Why use aLegal Estate Planning Specialist?

June 2009 - NEWSLETTER Welcome to this month's edition of WLEP news. Financial Planning plus Estate Planning gives your client peace of mind. Many sensible and prudent people use an Independent Financial Advisor such as you to help them improve or guard their financial security. During the discussion and Fact Find the client will be asked about any Will that may be in place. This is to assess its' usefulness in relation to the advice and plans to be utilised. If he does not have an up-to-date Will, or one that does the right job, much of your careful lifetime financial planning stands to be undermined when the client or spouse dies. It may be a question of paying too much Inheritance Tax, which sometimes forces a sale of a house passed on in the Will. It may relate to some of the estate not going to the people the client wants it to go to. There are many possibilities. A wise Financial Advisor will ensure the client is put in touch with an experienced professional in whom he can have complete confidence to ensure that the right Will is put in place to suit individual circumstances. It is the final leg of the journey to 'peace of mind'. Why is legal estate planning so important, and how does it affect me, the advisor? Indeed, what is it? It is the protection of the client, his assets and his family's inheritance and wellbeing against the many assaults that he and his family may encounter as he goes through life. You may have heard the term "Estate Planning" but you could be forgiven for not really knowing what it means. The basic premise is that it is to make sure your family is taken care of if something happens to you. For many people this can mean financial planning, lifetime gifts, drafting a Will and setting up Lasting Powers of Attorney. For some, perhaps those of more modest means, it may simply mean writing a Will to distribute their estate, e.g. leaving everything to their surviving spouse or partner and then on to their children. For those with more substantial wealth the avoidance of Capital Gains Tax, Care Home Fees, or Inheritance Tax may become important issues. This can be achieved in a number of ways e.g. 'jumping a generation' by making legacies to grandchildren. Lifetime Trusts we have featured in previous issues. These can be essential tools when looking to shelter property, pensions or long term investments and ensure those assets are available to those left behind. Growth can be drawn down before that situation occurs. A Lasting Power of Attorney (LPA) allows an individual at risk of loss of capacity to appoint persons that he or she trusts completely to make decisions about health care and/or finances on their behalf if they lose physical or mental capacity and can't make these decisions for themselves. Not to be confused with the Enduring Power of Attorney (EPA), an LPA is a much more technical instrument and requires professional advice to be acceptable to the Office of the Public Guardian (OPG). This should be done early - not later. If You Die Will it Kill Your Business? Running a business involves the use of your skills, your judgement and planning, so that you can achieve your business goals. When thinking of your Will and how to deal with your business interests think about these questions: • What would happen to my business if I died tomorrow? • Who would then make decisions about the business? • Would the business need to be sold? • Can I leave my business to someone through my Will? Your circumstances coupled with the business structure will largely dictate the answers to these questions. Sole Traders As a sole trader you are often the key person of the business with knowledge, skills and experience that cannot be replaced. Without you does the business has a value in terms of physical assets and goodwill that would allow the business to be sold as a going concern. If not the only realistic option may be for that the business is wound up and any monies realised as part of the estate. Other possibilities might be to 'bring on' an employee to purchase the business on such suitable terms that suit each party. Your Will can be drafted to achieve your wishes and if necessary by giving special powers to Trustees to accomplish your wishes. Remember to check leases and contracts within the business in particular the 'in the event of your death' provisions. There may be penalties and restrictions on the rights to assign. Partnerships A Partnership position cannot be passed on in a Will. However, you can leave the financial interest you have in the Partnership. Without a Partnership Agreement (PA) the death of a partner dissolves the Partnership and the firm is then wound up with the applicable proportion of the capital and income passing to your estate. Consider the possibility that at the time of death there may actually be more liabilities than capital which would leave the estate potentially liable for any debts under the doctrine of joint and several liability. So if death occurs at a time when liabilities exceed the capital in the firm there may nothing to leave and outstanding debts would be payable from your estate as the liability is against the individual Partners and not the no longer existing Firm. Best advice is to have good insurance cover to pay off the financial interest on the death of a Partner. AND to have a formal Partnership Agreement which spells out, amongst other things, the procedures in these circumstances. Best practice is for each partner to have a Will and a Partnership Agreement so that you can ensure that your family and surviving business Partners benefit from a considered and planned settlement of your business affairs. Just as important is that a surviving Partner will enjoy the protection afforded through your foresight and planning. A Shareholder in a Limited Company A Limited Liability Company has a separate identity distinct from the shareholders who own it. The Articles of Association of the Company set out the rights of Shareholders including the rights a shareholder has to dispose of his shares. Quite often there is a requirement to give other shareholders an option to purchase upon the death of a shareholder. There may be an option to leave shares to specified family members e.g. Spouse and children. By ensuring the Articles of Association are suitably drafted you can achieve the desired succession arrangements in your Will. The importance of the distribution of the shares after death is clearly more important if it involves a major shareholding. In conclusion, if your business is capable of continuing you need to ensure that the necessary permissions and restrictions are dealt within advance and that you have well drafted Will. Otherwise it may well not survive after your death and serve to an extra layer of problems to what would surely be a difficult enough time for your loved ones. If any of these business issues affect your clients, you should be speaking to a legal estate planning practitioner Have a good month. Regards Martin Wollaston Legal Estate Planning Specialist