It is hoped that conversations about wills and powers of attorney are happening as standard when professionals are advising on wealth and other matters with a client. Assuming that is the case, and a client has confirmed that they have a will and power of attorney, some may think that the box has been 'ticked' and there is nothing further to be done. However, it may be the case that simply having a will and power of attorney may not be enough to meet the client's current requirements as there are several issues that can arise.
Estate planning can be difficult for clients and may involve sensitive discussions. Some examples below show where advisers can assist a client and add value to their own service by identifying potential issues, and recommending when their client should seek legal advice to clarify and confirm what can be done.
Changing circumstances
As a starting point, your client's will and power of attorney may have been prepared a long time ago and are no longer fit for purpose for various reasons:
- their family circumstances and personal wealth may have changed significantly since the documents were prepared;
- their executors and attorneys may no longer be suitable to act in those roles, or other individuals are now preferred to be appointed;
- there may be a vulnerable beneficiary who requires their inheritance to be held in trust for their protection; or
- their will is not compatible with the estate planning which they are now looking to carry out.
Reviewing and updating these documents regularly will ensure that your client's wishes will take effect.
Legal rights claims on death
Regardless of the terms of a will, in Scotland (unlike in the rest of the UK) the doctrine of legal rights provides an automatic entitlement to a share of the moveable estate of a deceased person for their spouse/civil partner and children. This is one reason why the concept of domicile is particularly important in estate planning.
A client should be made aware of the possibility of legal rights being claimed on their death. In particular, the claiming of legal rights by children on a first death could result in their estate being liable to pay inheritance tax and would reduce or exhaust the nil rate band available to transfer to their spouse/civil partner on second death. Advice can be provided before death on how to mitigate the operation of legal rights.
Survivorship destinations
Historically, survivorship destinations were commonly added into property title deeds where joint owners were spouses/civil partners. A survivorship destination will transfer an individual's ownership interest in a property to the surviving joint owner immediately on death. The destination will "trump" the terms of the will and could result in the property passing against a client's current wishes. If a client has owned a property jointly for a long period of time, they may not be aware of having such a destination in their title deeds and it is worth checking this to ensure that it will not prevent their estate planning from being effective.
Separation
A client may update their adviser if they have recently separated from their spouse or civil partner and confirm that their will and power of attorney do not include that individual. However, if this is only an "informal" separation and no separation agreement or divorce has been granted, your client is at risk of the operation of both the doctrine of legal rights and any survivorship destinations still in their title deeds, in the event of their death. Clients should be encouraged to seek advice to finalise their separation arrangements as soon as possible after the fact.
International connections
A client may assume that by virtue of having a will in place that will be sufficient to safeguard succession to their estate, wherever it may be. The difficulty is that, depending on the kind of asset and client intentions, one will may not be sufficient to achieve the intended outcome - every country has its own rules where death and taxes (amongst other things) are concerned. It is advisable for any client holding Scottish and overseas assets to take advice both in Scotland and abroad to ensure a consideration is given to their worldwide estate planning.
Much of what is mentioned above may be, unintentionally, overlooked by clients when they are thinking about organising their affairs. That can result in unfortunate consequences which clients would not have intended. It is important for advisers to collaborate and identify potential issues for clients ahead of time to help to realise their objectives.
Brodies has extensive experience of advising on all aspects of estate planning. If you or your client needs help in starting the process of putting a will or power of attorney in place, or perhaps need a review of their documents to take account changing circumstances, please contact our wills and estate planning experts.
Contributor
Senior Associate
