Protecting your business - the importance of having a Will

As a business owner whose energies are undoubtedly invested in the here and now, not least in trying to survive the current economic crisis caused by COVID-19, it is just as important for you to consider what would happen to your business should something happen to you.

The prospect of us dying is a sobering thought. Still, by putting in place suitable measures to ensure that your business can continue in your absence, or that adequate financial provision can be made for those you leave behind, you can provide yourself and your loved ones with much-needed peace of mind. By planning ahead for all eventualities, you will also instill confidence in those you work with and those that work for you.

The starting point for any astute business owner, whether as part of a wider succession planning strategy for a partnership or limited company, or simply to ensure the financial security of your family after you die, is ensuring that you have a valid Will in place.

In England and Wales, if a person dies without making a Will, the rules of intestacy come into play. These restrict the beneficiaries of the deceased’s estate to specified classes of relatives, in a set order of priority, but making no automatic provision for unmarried partners. As such, there is potential for this to have unwelcome ramifications in relation to the distribution of both the deceased’s personal and commercial assets, in some cases solely benefitting estranged family members. It can also create problems for any surviving business, often adding an extra layer of confusion, delay and uncertainty to an already difficult process.

Where a person dies intestate, the task of handling their affairs usually falls to the deceased’s next of kin. However, in most cases, the next of kin will still need to apply for a ‘Grant of Letters of Administration’. This is the official document issued by the Probate Registry providing the personal representative(s) with the authority to administer the deceased’s estate. If the deceased’s affairs are especially complex and high value, involving the payment of inheritance tax, this could take weeks or even months to obtain.

Additional delay can also arise where a search needs to be undertaken to clarify whether a Will has been made or in verifying who is a valid member of the class of beneficiaries entitled to apply to the court for the Grant of Representation. This could be, for example, where the deceased has no surviving spouse, children or parents, or where their relatives are not known.

If you add into this mix the absence of adequate succession planning provisions within any partnership agreement or the company’s Articles of Association, post-death business problems can quickly escalate. This issue was recently highlighted in the case of Williams & Ors v Russell Price Farm Services Ltd [2020] EWHC 1088 (Ch).

On its facts, the late Russell Price was the sole director and shareholder of a contract farming company. However, there was no provision in the Articles for the executors to appoint a new director in the event of his death, leaving the executors of his estate without the authority to do so themselves prior to the Grant of Probate. This left the company in a precarious position as there was no-one to pay the company’s creditors to enable it to trade. As a result, the executors were forced to make an urgent application to the High Court requesting that they be entered into the company’s register of members so that they could appoint a director.

Yet, with prior planning, these problems could have so easily been avoided for the relatives and personal representatives of Mr Price. By putting in place a written Will, together with any suitable succession planning measures, you can help to safeguard both the financial interests of your loved ones and the future of your business you have worked so hard to build.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its’ accuracy, and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should always be sought.

Children’s Law Specialist Joins BSG Solicitors

BSG Solicitors welcomes Suzanne Willey to our family law department as Head of Children’s Law based at the Lancaster office.

Suzanne has over 17 years’ experience covering a wide range of matters including Care Proceedings, Private law Children cases and domestic abuse cases. Suzanne is a member of the Law Society’s Children Panel and a member of Resolution. She is also collaboratively law trained and can undertake collaborative meetings to establish flexible solutions to family matters.

Andie Brown, Partner and Head of Family Law commented:

“Suzanne brings with her a high level of expertise, which adds to our considerable experience in all aspects of family law. She shares our belief that wherever possible family issues should be dealt with in a non-confrontational friendly manner, keeping the interests of the children as the priority. I’m delighted to welcome her to the firm.”

Pictured L-R Suzanne and Andie.

The scope and effect of “subject to contract" negotiations

The term “subject to contract” is a well-known phrase in ordinary legal parlance and used daily by parties when seeking to compromise disputes. Still, in the recent case of Joanne Properties Ltd v Moneything Capital Ltd [2020] EWCA Civ 154, the Court of Appeal was required to reassess the scope and effect of this commonly used phrase, and whether or not there can be a legally binding agreement where this qualification has been used during the course of negotiations.

On the facts of the case, Joanne Properties Ltd (the Appellant) borrowed money from Moneything Capital Ltd (the Respondent), secured by a legal charge over a property in Wandsworth. When the Appellant fell into arrears, it challenged the Respondent’s appointment of LPA receivers on the ground that both the loan agreement and charge had been procured by undue influence. The Appellant then applied to the court to set aside both the agreement and the charge, and claimed injunctive relief against the receivers preventing them from taking any steps to realise the security.

The parties were able to compromise the injunction application, agreeing that the property should be sold, with an order for distribution of the proceeds of sale. The issue on appeal was whether the parties had reached a further binding contract of compromise about how the ring-fenced sum of £140,000, after repayment of the sale costs and the loan capital, was to be shared between them.

In allowing the appeal, Lord Justice Lewison provided a useful review of the origins of the “subject to contract” formula and the reasons behind it. Put simply, the effect of these words mean that neither party intends to be legally bound unless and until a formal contract is executed, and that each party therefore reserves the right to withdraw from any proposed agreement until such time as a binding contract is made. This allows the parties to see at once whether there is a contract, or whether they are still in the negotiation stage. The court reminded itself that without this principle there would be a great deal of uncertainty in law in respect of those agreements that have been fully concluded and those that have not.

The court went on to acknowledge that even where negotiations have begun "subject to contract", the parties may waive this qualification, but only if they both expressly agree that it should be expunged or if such an agreement was to be necessarily implied. The mere fact that parties get close to a contract or are of one mind is not, in itself, sufficient to create a legally binding agreement. There must be either a formal contract in place, or a clear factual basis for inferring that the parties must have intended to waive the qualification. In the case before the court there was neither.

On its' facts, both the alleged offer and acceptance were each headed "subject to contract”, and the parties also plainly contemplated that a consent order would be needed in order to embody the compromise, just as the earlier settlement agreement had been embodied in a formal signed contract. All that had happened here was that correspondence had been exchanged, and even though there had been an agreement in principal, this was not enough to be enforceable.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its’ accuracy, and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should always be sought.

Is a gift always a gift, or does it come with consequences?

When someone dies, a person's property and possessions, otherwise known as their estate, may become subject to inheritance tax (IHT). This is the tax payable on a deceased's estate where the value of that estate exceeds a certain threshold (currently referred to as the ‘nil rate band’) set by the government annually.  The current nil rate band is £325,000 and it is the value over this amount that is taxed at a flat rate of 40% unless there are any other reliefs that can be taken into account. 

By making lifetime gifts to loved ones, it may be possible to reduce the amount of inheritance tax payable on death, in this way maximising how much you can pass on to your friends and family after you die. However, to be effective, where there are no inheritance tax consequences arising from making a gift, it must meet certain strict criteria. 

In broad terms, gifts fall into three categories: exempt transfers, potentially exempt transfers (or PETs), and chargeable lifetime transfers (or CLTs).

 An exempt transfer is a gift that can be made at any time during your lifetime, whose value will be entirely ignored for the purposes of inheritance tax, even if you die shortly after making it. For example, this could include the £3,000 annual exemption that can be gifted to loved ones without this being added to the value of your estate. There are also various other low value exempt gifts that you can make without attracting any IHT. 

In contrast, potentially exempt transfers are gifts that will only become fully exempt from inheritance tax if you survive the date you made the gift by a period of 7 years. This is known as the 7-year rule.

If you die within the 7 year period, the value of the gift is effectively added back into the value of your estate.   If the gift itself is taxable because it exceeds your nil rate band, then taper relief can apply depending on how many years you have survived it.  If it is less than 3 years, however, the full value of the gift will be subject to inheritance tax at the flat rate of 40%. 

 For those gifts falling within the chargeable lifetime transfer category, these may attract an immediate tax charge, with an additional charge should you then die within 7 years of the gift being made.  A gift made into a discretionary trust would be treated as a chargeable transfer and can have a knock-on effect to past or future lifetime gifts if the value exceeds your nil rate band.  However, these trusts can still prove to be useful tools as part of your overall tax planning, especially where there are minor beneficiaries.

The rules relating to gifts and the inheritance tax consequences that can flow from this can be complex.If, for example, you sold your house to an adult child for less than it is worth, the difference in value will count as a gift and would be subject to the capital gains tax regime in your lifetime with a potential for inheritance tax to apply to the gift element of the transaction if you failed to survive 7 years.  

There are also a number of other potential tax traps, or financial catches, that can arise when making a gift during your lifetime, including the following:

• reservation of benefit: where you gift an asset but continue to derive a benefit from it, like giving away your house but continuing to live there, you may be treated as still owning it for inheritance tax purposes, even if the gift was made more than 7 years before your death;

• deprivation of assets: where you gift an asset but subsequently require nursing care, you may be treated as still owning that asset for the purpose of the financial assessment undertaken by the local authority to determine your contribution to the cost of your care;

• capital gains tax liability: where you gift certain assets, such as shares or a second home, this may be treated as a disposal for capital gains tax purposes, where you may be liable to an immediate charge to tax if the asset's value has increased since it was acquired. 

It is important to always seek specialist legal advice when gifting money or giving away assets during your lifetime for the purposes of avoiding inheritance tax after you die. This can require careful estate planning and expert knowledge of the law.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

 Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its’ accuracy, and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should always be sought.

Can you still move home during Lockdown 3?

• You can still move home. People outside your household or support bubble should not help with moving house unless absolutely necessary.

• Estate and letting agents and removals firms can continue to work. If you are looking to move, you can go to property viewings.

• Follow the national guidance on moving home safely, which includes advice on social distancing, letting fresh air in, and wearing a face covering.

For a fixed fee conveyancing quote please call 01524 386 500.

The ‘Do Not Resuscitate’ decision - who makes this?

With the recent pandemic, and the significant media coverage relating to coronavirus deaths, many of us have become more concerned about our future care, and that of our loved ones, especially if a difficult decision had to be made as to whether or not to resuscitate.

Understanding how the law works in relation to a ‘Do Not Resuscitate’ decision can help to provide us with some much needed peace of mind, and even allow us to make suitable provision in advance to ensure that, if the time came, our dying wishes would be honoured.

What is a ‘Do Not Resuscitate’ order?

A ‘Do Not Resuscitate’ order is an order not to attempt cardiopulmonary resuscitation, more commonly known as CPR. This is an emergency life-saving procedure, typically combining rescue breaths, chest compressions and even electric shocks, that can be carried out when someone has ceased breathing and their heart has stopped beating.

However, when someone’s breathing and heart stops because they are dying from an advanced and irreversible condition, vigorous physical intervention by way of CPR can actually deprive them and those close to them of a dignified death. For some patients this may prolong the process of dying and, in doing so, prolong or increase their suffering.  

As such, a ‘Do Not Attempt CPR’ (DNACPR) decision can be made and recorded in advance, to guide those present if a person subsequently suffers a cardiac arrest. 

Who makes a ‘Do Not Resuscitate' decision?

While you still have mental capacity as a patient, you can accept or refuse life-sustaining treatment in a number of different scenarios. For example, you might decide that you don’t want to be given antibiotics for a life-threatening infection if you’re suffering from terminal cancer.

It’s only when a patient loses mental capacity that decisions relating to medical treatment become more difficult. This means that if you lose the ability to make your own decisions, for example, you are unconscious or otherwise too poorly to participate in any discussion, unless you have clearly set out your wishes in advance, the decision as to whether or not to resuscitate will need to be made by the leading physician in charge of your care. 

In these circumstances, although advice will usually be sought from your next of kin as to what’s in your best interests, the final decision will ultimately lie with the healthcare professionals.

Can a ‘Do Not Resuscitate’ decision be made by family?

Your family cannot refuse life-sustaining treatment on your behalf, not unless you have specifically granted them this power by way of a Lasting Power of Attorney (LPA).

An LPA allows you to appoint an attorney, providing them with the power to make decisions about your health and welfare should you lose the capacity to make these decisions for yourself. It is up to you who you appoint, for example, a relative or close family friend. You can also appoint more than one person, where decisions about your daily care routine can be decided by one attorney, and the bigger decisions about life-sustaining treatment made jointly.

You can record your wishes while you are mentally well, so that any attorney acting on your behalf has some guidance on what decisions you would like to be made. You can also make an ‘Advance Decision to Refuse Treatment’ (ADRT), or a Living Will, in clearly defined circumstances. This will let your family, carers and health professionals know your wishes about refusing treatment if you're unable to make or communicate those decisions yourself.

This will be a legally binding decision that cannot usually be overridden by either your family or your physician.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.

Can intellectual property be included in my will?

Intellectual Property is a commercial asset that can form a valuable part of your estate after you die, especially if you’re an artist, musician or author, or even say, a software developer or business owner. In the absence of other more tangible forms of property, this could represent a significant proportion of the overall assets that you leave your loved ones. 

Below we look briefly at some of the key considerations for intellectual property owners when bequeathing the rights to their intellectual creations, including who you’d like to benefit and how you’d like any intellectual property to be dealt with after your death.

What is intellectual property?

Intellectual property refers to something that has been uniquely created, such as things written, created or produced; the design or look of anything that has been produced; or even the name of a brand or product. This can include inventions, innovative designs, works of art, a piece of music or writing, computer programs, or even symbols or images used in marketing. 

Intellectual property law grants the creator or owner exclusive rights over their intellectual asset(s) for a fixed period of time, where in some cases this protection can span several decades.

Throughout this period of exclusivity, intellectual property rights can be bought, sold, licensed, mortgaged or otherwise assigned. This means that your creation will have an intrinsic value in itself, in addition to any income generated from allowing others to exploit the rights relating to it, for example, through license agreements to use a software program or royalties to play a song on the radio. 

How to bequeath intellectual property?

When bequeathing intellectual property in your Will, you need to consider not only the value of any creation, but also the nature of any legal rights relating to it. These could include, for example, patents, copyright, design rights and trademarks.

Whilst a creation itself may be successful, it is often these additional layers that are most valuable, especially where these rights give rise to a potential valuable source of income for the subsequent owner(s) in years to come. This means that due consideration must be given to how these rights will be distributed amongst any beneficiaries.

By way of example, copyright is a collection of rights automatically afforded in relation to various artistic creations, including music, books, films and paintings. Here, the law affords protection over the creation for the lifetime of the maker, plus an additional 70 years from the end of the year in which they died.  

This means that the right to benefit from copyright can be bequeathed in your Will. This could be left to one person specifically, or divided between multiple people in separate shares. If you have multiple works, and therefore copyright within multiple sources, these could again be left to either one person or divided between several different individuals.

You could also consider a trust arrangement for ring-fencing any intellectual property rights. By using a trust mechanism, you can assign appointed trustees with the task of utilising these rights for the benefit of chosen beneficiaries, whilst continuing to exercise some control over your creative legacy even after you die.

Ensuring that your loved ones benefit from any intellectual property in the way that you would want can all be achieved with the right legal advice and a well-drafted Will.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.

Firm Donates To St John's Hospice

BSG Solicitors has donated £200 to St John’s Hospice for their Cuddle Bed Appeal.

Director Rebecca Lauder commented:

“We saw the Cuddle Bed appeal on social media and really wanted to help.  I think whether you are a person who likes to hug or not, the last year has made us all realise how important physical contact is and just how much better a cuddle can make you feel. 

St John’s Hospice do such wonderful work and a lot of my clients say they couldn’t have got through such difficult times without them. Like all charities, their charitable donations have been impacted significantly and we need to do all we can to support these vital services.”

Pictured above L-R Natalie Santamera from St John’s Hospice and Rebecca Lauder.

Protecting your life assurance policy for your loved ones

A life assurance policy will often form an essential part of estate planning, where policy proceeds can be used to provide the necessary funds to see your loved ones through the estate administration process, until other money and assets can be released. It may also be sufficient to set them up financially for their future or, at the very least, maintain or improve their standard of living.

That said, where a life assurance policy has not been written into a trust prior to death, this will automatically be treated as part of your legal estate after you die. This means that the policy proceeds will not usually be made available until a grant of probate has been obtained, causing unnecessary delay in gaining access to these funds.

It also means that where the value of your estate exceeds the relevant threshold, the policy will be subject to inheritance tax in the same way as any other estate asset.

What estate planning steps should I take to protect my policy?

By using a trust mechanism for your life assurance policy, this will help to avoid going over the inheritance tax threshold and will allow your loved ones to bypass probate, at least in respect of this particular asset. Probate is the legal process of granting your personal representatives the authority to deal with your possessions. 

A trust essentially allows you to set aside an asset, in this case the proceeds of your policy, to benefit a specified person or people. These are known as the beneficiaries. By putting a policy into a trust you can control what happens to the payout from a policy in the event of your death, in some cases providing an immediate tax-free lump sum for your beneficiaries, depending on the type of trust used.

What types of trust can be used to protect my policy?

An absolute trust is ideal for where you would like to name a specific beneficiary or beneficiaries, such as your spouse and/or any children. This type of trust will give each named beneficiary an absolute entitlement to a fixed share of the proceeds on the death of the policyholder, in this way ensuring that the trust fund is paid directly to your loved ones rather than to your legal estate. This means that the money can be released without the grant of probate and will not usually be taken into account for inheritance tax purposes.

In other cases, especially where your children are under 18, you may prefer the flexibility of a discretionary trust. This will again allow you to name a number of beneficiaries, although none of them will have an absolute entitlement. Under a discretionary trust your trustees have a high level of discretion about which beneficiaries to pay and when, although you can provide them with a letter of wishes outlining your intentions as to how the trust should be administered.

The discretionary trust can be useful in the case of parents or grandparents who wish to benefit future generations, depending on the stage that each potential beneficiary has reached in their life when the policyholder passes away.

What advice should I seek when protecting my policy?

If you are considering putting a life assurance policy into trust, you must always seek advice from an independent legal advisor, as the practical aspects and advantages will vary depending on the type of policy and your situation.

It is also worth noting that in some cases there may be tax implications when putting a policy into trust, especially when using a discretionary trust mechanism, so it’s important to secure expert advice tailored to your particular circumstances.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.

How and When to Remove a Personal Representative

When a loved one dies, you may not necessarily be appointed to administer their estate. The job of distributing the deceased’s wealth and worldly belongings may be left to another relative or close family friend, a solicitor or other independent professional, or even a combination of some or all of these people.

That said, as a beneficiary of the estate, this does not leave you entirely powerless, especially where the deceased’s Personal Representatives are not handling matters as you would expect. It may even be the case that you’ve been appointed as one of the people to handle the deceased’s estate, but you’re not happy with the way in which another representative is behaving. 

Below we look at the rules relating to Personal Representatives, including the grounds for removing and substituting an Executor or Administrator, and how to go about doing this.

What are the grounds for removing a Personal Representative?

A Personal Representative is someone who has the legal authority to administer a person’s estate after they have died. In England and Wales there are two types of Personal Representative: an Executor and an Administrator. An Executor is a Personal Representative named in the deceased’s Last Will and Testament, appointed during the testator’s lifetime to undertake the job of administering and distributing their estate after they die, whereas an Administrator is someone who acts when there is no valid Will in place and is often the deceased’s next of kin.

In either case, however, those appointed to handle the deceased’s estate will not always act, or be capable of acting, in the best interests of the beneficiaries. As such, if you believe that the estate is not being properly administered, this may necessitate an application to the courts to have the Personal Representative removed and, where necessary, substituted.

Grounds for removal can be varied, but commonly relate to issues of either conduct or capability. These could include, for example, where there is evidence of:

• A potential conflict of interests between the interests of the Personal Representative and their obligations to the deceased’s estate

• A lack of honesty or fidelity on the part of a Personal Representative

• A delay in the Personal Representative acting, or otherwise causing undue delay in administering the deceased’s estate

• A Personal Representative endangering estate property in some way, for example, through poor or incompetent financial decision-making.

The existence of poor relations between the Personal Representatives, or between the representatives and the beneficiaries, can also support a case for removal, but only where there is clear evidence that the degree of animosity or distrust is likely to adversely affect the proper administration of the estate and the welfare of the beneficiaries. It is important to note that while friction or hostility between the parties is a relevant consideration, it is not of itself, a reason for the removal of a Personal Representative.

How can you apply to have a Personal Representative removed?

In circumstances where you believe that the deceased’s estate is not being properly or competently administered, and agreement cannot be otherwise reached, then an application can be made to the High Court to remove or substitute one or more of the Personal Representatives pursuant to section 50 of the Administration of Justice Act 1985. An application can be made under section 50 by either an existing Personal Representative of the deceased or a beneficiary of the estate.

Where it can be proven that a Personal Representative has failed to administer and distribute the estate correctly, the court may exercise its discretion to remove them. However, given the wide discretion conferred on the court in these cases, there are a number of additional factors that may be taken into account including, for example, whether the Personal Representative was appointed by the Testator, as well as the likelihood of increased administration costs.

There must be clear and compelling reasons to remove a Personal Representative. This means that the court must be satisfied that these factors would adversely affect the administration of the estate and the welfare of the beneficiaries. The court must also be satisfied that any additional factors do not weigh more heavily in the balance, especially if the cost of any replacement representative is likely to be disproportionate to the problem complained about.

Needless to say, seeking to amicably resolve any issues relating to the conduct or capability of a deceased’s Personal Representative will often represent a more cost effective and quicker solution than seeking recourse through the courts. Before making an application to remove a Personal Representative, it is always best to first seek expert legal advice.

Our private client team can be contacted on 01524 386500 or email enquiries@bsglaw.co.uk

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.