Common Question: “Why do I need Probate my mum left a Will?”

This seems to be one of the biggest misconceptions - that if there is a valid Will in place there is no need for an application for the Grant of Probate to be made.

Most estates with or without a Will need to go through Probate but trust me it is far easier and cheaper to do this with a valid Will.

The Grant of Probate is the legal document that will allow your executors a legal right to gather in your assets and then distribute them according to your Will.

Most organisations such as banks, building societies, life assurance companies need to ensure they are paying over a deceased person’s money to the correct person and the Grant of Probate is the proof. The executors are named on the Grant and the organisations pay them accordingly to then pass over the money to the beneficiaries.

Generally speaking if someone owns a property and / or has over £15,000 of cash assets held with a bank/building society a Grant of Probate is going to be needed. Please note however that banks/building societies have their own rules so they may wish to see the grant for a lower figure than £15,000.

If the deceased held everything jointly with their spouse than the Grant of Probate is not going to be needed just simply show the death certificate to the bank/building society and they will remove the deceased spouse’s name.

All of the above deals with situations where the deceased left a will – what happens where there is no will? Well, the basic rules are the same but the people who will administer the estate are known as Administrators (instead of Executors). They will apply for a Grant of Letters of Administration (instead of a Grant of Probate) and the distribution of the estate will take place according to the rules of intestacy.

At Abbotts we are able to advise clients when dealing with Probate / Letters of Administration so if you need some assistance feel free to contact us.

Life Interest Trusts - What is it and how do they work?

A Life Interest Trust (LIT), also known as an Interest in Possession Trust, is a document that names one or more beneficiaries to an estate and their entitlement to an income from assets held in trust over their life time.

This person is known as the Life Tenant. If that asset is a house or property, then the Life Tenant is entitled to either the rental income on the property, if it is rented out, or to live in the property if they wish to.

However, a Life Tenant is not entitled to receive any of the remaining capital from the Trust. The Trust can also name other beneficiaries who are entitled to the assets in the Trust once the Life Tenant has died. They are known as Residuary Beneficiaries or Remainder men. However, while the Life Tenant is alive they do not receive anything from the Trust unless the Life Tenant agrees to a distribution of the assets. LITs are designed to protect the children of a marriage or Civil Partnership in the event that one partner dies and the other remarries.

You can also make specific requests or instructions on a Life Interest Trust. As a Trust is overseen by Trustees, you can give them specific instructions as to how you would like the Trust to be managed.

For example: You can give the Trustees the power to either give or lend capital from the estate to the Life Tenant at their discretion. Where a property is involved, you can specify that if the Life Tenant wants to vacate the property they can then direct the Trustees to sell that property and buy another for the Life Tenant to occupy and you can give specific instructions as to how you would like any capital in the Trust to be invested.

Taxation

A Life Tenant is treated as owning all of the assets held in Trust. Any income (such as rent) from the Trust belongs to the Life Tenant and is therefore taxed according to the beneficiary’s personal income tax rate.

No additional income tax is paid by the Trust. One major advantage of the LIT is that it protects the assets in the Trust from being used up during the lifetime of the Life Tenant. So if a Life Tenant goes into full time nursing care, the local authority cannot take the assets in the Trust to pay for the care of the Life Tenant.

A Life Interest Trust is particularly useful if a couple have children and want to make sure that they benefit from the estate of either partner. This can be contrasted with a trust which simply gives a right to reside in the property.

A trust of this nature does not give the occupant a right to income from the trust and is not therefore taxed as an income in possession trust.

Abbotts are able to complete Life Interest Trusts for £250 plus VAT within your Mirror Wills (£216 incl VAT). For more information please contact us on 0845 313 3353 or email us mailto:info@abbottswills.co.uk?subject=Life%20Interest%20Trusts