Wills, Trusts, Inheritance Tax, Care Fees: Common Myths Debunked

A Will remains one of the most important documents you will ever make. It allows you to put the person(s) of your choice in control of your affairs after your death, and ensures your loved ones are provided for. Without a Will, your money, property and possessions are divided under the laws of intestacy.

This article explores and debunks the common myths surrounding Wills, Trusts, Inheritance Tax and care fee avoidance schemes. We also offer practical advice on how you can protect yourself from falling prey to the fraudulent schemes that exist.

Myth 1: Wills have an ‘expiry date’

Many wrongly believe that Wills are only valid for a set period of time and the thought of having to re-do it every couple of years makes individuals choose not to prepare one.

This is not the case as once the Will is finalised, it lasts forever unless revoked. There are no time restrictions on Wills, meaning you only have to update it when you feel it is necessary, for example,. if it has become out of date as a result of children growing up, or you have been through a divorce.

Myth 2: Online Will writers are cheaper than solicitors

Unfortunately, and often in a bid to obtain a Will quickly and cheaply, an increasing number of people are falling victim to Will writing scams, leaving them out of pocket, without a reliable Will, or without one entirely.

The Law in England and Wales states that anyone can write a Will and often, these Will writers are not regulated nor do they hold any legal qualifications. This means you are not protected, nor guaranteed to have a legally valid Will. In these cases, you may be charged an extortionate fee for having your Will re-written due to poor practices, and further problems may arise at the probate stage, causing severe upset and disturbance to all, at what is already an extremely upsetting time.

Will writers often advertise themselves as ‘cheaper’ than solicitors, however, they are more likely to charge hidden and unexpected fees such as a monthly cost to store your Will.

We recommend choosing a qualified and regulated solicitor to write your Will, especially if it is deemed to be complex (ie the estate is distributed in differing proportions to many beneficiaries, or if the testator has assets abroad, children from a different marriage, etc.)

When looking for a Will writer, be wary of anyone contacting you via ‘cold calls’ or emails as these are likely to be scammers. It is important to check whether the firm you wish to instruct belongs to a professional body. Most firms belong to one of the following:

  1. Society of Will Writers;
  2. Institute of Professional Will Writers; or
  3. Society of Trust and Estate Practitioners.

Members of certain professions such as the NHS and trade unions have access to free Will services so check with your professional body to find out if this applies to you. Charitable organisations also often partner with Law firms to offer Wills at significantly reduced rates in return for a donation.

Myth 3: You need to set up trusts to protect your money

Setting up trusts can often incur extra charges, taxes and may carry a heavy administrative burden on the individual, meaning doing so is only worthwhile in limited circumstances. We advise contacting one of our solicitors to see whether a trust is suitable for your circumstances.

Myth 4: You can gift your house while still living in it to avoid paying Inheritance Tax on death

Whether or not you pay Inheritance Tax, and how much, depends on the following:

  1. Who you have gifted the property to; and
  2. Whether the property is your main home.

Generally, when you give away an asset in your lifetime and live for seven years from the point of making the gift, it is not included in your estate when you die , therefore, will not be subject to Inheritance Tax on your death.

However, if you gift a house to a family member but continue to benefit from it in some way, it would remain as part of your estate when you die. This means your loved ones could be taxed at a rate of 40% for anything over the tax-free threshold. If you gift the house to a family member and continue to live in it, you are said to have retained the whole benefit of the property. The consequence of this is that HMRC will still include the full value of that home in your estate when you die. This is described as a Gift with Reservation of Benefit (“GROB”). For possible ways to mitigate this, please contact one of our Private Client Solicitors.

Myth 5: You can avoid paying care fees by spending or giving away your assets

Sadly, there is no way to avoid paying care home fees, so any offer of a “care home fee avoidance scheme” is not legal and should be avoided by all. You should be aware of the Deliberate Deprivation of Assets Rules. This is where a local authority decides that you have deliberately reduced your capital to avoid care home fees. This may happen when you have gifted assets; have spent large amounts of money yourself prior to your care needs assessment or have sold an asset for less than it’s worth. Further information and advice on this can be found on the AgeUK website.

There are, however, a number of options available to those that wish to pay care home fees without selling their property. These include care annuity policies, deferred payment schemes, equity release, renting out your property and setting up an asset protection trust. Please contact us to talk through the various options and get advice on the most suitable for your circumstances.

If you would like advice on any of the issues raised in this article then please contact our Private Client team on info@coolebevisllp.com or visit our website for further information.

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