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Thy will be done

We are a married couple with two young children. We have net assets worth

about £350,000. These comprise our house, worth about £150,000,

with the balance in investments that are divided between us roughly

equally. We have no wills and are concerned that our children should be

properly catered for in the event of our deaths. What issues do we need to


As you have no wills, your individually-owned assets would be distributed

in accordance with the Intestates Estates Act 1952. If they were less than

£125,000, they would be transferred to the surviving partner and form

part of their estate. If they were more than this, the surviving spouse

would take the personal chattels plus a statutory legacy of £125,000

with interest up to the date of payment.

The residue would be held 50 per cent in trust for the benefit of the

surviving spouse for life (and thereafter in statutory trust for the

children) and 50 per cent immediately in statutory trust for the children.

A statutory trust in respect of the surviving spouse effectively gives

them the right to the income for life but not the capital. It gives adult

children an immediate entitlement to the capital.

Statutory trusts are extremely inflexible in terms of their capacity to

make capital and income payments for the children. In the absence of

individuals appointed to look after the funds, the Court of Protection will

be given responsibility. This can take a very long time to agree to


As you have minor children, in the event of your deaths, guardians need to

be appointed. In the absence of wills, they will be appointed by a court

and might not be the individuals that you would have chosen. In order to

remedy these deficiencies, it would be appropriate for you both to arrange


Given the size of your estate, your wills do not need to make any specific

provision for inheritance tax although this should be kept under review.

You should, however, appoint guardians for your children and trustees to

administer any funds on their behalf until they attain an age when you

would be happy for them to receive the capital. The trust under which the

children&#39s inheritance would be administered should have flexible

provisions as to the distribution of capital and income. It should also

have wide powers of investment.

If one of you is incapacitated, you may become unable to administer your

affairs. If this occurs, they would come under the control of the Court of

Protection. To avoid this, it would be appropriate to arrange enduring

powers of attorney. This type of power of attorney will continue to be

effective in the event that the person who has granted it becomes mentally

or physically incapacitated. If this occurs, it will be necessary for a

court to ratify it. Attorneys effectively stand in the place of the person

for whom they are acting.

The powers of attorney should be drafted to enable the spouse who is not

incapacitated to be the attorney for the other. It would probably be

prudent to include additional attorneys to ensure your affairs can still be

administered if both of you become incapacitated.

It would be appropriate for any life insurance and pension policies to be

placed into trust to provide for the children to be the initial

beneficiaries with an entitlement to any income that may arise. The

surviving spouse should be one of a number of individuals to whom the

trustees would have the power to make distributions of income or capital at

their discretion. This will ensure the capital does not form part of the

surviving spouse&#39s estate, while ensuring that funds can be made available

to them.

The benefit of this type of arrangement is that it willensure the policy

proceedsare paid swiftly to their intended beneficiaries without the delays

associated with obtaining grant of probate. In addition, they will pass

outside the estate of the surviving spouse and avoid inflating this for

inheritance tax purposes.

Various types of trust exist with different tax implications. The

trustees&#39 powers can be strictly drafted or they can be given a substantial

degree of discretion. It is normal for trusts to be governed by a trust

deed created by an individual during their lifetime or by a will.

There is a substantial body of statute and case law regarding trusts. This

is normally overridden by the provisions of a trust deed or will.

Conversely, where the trust document fails to indicate the powers of

trustees in a given set of circumstances, the provisions of the relevant

Act of Parliament or case law will prevail. It is most important that the

will or trust is widely drafted and that it is reviewed periodically.


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