandparents to remind the rest of that fact.

John M Fotheringham WS
Lindsays, solicitors
Edinburgh, Glasgow, North Berwick and Jedburgh
0131 229 1212
johnfotheringham@lindsays.co.uk

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Trusts – Do they work?

The following is a familiar but anonymised scenario. It is the kind of memorandum I receive from my colleagues in the Wills, Trust and Probate Department fairly regularly:-


"Dear Liz My clients Mr & Mrs Smith are looking at their assets, with a view to trying to minimise the effect of Inheritance Tax on their estates. Although they are 55 and 57 respectively, they both want to begin looking at tax-effective methods for passing on some of their assets to their children in due course of time. They are thinking of creating a Discretionary Trust, for the benefit of their children Tom and Rebecca. Tom and Rebecca are both married with children of their own. Tom’s marriage has been going through a rocky period. His wife is a little volatile and they have had a trial separation in the last 18 months. Although reconciled, the future does not look very certain. Mr & Mrs Smith’s relationship with Tom’s wife is also a little tricky at times and they feel that there is a certain lack of trust between them now. As a result, although they are keen to help Tom, they do not want Tom’s wife to be able to make a claim against Tom’s interest in the Trust Fund. They also do not want it to play any part in future divorce proceedings between Tom and his wife. Can you give Mr & Mrs Smith some guidance on how the divorce Court would approach Tom’s interest in the Discretionary Trust?”


It is a very common scenario. The answer, however, can be disappointing. If Mr & Mrs Smith set up a Trust Fund for their children, no matter how big or how small the Trust Fund is, if Tom and Rebecca are the intended beneficiaries of the Trust, then they have an interest in the Trust Fund itself. If Tom gets divorced, Tom will have to fill in a document called a Financial Statement (a Form E). In it, he has to disclose an interest in any asset whatever wheresoever that asset may be held. If Tom is a beneficiary of a Trust, he has to disclose it. That is the first point.

If Tom is receiving an income from the Trust, the Court will take that into account when deciding what Tom’s total income from all sources is. That could be relevant, for example, when considering how much maintenance Tom might have to pay to his wife (or to his children). It will also be relevant when looking at what sum Tom might be able to raise on a mortgage to buy another property (if his own home is sold in the course of the divorce).

The third point is that if the Trust has the power to advance capital to Tom that is also a benefit which he will have to disclose in his Financial Statement. This does not mean that Tom’s wife will be able to take a chunk of Trust capital. It does mean, that Tom’s wife can say to the divorce Court “Well, Tom doesn’t need such a big share of our marital assets, because Tom has assets of his own which will bail him out in an emergency”. The net effect, therefore, could be that Tom’s wife ends up with more of the marital assets than might otherwise be the case, because of Tom’s nest-egg, if you like, in the Trust.


I will tell Mr & Mrs Smith that Tom’s wife will not get her hands on their money put aside for Tom in the Trust Fund. However, Tom’s wife will be able to have it taken into account in the ways that I have outlined above. Thus, although the Trust Fund will undoubtedly help Tom, it can sometimes be two-edged sword. If there are more than enough assets in the marital pot to go round between Tom and his wife, then it will not make too much of a difference overall.


So, are Trusts worthwhile in these circumstances? Yes, they can be. However, long gone are the days when a Trust was an impenetrable shield in divorce proceedings. What many people do not know is that Judges in divorce cases have extremely wide powers. They are alive to various means and methods which have been used over the years to try and put assets beyond the reach of one or other party to a marriage. Ten years ago money put in a Trust Fund might well have been a veil which the Court could not lift and peer under. Now, if a spouse going through divorce proceedings is within a class of potential beneficiaries under a Trust Fund (and particularly a Trust Fund set up by their parent or parents), then that is a veil which the Court is going to peer under very carefully.


As with all these things, there are upsides, and there are downsides to Trusts. What is essential, however, is that Mr & Mrs Smith should take legal advice from a qualified and experienced Solicitor just as in the example above. Here, Mr & Mrs Smith consulted my partner in the Wills, Trust and Probate Department. He sought my view (as a divorce specialist) and then Mr & Mrs Smith had the benefit of advice from both relevant experts, on which they could make a reasoned judgement on whether or not to proceed and commit to the expense of setting up a Trust Fund for their children.

Elizabeth A Hodder
Partner & Head of Family Law Department
Gross & Co Solicitors
Bury St Edmunds
Suffolk
eah@gross.co.uk

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Court Rules in Favour of Adult Daughter Excluded from Late Mother's Will

The Court of Appeal recently upheld the appeal of Mrs Ilott, aged 50 and an only child, against the decision of the High Court that her estranged mother's Will could reasonably make no financial provision for her, instead leaving the entire £486,000 estate to three charities. In the first instance, Mrs Ilott received a lump sum of £50,000 on her claim but the Court of Appeal directed that her appeal against this should be sent to the High Court.  In reaching its decision the Court of Appeal examined in detail the approach to be taken under the Inheritance (Provision for Family & Dependents) Act 1975 where an adult child claims that the Will of a deceased parent has failed to make reasonable financial provision for him or her. This case does not highlight any "new" legal development, but is a helpful guide on how the Court should approach cases involving the claims of adult children. In the past it was thought by many practitioners that adult children who were not financially dependent on their parents and had not given up a benefit to their own detriment to care for their parent, would be unsuccessful in making a claim against the estate of a deceased parent. However, the above case emphasises the need to take into account all the factors set out in Section 3. of the Inheritance Act 1975 in deciding whether the financial provision for any claimant is unreasonable. The above decision reinforces the proposition that an adult child is in the same position as any other applicant who has to prove his case under the Act and that Parliament clearly intended that an adult child should be able to bring a claim, even if he can live without claiming on the estate. 

Practitioners and clients alike need to be aware of the above case.  Practitioners should explain to their clients that disregarding an adult child under their Will, will be treated the same as them disregarding a young dependent child.  Clients need to make sure they are aware of this fact when deciding whom to leave their estate to.  It will no longer be sufficient to assume that just because their children are adults and able to financially fend for themselves, that any claim by them against the estate post death will be unsuccessful. It remains to be seen whether the above case will be referred to the House of Lords on appeal by the charities.

Clare Wills
Head of the Wills & Probate department and a member of Solicitors For the Elderly (SFE).
020 8370 2874
clarewills@vanderpumps.co.uk.

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How to prevent Grandchildren wasting their inheritance…

To know that one's grandchildren cannot fritter away their inheritance would be a great relief to many grandparents.  It is possible to draft a Will in such a way as to control how the beneficiaries can use their inheritance, by way of a discretionary trust.
By creating a discretionary trust, each beneficiary, for example a grandchild, would be dependent on a carefully chosen trustee in order to access any money. A reassuring aspect of discretionary trusts is that grandchildren have no 'right' to the money as they are only potential beneficiaries. This means the trust fund should not be at risk from bankruptcy or divorce claims in turbulent times.
The trust itself is also flexible in allowing the trustee to allocate money to new potential beneficiaries such as grandchildren not born at the time of the trust's creation. The trustee would be chosen by the testator (making the Will), their role being to ensure the money left is used in accordance with their wishes. This is a very personal decision, often relatives or close friends are chosen, though a professional trustee can also be selected.  The testator's children (parents of the grandchildren) are often a natural choice of trustee.  Testators are able to guide a trustee by leaving a 'letter of wishes' with their will.
The trustee, on behalf of the testator, can decide how much each beneficiary receives, how often they receive money and can impose conditions.  A likely situation to illustrate this would be the allocation of £300 a month for a grandson at university, on the condition it is used to pay the maintenance costs incurred at university. This can be a very useful mechanism of stopping a headstrong 18 year old grandson spending money on a new high-tech gadget he doesn't need!
The discretionary trust is a useful tool, but requires careful drafting by a solicitor to ensure it will work well for your family.
Charlotte Davies
Solicitor

Michelmores LLP  
sarah.back@michelmores.com
www.michelmores.com

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Grandparents have rights too


When a couple with children separate, the impact on the wider family is often overlooked.  Statistics show that almost half of grandparents lose all contact with their grandchildren after a family separation.  42% never see their grandchildren again and 67% are prevented from providing that valuable babysitting or childcare arrangement or taking their grandchildren on treats even when they did so previously.

Figures show that grandparents whose sons are involved in a break-up fare worst. Only a third of paternal grandparents said they still maintained a relationship with their grandchildren after separation.  Two thirds of maternal grandparents said that they did.

Grandparents cannot only suffer in situations of family separation, but also in the tragic situation when their own child dies. This tragedy can be compounded when grandchildren are “lost” too.

The law does not provide grandparents with an automatic right to contact to their grandchildren.  The first step is to apply for permission from the court to make an application.  Rarely is the application itself refused.  The next step is for the grandparents to put forward their own case to the court.  The court will consider what is in the best interest of the child.  Recent research has shown that a strong link between children, especially teenagers, and their grandparents provides added dimension to a child’s life, providing wellbeing and security.

This does not mean that an application by grandparents would automatically be successful, but it does have a fair chance.

Unfortunately, sometimes the costs involved in making an application can be off putting.  In other cases, if contact arrangements are already fraught between the parents, the grandparents decide to take a back seat so as not to “make the situation worse”. 

At Linder Myers, we deal with these problems regularly.  If you would like advice on this matter or on any issue relating to children or relationship breakdown please contact us.

16 OCTOBER 2009

For further information on Linder Myers expertise in dealing with the issues raised in this article please contact:

SUZANNE LURIE, PARTNER
FAMILY DEPARTMENT
0161 837 6854
suzanne.lurie@lindermyers.co.uk

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Lawyers Support the Proposed Change in Rights to Grandparents

Single parents and working mums are common in our society. As a result, many grandparents play a crucial role in providing childcare for their grandchildren, which allows parents to continue working or provides them with some respite. The grandparent-grandchild relationship may also be fundamental in fostering a child's sense of identity and can be equally valuable to the grandparent.
However, in the event of a family breakdown or Social Services involvement with a family, the grandparents often get forgotten in terms of making arrangements for contact with the children. This may result in a grandparent suddenly being prevented from seeing a grandchild that they previously enjoyed close contact with.

Under the current legal framework, grandparents have no automatic rights to see their grandchildren. If the parents are denying a grandparent access to their grandchild, there is very little that a grandparent can do, particularly if the parents are refusing to negotiate. In such situations, a grandparent's only course of action would be to apply to the Court for permission to make an application for contact – known as "leave to apply".

In deciding whether to grant leave to apply, the Court will take into consideration the applicant's connection to the child and the parent's wishes, amongst other things. If successful, the grandparent would then be allowed to make their substantive application for contact which the Court will decide based on the best interests of the child. There is no guarantee that a contact application would succeed despite leave to apply having been granted.

Therefore, under the current system, grandparents are expected to overcome the hurdles of two applications to Court before contact with their grandchild could be granted.
With the new coalition government pledging to review how best to provide access rights to grandparents, this situation looks set to change. On 20 May 2010, the government announced its programme under the banner 'Freedom, Fairness, Responsibility'. It stated that it will "conduct a comprehensive review of family law" and one possibility is that grandparents would be granted automatic rights of access to their grandchild. This would remove the need for leave to apply so that grandparents would be entitled to make applications for contact without requiring the permission of court.
Granting grandparents automatic rights of contact may help to maintain stability for a child in times of parental difficulty and seems appropriate recognition of the vital role that a grandparent can play in a child's life.

Bethan Jones

Michelmores LLP         DDI:    +44 (0) 1392 687472
Woodwater House         Tel:    +44 (0) 1392 688688
Pynes Hill                      Fax:    +44 (0) 1392 360563
Exeter                          Email:  szb@michelmores.com
EX2 5WR                         Web:    www.michelmores.com

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What is Special Guardianship?

Special Guardianship Orders crept in almost unnoticed on to the Statue book at the very end of 2005.  Say “Special Guardianship” to most people in the street, and they will probably not have a clue what a “special guardian is”.  This article will outline in essence what Special Guardianship means.

The person upon whom the Order is conferred is called a special guardian.  A guardian is a legal concept that has been around since the middle ages.  The job that a guardian does is entirely different to the job that a special guardian does however.  Wouldn’t it have been helpful if a different word altogether had been used for these two different legal roles? 

A guardian can stand in the shoes of a deceased parent.  A guardian can also represent a child’s interest, in care proceedings.  A special guardian takes on their legal role in the child’s life, during the lifetime of the child’s parents, and can work alongside the child’s parents, or to the exclusion of the child’s parents. 

How is a special guardian appointed?

Only by a Court.  The Court can simply appoint a special guardian, or anyone who qualifies (see below) can apply to a Court for a Special Guardianship Order. 

Who is eligible to be a special guardian?

A range of individuals can apply, but Special Guardianship is often the territory of grandparents who are looking after a grandchild or grandchildren, on a long term basis.  The list of potential candidates for Special Guardianship Orders is :

•    Any individual who has a Residence Order in respect of a child or children
•    Any person with whom the child or children has lived for a period of least three years
•    Anyone who has the consent of each person in whose favour a Residence Order currently exists
•    Anyone who has the consent of a local authority (where the child is in care)
•    Anyone who has the consent of those who have parental responsibility for the child

Why have a Special Guardianship Order?

The most important effect of the Order will be to give a special guardian parental responsibility for the child or children.  Since the advent of the Data Protection Act, anyone who cares for a child on a day to day basis must in reality have parental responsibility.  The child’s GP or school will not reveal any information about a child, to a person without parental responsibility or without an Order of the Court.  Whilst the Special Guardianship Order exists, the guardian will have parental responsibility, which can be exercised to the exclusion of anyone else with parental responsibility for the child, with some exceptions.  The exceptions are immunisation, a change in the child’s education, consent to adoption, and change of child’s surname or removal of a child from the UK for more than three months.

Special guardians therefore have significant powers.  Those powers can be varied by the Court, either if the special guardian themselves applies for a variation or, if the Court deems it in the best interest of the child or children.  Special Guardianship Orders can continue until the child reaches the age of 18, unless otherwise provided for.

Many grandparents have acted as pseudo special guardians, for many years.  They have done so without any legal title being conferred upon them.  Because of the ever more regulated nature of our society, this is largely no longer practical.  It is often the case that following a marital breakdown, the parents of a child may no longer be able to provide parental care, and one or other parent will turn for help to a grandparent.  Obtaining a Special Guardianship Order in these circumstances can avoid conflict that would otherwise between one of the parents with parental responsibility, and the grandparents who are looking after the child on a day to day basis. 

For more information, contact eah@gross.co.uk
Elizabeth A Hodder
Solicitor and Collaborative Lawyer
Partner and Head of Gross & Co Family Department
83/84 Guildhall Street, Bury St Edmunds, Suffolk IP33 1LN
01284 763333
www.gross.co.uk

Special Guardianship Orders crept in almost unnoticed on to the Statue book at the very end of 2005.  Say “Special Guardianship” to most people in the street, and they will probably not have a clue what a “special guardian is”.  This article will outline in essence what Special Guardianship means.

The person upon whom the Order is conferred is called a special guardian.  A guardian is a legal concept that has been around since the middle ages.  The job that a guardian does is entirely different to the job that a special guardian does however.  Wouldn’t it have been helpful if a different word altogether had been used for these two different legal roles? 

A guardian can stand in the shoes of a deceased parent.  A guardian can also represent a child’s interest, in care proceedings.  A special guardian takes on their legal role in the child’s life, during the lifetime of the child’s parents, and can work alongside the child’s parents, or to the exclusion of the child’s parents. 


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It's All a Matter of Trust …

Erica Pearce-Howard, Trust & Estates Practitioner, breaks down the complexities of perpetuities and accumulations.

When asked to write an article about the new Perpetuities and Accumulations Act 2009 ("the Act") there was a collective hush in the office – who would draw the short straw?  Me!  Upon further research I came across some other rather amusing enforceable albeit outdated laws:

•    Pregnant women in the UK can legally relieve themselves anywhere they wish – even in a policeman's helmet
•    The killing of Scotsmen in York is permitted (providing they are carrying a bow and arrow).

Whether you already have a Will or pass away without one (and if you do write one please come to V&S!) the following is relevant to you. An important aspect of the legal system of England and Wales is that property cannot be tied up in trust for an indefinite amount of time. Future interests must take effect within what is called the perpetuity period.

In practice, at the end of that perpetuity period, the trust comes to an end and the trust property is held according to the document terms i.e. whoever is the stated beneficiary. The Perpetuities and Accumulations Act 1964 allowed people to choose a fixed perpetuity period of 80 years. 
The 1964 Act also placed a restriction of 21 years on the length of time that income can be accumulated as part of capital within a trust.

The Perpetuities and Accumulations Act 2009
This came into force on 6 April 2010. It introduced a single 125-year perpetuity period which will always apply (although a shorter trust period may still be chosen), and it provides that trustees can accumulate income for the whole of that period.

The change in the accumulation period is likely to have the greater impact on the drafting of new trusts and wills since it will prevent the situation where distributions of income have to be made to inappropriate or immature beneficiaries.

Existing Trusts
There is generally no change to existing Trusts which are currently in force.  However in some cases Trustees can execute a deed to allow the perpetuity period to become a fixed 100 years.  Whether or not this action can be taken depends upon the trust.

What action should be taken now?
The need to have a valid and appropriate will in place to avoid intestacy will always outweigh any benefit from deferring execution in order that the longer periods will apply.

Likewise for lifetime trusts, the creation of a trust should not be delayed if it is required to make immediate provision for beneficiaries or you wish to ensure that it is created in the current tax environment.

And finally…… given the recent debacle regarding MP expenses, let's hope that if one particular Scottish gentleman visits York he avoids anyone with a bow and arrow.
Erica Pearce-Howard is a member of Solicitors for the Elderly (SFE) and the Society of Trust and Estate Practitioners (STEP) and can be contacted on: 020 8370 2899 or email ericapearcehoward@vanderpumps.co.uk.

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Wills & Probate: Are You Up-To-Date?

October 2007 heralded a change in legislation in two distinct areas of law.  Legislation relating to the Mental Health Act and Inheritance Tax were substantially altered. 
Erica Pearce-Howard, a Trusts and Estates Practitioner in the Wills & Probate department, at Vanderpump & Sykes takes a look at how those changes have manifested and the practical problems of their implementation.

Mental Capacity Act 2005

The Mental Capacity Act 2005 came into force in October 2007.  Since then it has been possible to appoint one or more Attorneys under a Lasting Power of Attorney (LPA) for Property and Affairs and/or Personal Welfare.  The main differences between the old Enduring Powers of Attorney and the new LPAs are that in order to be able to use an LPA it must be registered, which currently costs £120.00.  Also, a Certificate Provider is now required to certify that the person making the LPA is not having any pressure placed on them and are aware of the consequences of giving power to their Attorney.

In practice the forms have been found to be lengthy, cumbersome and fraught with potential for error, resulting in many LPAs being returned unregistered due to mistakes in completion (with the registration fee often being retained!).  The response to criticisms is an ongoing consultation, with a view to amending the forms and a reduction in the registration fee.

Inheritance Tax

A significant change also took place in October 2007 relating to Inheritance Tax.  Prior to 9th October 2007 if a husband/wife/registered civil partner left their assets to each other and then on the second death to a third party (usually their children) they would only be able to use one nil rate band* allowance for the purposes of Inheritance Tax (*currently £325,000.00).

Now, if a surviving spouse dies after 9th October 2007 it is possible for their Executors to transfer any part of the nil-rate band allowance, that was not used when the first spouse died.  So, if a husband/wife/registered civil partner leave all their assets to each other and the survivor of them dies after October 2007, the survivors estate will benefit from double the nil rate band allowance, which at today's rates would be £650,000.00.

It is important to remember that even if all the assets passing under the Will of the first to die are left to the surviving spouse, there may be other elements that affect the allowance, such as assets in trust, or gifts to other people made within 7 years of the first death. Such gifts or trusts will reduce the amount of unused nil-rate band that may be available.

In order to apply for the double exemption certain documents must be produced on the second death.  These are the death certificate, the marriage certificate, the copy of the grant of representation and a copy of the Will of the first deceased.

For further advice on either of them matters above please contact Vanderpump & Sykes Solicitors on: 020 8370 2899.








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Will Contact Orders now have more teeth?

by Natalie Cutting

For far too long it seems that the Family Courts have struggled with the dilemma of what to do to enforce court orders for children to have contact with their parent (or grandparent). Sometimes the only real remedy for a breach of the order has appeared to be to send the offending parent to prison, effectively often making the child to suffer. Understandably family Judges very rarely take this course of action.

On the 8th December 2008 new legal provisions were added to the Children Act 1989 which are intended to give the Family Courts new powers to promote contact and enforce contact orders.

It is too early to say whether the new provisions introduced in December will make a real difference but this change does appear to signal a new and more proactive approach to this thorny subject.

Two new concepts have been introduced, a Contact Activities Direction, and an Enforcement Order. A Court can now direct a parent to take part in a specified activity such as attending parenting classes, counselling or guidance aimed at promoting contact.

The Court can ask CAFCASS (Children and Family Court Advisory and Support Service) to provide information on the suitability of such a direction and to monitor compliance and report back to the Court if there is a failure to comply.

In addition to the Contact Activities Direction, where there is a breach of a contact order the Court has new powers to make an Enforcement Order which can impose a requirement to do unpaid work or a requirement to pay compensation for financial loss caused by a breach of the order.

These new provisions clearly have significant resource implications. CAFCASS is already an overstretched organisation, but it is to be hoped that when a Court orders that contact to a child should take place, this new regime of remedies and enforcement provisions might mean that such an Order is one which a parent would be minded to comply with knowing that the Order would have “teeth” which might indeed be a change for the better. We shall have to wait and see.

Natalie Cutting, family lawyer with Charlesworth Nicholl & Co, 31 High Street, Crediton, Devon, telephone 01363 774706, www.charlesworthnicholl.co.uk.

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Pensions and Grandchildren

by Kevin Nelson

In my previous article I listed some of the ways Grandparents could help their grandchildren through investments. One area that I did not touch upon was that of pension investment. However, because pensions are so important this article attempts to list some of the key points which could be of benefit to Grandparents themselves and their children as well as their grandchildren.The article will not deal with defined benefit pensions but concentrate on retirement planning through building up an individual pension fund which can eventually be converted into a pension.

The life expectancy of a 65 year old man in 1980 was 14 years – now it is 24 years (Institute of Actuaries, Annuitant Mortality Tables). So from a retirement planning point of view it means that someone retiring now would need to build up 71% more in retirement funds to generate the same income as someone retiring in 1980.This prospect of running out of money in retirement is a daunting one and why it is vital to take action as early as possible.

Calculating the amount of income you need in retirement is a personal matter but, once calculated, a rough rule of thumb is to multiply the income requirement by 25 to give an approximate size of fund needed to generate that income. For example a fund of £500,000 would be required to generate an income of £20,000 per annum. The current full level of basic state pension is £90.70 per week so the bonus of saving for old age is being placed fairly and squarely on the shoulders of the individual. Generating the requisite fund size is a lot easier to achieve the longer you have to do it- for example a man starting to plan for retirement at age 40 who saves £500 per month nett of basic rate tax relief increasing each year in line with average earnings would need to save £783 per month at age 45 and £1307 per month at age 50 to have the same effect. This considerable difference in contribution rates is due to the effect of compound nterest once described by Albert Einstein as ‘the most powerful force in the universe’. The key message is start early to have highest impact but people should never avoid investing in a pension on the grounds that they have left it too late because, unlike any other savings plan for retirement pension saving carries useful tax incentives.

The unique advantage pensions have in saving for retirement is thanks to the availability of tax relief on your contributions up to your highest marginal rate and the ability to invest up to 100% of your earnings each year if you were so minded(admittedly with a ceiling of £235,000 per annum in the tax year 2008-09).In other words a basic rate (20%) taxpayer would only need to save £80 to be credited with £100 into their pension and a higher rate taxpayer would only have to invest £60 for the same result (for the higher rate taxpayer 0% tax relief would be given on the initial contribution and the remaining 20% relief would need to be claimed via the contributor’s annual tax return). Even for those without an income due to age or other reasons you are entitled to save up to £3600 per year into a pension and receive tax relief at 20% so a nett contribution of £2808 (this also means, of course, that parents or grandparents could initiate pension plans for children/grandchildren if they had the resources).The growth of your contributions while invested is also largely free of UK income or capital gains tax. On retirement you are also allowed to take up to 25% of your fund value as tax free cash.

The minimum age for retirement from 2010 will be 55 years (currently 50 years) and there is now greater flexibility in options at that point – for example you are now entitled to continue working while drawing your pension. There is also a wider variety of options available in taking your pension depending on the size of fund you have available. The traditional route of buying an annuity from an insurance company (in which they effectively guarantee you an income based on the value of fund you place with them ) remains the most popular but the government has now provided an open market option which means that you are not constrained to buy your annuity from the company with whom you held your pension fund but can effectively obtain the best offer possible from the market place for the type of annuity you want.

This article attempts to summarise some of the options open to parents/grandparents and has been written for grandparent times by Kevin Nelson of St. James’s Place Wealth Management - he will be happy to answer any questions you may have and can be contacted at St. James’s Place Wealth Management ,Chancellor Court, The Calls, Leeds LS2 7EH or on email at kevin.nelson@sjpp.co.uk This e-mail address is being protected from spambots. You need JavaScript enabled to view it or on 07767 658 850.You may also visit his website at www.sjpp.co.uk/kevinnelson

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Inheritance Tax and Grandparents

by Kevin Nelson

Inheritance Tax is no longer a concern just of the wealthy .In the tax year 2007-08 HMRC collected some £3.9 billion pounds in IHT because too few people took adequate steps to manage their potential liability. The basic facts are that, in the current tax year, the first £312,000 of each individual’s estate is taxed at 0% and therefore not liable to IHT. The entire estate above that level is taxed at a flat rate of 40%. Anyone domiciled in the UK is liable to this tax on transfers of value of their assets anywhere in the world with only certain limited restrictions. The government also has strict rules on how domicile is assessed .Simply moving abroad to live does not stop your UK domicile status.

This article attempts to list some of the ways Grandparents could help their children and grandchildren through more careful estate planning .Not preparing for IHT could be like asking your children and grandchildren to sit down and write a large cheque to HMRC.

There are three types of transfer of value – exempt, potentially exempt and chargeable lifetime transfers- below is a brief explanation of each.

Certain transfers are totally exempt for IHT purposes for example between spouses either in their lifetime or on death – this also applies to registered civil partnerships but not common law partnerships. Since the Chancellor’s pre budget report 2007 it has also been possible for the surviving spouse to add any unused portion of their late spouse’s nil rate band to their own. Annual gifts of up to £3,000 per person( donor) are also permitted and up to one year can be carried forward – it is also possible to make an unlimited number of small gifts (i.e. of less than £250 each ) but not including the individual who received the annual exemption. Gifts out of income are also permitted but must clearly not affect the individual’s standard of living – funding contributions to a life insurance policy ( particularly one which is held in trust ) would be a good example of this. Gifts for the maintenance of a young or infirm dependants are permitted as well as gifts to a certain level in recognition of marriage or civil partnership the level allowed is between £5000 for a parent and £1000 for non relative).

Other gifts ( for example outright gifts or gifts into absolute trusts ) may be classified as ‘potentially exempt transfers’on any value above the nil rate band level – here no inheritance tax will be levied if the donor survives for at least seven years after the gift and a tapering system will reduce the liability if the donor survives for more than three years but less than seven.

The third category are chargeable lifetime gifts which are generally those made into a discretionary trust – these will become immediately liable to IHT where the gift exceeds the nil rate band but only at an initial rate of 20%

IHT is normally payable by the personal representatives six months after the end of the month in which death occurs. Usually IHT has to be paid before a Grant of Representation is issued which means that,frequently, the personal representatives need to take out a loan before a Grant of Representation is issued.

A number of strategies can be employed to mitigate against the possible effect of IHT from the outright gifting options listed above to gifting options which enable the donor to either a) gift capital but retain the right to an income from that capital or b)gift the growth of investment capital but retain access to the capital itself.

Certain investment products are also potentially free from IHT – for example Alternative Investment Market (AIM) shares are exempt if held for a minimum of two years at the time of death and so are appealing to individuals who wish to retain full access to capital. They do, however, require specialist advice before purchase.

An alternative approach to IHT mitigation is not to reduce the size of the estate but to create a tax efficient fund to pay the Inheritance Tax Bill when required – the normal mechanism here is to fund a whole of life insurance policy in trust so that the proceeds fall outside the estate and can then be used to pay the IHT bill. Such a policy can either be paid by the estate owner or the potential beneficiaries of the estate. If the policy premiums are paid by the estate owner the funding could possibly be classified as expenditure out of income. It is also worth pointing out that investing in pensions can also be an indirect method of avoiding IHT as death benefits in modern pension plans are broadly exempt but it is important that suitable trusts be put in place for the funds to pass appropriately to the beneficiary.

Before deciding on an appropriate strategy any individual should carefully reflect on their circumstances and objectives and look for a solution which is realistic and flexible. The objective is to pass wealth to the next generation but not at the expense of the individual’s lifestyle today or their ability to adapt to future changes in situation. It is perhaps also worth remembering a quote from John Paul Getty ‘Money isn’t everything but it sure keeps you in touch with your children’.

www.sjpp.co.uk/kevinnelson/

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Investing for Grandchildren

by Kevin Nelson

There is a growing need for the older generations to help those following on to establish themselves and to face the significant financial challenges of a world which is increasingly complicated. Investing for children is becoming a necessity not just a nice to do. It’s not just about helping towards the cost of a wedding but recognizing the difficulties for young people to get on the property ladder and that many will be burdened with debt for a considerable part of their early working life.

There are a variety of different ways in which the older generation can help and this article seeks to list some of them :

Child Trust Fund: this should be the first option for those born after 01/09/2002 since the government has started to provide some assistance to young people through the Child Trust Fund into which it makes an opening contribution of £250– all details can be accessed on www.childtrustfund.gov.uk – maximum contribution per year is £1200 and there is important information about providers and who is eligible to open and manage a CTF

For children born before the above date or for those who have the luxury to invest more than the above other options do exist:

ISAs – gifts can be made into Individual Savings Accounts for children as long as they meet the normal ISA criteria i.e. minimum of 16 years old for a cash ISA and 18 for a Stocks and Shares ISA. Alternatively parents/ grandparents could invest in their own ISAs and make lump sum gifts to their grandchildren.The child’s age and the adults’ unwillingness to sacrifice their own ISA allowance may make this an inappropriate choice

Unit Trusts – these are particularly effective vehicles for investing on behalf of children as the unit trust investment can be ‘designated ‘ in the child’s name which would mean that the parents or the grandparents would have control over it until the child reached 18 at which point they become the legal owner and have the right to demand the funds contained in the investment. Before the age of 18 income and/or capital can be distributed to the beneficiary ( the child )for their welfare ,maintenance or education.

There is a slight advantage here of grandparents investing on behalf of children since parents are potentially liable to tax if the income from any trust designated to a child (dividends/interest payments) exceeds £100 p.a. Where the grandparent has opened the trust any income is directly assessable to the beneficiary( the child) and unless the child is a higher rate taxpayer there is no further liability ( although they will be unable to reclaim the 10% tax credit paid net on dividends) It should also be remembered that the beneficiary (the child) is also liable to Capital Gains Tax but carries a full annual exemption of £9200 before there is any tax liability.

IHT benefits of investing for Children - funding out of income is still classed as an Inheritance Tax (IHT) exempt gift and therefore falls outside the donor’s estate .A regular unit trust savings plan would help to utilize this exemption and the annual individual gift allowance of £3000 could be used to fund savings into plans for one or more children.

This article article attempts to summarise some of the options open to parents/grandparents and has been written for grandparent times by Kevin NELSON of St. James’s Place Wealth Management - he will be happy to answer any questions you may have and can be contacted at St. James’s Place Wealth Management ,Chancellor Court, The Calls, Leeds LS2 7EH or on email at Kevin.nelson@sjpp.co.uk This e-mail address is being protected from spambots. You need JavaScript enabled to view it or on 07767 658 850

www.sjpp.co.uk/kevinnelson/

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" There is nothing certain in life except death and taxes!"

(Benjamin Franklin, scientist and a founding father of the USA)

Everyone should make a will! That is unless you know how the rules of intestacy would work so that your property would go only to those whom you want it to go to when you die.

Tax is important when you die as well as when you are alive since Inheritance Tax can swallow 40% of the value of your property over the threshold of £300,000 (the value of many homes today). Grandparents who wish to leave gifts for grandchildren will almost certainly need to make a will in order to do so, and even more so if you are in the unfortunate position of not knowing all your grandchildren, but wish to ensure that all of them benefit. The help that a grandparent can give by a wisely made will can be very valuable to a grandchild. It can help to ensure that they are able to go to university, or to set up in business, as well as giving them a start on the housing ladder. As an Association we therefore encourage grandparents to make a will.

Do consider the question of making a will, no matter what your circumstances may be. The cost of doing so is well worth the peace of mind that it will bring, in the assurance that only those whom you want to benefit when you die are those who will do so.

Most of the members of our Lawyers List of solicitors have experts in wills and probate, who can provide you with specialist advice and, thereby, peace of mind. The solicitors on our list have an interest in ensuring that their client grandparents’ wishes are carried out, and can also act as executors as well as obtaining probate when the time comes. Most will undertake home visits where necessary, and our list is made up on a town and county basis for convenience.

Peter Harris

Chairman of The Grandparents Association

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New Power of Attorney Laws

We are all living longer that’s the good news. The bad news is that Alzheimer’s disease and dementia are increasingly taking their toll on families. There are important steps that can be taken to address some of the financial and/or welfare problems that can occur in such situations. One of these steps is to make a Lasting Power of Attorney (LPA) which is a legal document usually set up by a solicitor whereby you appoint someone to deal with your finances and/or your welfare should you become unable to manage these areas yourself.

On 1st October 2007 the former document granting someone power over finances (an Enduring Power of Attorney) was replaced by the new LPA, under the Mental Capacity Act 2005.

Under an LPA it is now possible to choose someone to manage your finances and property should you become incapable but also to make health and welfare decisions for you. You can allow Attorneys to make decisions in different areas including consent to medical treatment and (somewhat controversially) end of life treatment if you wish.

LPA forms are quite lengthy and must be registered with the office of the Public Guardian by you or your Attorneys, before they can act under the document. Sometimes medical professionals may need to consulted during the process which does add to the expense. We recommend however, that making an LPA be seriously considered by individuals because of the problems which can occur if lack of capacity becomes an issue in the future. We also recommend proper legal advice be taken during the process.

Solicitors costs for an LPA vary from firm to firm, and in different regions of the country. We generally find that our costs range between £400.00 and £500.00, depending on the circumstances of the case, although sometimes costs may be in excess of this if a particular matter is more complicated.

For more information, please ask for a consultation with a member of the Private Client Department at Ridley and Hall solicitors (01484-538421) or visit our website at www.ridleyandhall.co.uk

Other useful contact details :-

Office of the Public Guardian

Archway Tower

2 Junction Road

London

N19 5SZ

Telephone Number: 0845 330 2900

Text Phone: 0207 664 7755

Fax Number: 0207 664 7705

Website: www.publicguardian.gov.uk

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If you would like to write a piece for this corner, please send your article to:

Moot House, The Stow, HARLOW, Essex CM20 3AG

or

email: info@grandparents-association.org.uk

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