The Mental Capacity Act 2005 (MCA) is a fundamental piece of legislation in the United Kingdom that safeguards the rights and welfare of individuals who may lack mental capacity. Enacted to provide a legal framework for decision-making on behalf of those unable to make their own decisions, the MCA is underpinned by several key principles. In this blog, we will explore the importance of these principles and how they impact the lives of vulnerable individuals.

 

1. Presumption of Capacity

The first key principle of the MCA is the presumption of capacity. This principle highlights that every person is presumed to have the capacity to make decisions unless it can be proven otherwise. This is fundamental in maintaining an individual’s independence and avoiding unnecessary restrictions. It ensures that decision-making processes start with the assumption that individuals can make choices about their own lives.

 

2. The right to be supported when making decisions

This principle of the MCA lay emphasis on the importance of supporting individuals in making their own decisions. Even if a person lacks capacity for a specific decision, efforts should be made to enable them to participate as fully as possible in the decision-making process. This may involve providing information in an accessible format, using communication aids, or involving advocates to represent the person’s wishes.

 

 

3. An unwise decision cannot be seen as a wrong decision

This principle acknowledges that individuals have the right to make unwise decisions. Capacity is not determined by whether the decision made is considered wise by others; rather, it focuses on the person’s ability to understand the decision and its consequences. This principle reinforces the importance of respecting a person’s choices even if they are unconventional.

 

4. Best Interests must be at the centre of all decision making

This principle centres on making decisions in the individual’s best interests. When someone lacks the capacity to make a specific decision, the MCA requires that any actions taken, or decisions made on the person’s behalf must be in their best interests. This principle places a significant emphasis on considering the person’s wishes, feelings, beliefs, and values, as well as consulting with relevant parties, such as family and healthcare professionals. It ensures that the individual’s rights and well-being remain the central focus.

 

5. Least Restrictive Option

The MCA promotes the least restrictive option as a key principle. This means that any action taken, or decision made on behalf of a person who lacks capacity should be the least restrictive option possible. This principle discourages unnecessary restrictions or interventions, encouraging the exploration of alternative solutions that respect the individual’s independence and minimise interference in their life.

 

The Mental Capacity Act 2005 is a essential piece of legislation that protects the rights and well-being of individuals who may lack capacity. Its key principles, including the presumption of capacity, best interests, least restrictive option, unwise decisions, and supporting decision-making, are essential for upholding the dignity and autonomy of those it serves. By adhering to these principles, society can ensure that vulnerable individuals receive the care and support they need while respecting their rights and choices.

 

The Private Client Team advise clients on matters regarding capacity every day. Should you need to speak to one of the team, you can contact them on 01206 577676.

From 26^th July the Statutory Legacy increased from £270,000 to £322,000, that is the amount your surviving spouse or civil partner will inherit under the rules of intestacy.

The rules of intestacy are a set of legislative rules which come into effect when a person dies without a valid Will. They set out who will inherit and who is responsible for the administration of your estate.

The priority of who will inherit under the Intestacy Rules is as follows: spouse, children, parents, siblings, grandparents, aunts/uncles, then lastly the Crown.

If there are no children of the family, then the spouse or civil partner will inherit the whole Estate.

When an individual has children of the family, the Intestacy Rules provide that the spouse should receive the Statutory Legacy, previously £270,000, and now increased to £322,000, all personal possessions and half of the residuary of the estate. The remaining half of the residuary estate will then be divided between the children equally. As it is normally the case, if any of the children are under the age of 18, the inheritance will be held in a trust.

This increase of the Statutory Legacy is meant to reflect the rising cost of living as well as to provide spouses and civil partners with an additional financial security. It is being reviewed regularly but as a rule it is reviewed at least every 5 years.

An important point to remember is that the Statutory Legacy only applies to spouses or civil partners. If you are cohabiting or in a common law marriage, then there is no automatic right to inherit or a right to the Statutory Legacy. For this reason, we recommend that if you wish for the estate to pass in accordance with your wishes you create a Will.

If you would like to discuss anything to do with Wills, Trusts or Probate, please contact our Private Client Team who are available for appointments on 01206 577676 or alternatively email us at [email protected].

 

There are over 850,000 people in the UK suffering from dementia- a figure set to rise to one million in 2025 due to our increasing life expectancy.

Diagnosis at any age can be devastating for the patient, their friends and their family.  But there are steps that can be taken to minimise the loss of control a sufferer has over their own lives and feelings of helplessness for those around them.

But it is important to act quickly whilst one still retains their mental capacity. Mental capacity is essentially one’s ability to understand information, make a decision and effectively communicate it.

Whilst a person has mental capacity they can create Lasting Powers of Attorney for both their health and welfare and property and financial affairs.  They as donor are able to appoint attorneys chosen by themselves who will be able to make decisions on their behalf if and when they lose mental capacity -for example because they are suffering from advanced dementia. A donor can appoint up to four attorneys and choose whether they must act jointly, or can act jointly and severally. If jointly, all attorneys must agree on a decision. If jointly and severally, any one attorney can decide a course of action.  The Lasting Power of Attorney must be signed by a certificate provider who verifies that the donor has mental capacity – often this will be the solicitor who has drafted the document.

If a person as already lost mental capacity, they cannot obtain a Lasting Power of Attorney. Their family and friends will need to apply to the Court of Protection for a Deputyship. However, this is a much lengthier and costly process and not always successful. Further if a deputy is appointed, they are answerable to the Court and must account to them for every penny spent on behalf of the person who has lost mental capacity. 

A person must also have mental capacity, or what is referred to as testamentary capacity to make a Will. In addition to mental capacity as defined above, a testator must be able to understand the nature and effect of creating a Will and the size and value of their estate, and have an appreciation of those who might expect to benefit from their Will  – whether or not that be the case.

A person who lacks such capacity will be unable to make a Will. If they do not have a Will, they will die intestate. This means that their estate will distributed according to the rules of intestacy, which may not reflect what the deceased intended.

So, when considering a Lasting Power of Attorney or a Will or indeed both, the take home message is to act now.

If you would like to discuss anything to do with Wills, Trusts or Probate, please contact our Private Client Team who are available for appointments on 01206 577676 or alternatively email us at [email protected]. 

Life interest trusts are often created to protect assets that will ultimately go to your children, while still allowing your spouse or partner to benefit from those assets. These types of trusts are even more common between couples who have been previously married, have stepchildren or have concerns that the current spouse or partner will remarry or cohabit with someone else following their passing. A life interest trust can be set up in a Will, but it is important to ensure that the instructions in the Will are clear and that the trust is properly established and administered. It is also important to consider any applicable tax laws and regulations when setting up a life interest trust.

What is a life interest trust?

A life interest trust that is written in your Will is a type of trust by which a particular asset, usually the family home, is ring-fenced for the benefit of a named individual, normally a spouse. The individual who has the benefit of the asset during their lifetime is called a ‘life tenant’ and he or she is only entitled to receive the income from the trust, while the capital is held for the ‘remaindermen’ -the ultimate beneficiaries. In addition, a life interest trust is looked after and administered by at least two trustees. For example, if the asset is an investment property that is subject to a lease, the income is the rent received and the capital is the property. To put it simply, the life tenant has the use of the property during their lifetime but when he or she dies the property passes to the named beneficiaries under the trust.

A crucial point before creating a life interest trust is for the property that is to be placed into the trust must be held as tenants in common. That means that each owner owns a distinct share in the property, for instance 50/50. When the life interest trust comes into effect, the share of the deceased will be transferred in the trustees’ names, and they will become the registered proprietors together with the spouse or individual who holds the other share in the property.

What are the general advantages of a life interest trust?

• The most important advantage is that a life interest trust provides the certainty that your share of the property will be passed onto your chosen beneficiaries and the person who is the life tenant can not undo your wishes. For example, if you leave everything to your spouse and then they remarry they can pass the whole of the property to their new spouse, whereas, with a life interest trust, the surviving spouse who is the life tenant will not be able to pass your share in the property to anyone else when they die.
• The surviving spouse has the protection of being able to continue living in the family home and/or a right to income from other assets in your estate that are placed in a life interest trust.
• The share of the assets that is placed in a life interest trust can not be used to pay for care home fees necessary for the surviving spouse. Similarly, if the life tenant becomes bankrupt the value of your share will not be taken into account by a trustee in bankruptcy.
• Depending on the terms of the trust, the surviving spouse can agree with the trustees to downsize. If there is any surplus money from the sale of the property and it belongs to the trust, that can either be invested to generate income for the surviving spouse or it can be paid out to the remaindermen i.e. beneficiaries.

What are the general disadvantages of a life interest trust?

• The surviving spouse or partner has a right to live in the property or receive the income from the assets placed in the trust which might create financial difficulties and might make them feel they lack control over the assets.
• The fact that the surviving spouse or partner will only have access to a certain share in the property when it comes to care home fees might affect the level of care he or she can receive.

The advantages and disadvantages of a life interest trust need to be considered together with each individual’s circumstances before deciding if it is an advantageous option. Therefore if you would like advice on life interest trusts and how one can be included in your Will, please do not hesitate to contact us on 01206 577 676 or email us at [email protected]

There are two certainties in life – death and taxes. Sometimes at the same time. How lucky we are.

Yes, inheritance tax or IHT is the one we love to hate and HMRC are cracking down on bereaved families who fail to pay the correct amount following their loved ones passing. In the tax year 2021/2022, they billed £326m rectifying IHT underpayments -almost one third up on the previous year.

When we die, we each have a nil rate band of £325,000. This means that the first £325,000 of our estate will be inheritance tax free. If we are passing the family home to our children or grandchildren, we also get the residence nil rate band of £175,000. This means that the next £175,000 of our estate will be inheritance tax free.

When an estate passes from a deceased spouse to their widow(er), this benefits from the spouse exemption. The widow(er) will inherit the entire estate inheritance tax free, and their deceased spouse’s nil rate band(s). A married couple with children then can have up to £1m inheritance tax free.  Certainly, this seems generous, but rising property prices have meant that increasingly estates are exceeding the threshold for IHT liability.  As a result, last year a record £6.1 billion of inheritance tax was paid.

A common reason why bereaved families are not paying enough inheritance tax is because they are not declaring in full the deceased’s assets.  It might be an old painting that’s sat in the living room for years, or a diamond ring that’s been in the family for generations. 

However, HMRC can access a wealth of our personal information using a database called Connect. It will reveal the deceased’s bank accounts, property details and insurance policies. If IHT payments do not match those predicted by HMRC, they may investigate further. If an asset such as a piece of jewellery or fine art is insured, HMRC will know of its existence.  Even if this valuable asset changed hands over 7 years before death thereby rendering it exempt from IHT, HMRC will demand evidence of this. Families should be careful too of undervaluing the deceased’s home. We suggest obtaining at least three market appraisals and taking an average.

Unpaid inheritance tax attracts interest of 6%, a rate that has more than doubled in the past year. Add to this a penalty of anywhere between 20% to 100% of the IHT due depending on whether the family made a genuine mistake or acted deliberately, and their efforts to conceal it.

Families should remember too that if they fail to disclose or undervalue just one asset, inadvertently or not, they will be perceived as less credible by HMRC, who will look to scrutinise the deceased’s estate further.  

If you would like to discuss anything to do with Wills, Trusts or Probate, please contact our Private Client Team who are available for appointments on 01206 577676 or alternatively email us at [email protected]

Agricultural property relief or APR as it is known, is available on land or pasture used to rear animals or grow crops, and other buildings used for agricultural purposes.  APR doesn’t apply to plant and machinery, livestock, crops and unused farm buildings.

One needn’t be a farmer to qualify for this relief. It is necessary only to own property used for agricultural purposes. It may therefore apply to a landlord who leases land to a farmer.

For farmers, they must have owned and occupied the agricultural property for at least 2 years. For landlords, it must have been owned by them and used for farming for at least 7 years.  If these conditions are not satisfied the relief will not apply.

APR is almost always given at a rate of 100% but note that this is applied to the agricultural value of the land rather than the market value. The market value is what the land would sell for on the open market. The agricultural value is the value of the land assuming it could only be used for farming and could not be redeveloped.  This means that whatever the charge to inheritance tax is, APR is unlikely to reduce it to zero. However, farms often also qualify for business property relief, which if combined with APR, may achieve this.

APR can be given at a rate of 50%, but this applies only to leased land for leases created prior to 1^st September 1995 with over two years left run on them.

We are often asked whether a farmhouse is eligible for APR- it being the farmer’s home as well as agricultural property. The answer is yes provided it is an authentic farmhouse, meaning that its character and size is in keeping with the rest of the farm and it is from where farm operations are managed. Similarly, farm cottages will also apply if they are occupied by employees of the farm or their widowed spouses.

Another concession that may be available to some farmers is heritage tax relief. For this farmland and buildings must qualify as designated heritage property, be preserved as such, and access must be given to the public.

If you would like to discuss anything to do with Wills, Trusts or Probate, please contact our Private Client Team who are available for appointments on 01206 577676 or alternatively email us at [email protected]