Better LPA Forms
The Office of the Public Guardian has responded to criticisms of its overly complex forms for creating a Lasting Power of Attorney (LPA) by issuing new and simplified forms.
An LPA allows a person to give a friend, relative or trusted advisor the power to make decisions about their property or personal affairs if they become unable to do so for themselves – for example as a result of a brain injury or mental disorder.
If you wish to be confident that in the event that you are unable to manage your own affairs they will be dealt with as you would want them to be, we would be pleased to advise you on the pros and cons of creating an LPA.
Partner Note
Carer Excluded from Will
A carer, who was the sole beneficiary of a woman’s will, failed recently to persuade the court that a new will should not be created on the woman’s behalf.
The case arose when the deputy of the woman, who was agreed to lack mental capacity, requested the court to write a statutory will for her. A statutory will is a will created by the court for persons who lack the mental capacity to make one themselves.
The woman, a childless widow, was placed in a care home in 2008, having written a will in 2004 leaving her entire estate to her carer. This replaced an earlier will in which the bulk of her estate was divided between nine charities.
At the same time, she executed an Enduring Power of Attorney (EPA) in favour of her carer, with the result that more than £170,000 was paid to him over time. He failed to provide a proper accounting of these payments.
The local council objected to the carer’s authority under the EPA as it believed him to be an unsuitable person to fulfil the role. Proceedings ensued with the result that the Official Solicitor was appointed as interim ‘property and affairs deputy’ to look after the woman’s affairs, the judge concluding that the carer was ‘someone in whom the court cannot …have that trust and confidence which in this kind of situation the court must have if such a person is to be in a caring relationship with the patient’.
Vulnerable elderly people sometimes need protection from those who abuse their position of trust and seek to use their influence over them for personal gain. If you are worried about circumstances similar to these, contact us for advice.
Partner Note
In the Matter of the Mental Capacity Act 2005 and in the Matter of M
ITW – and –
(1) Z
(2) M (by her litigation friend the Official Solicitor to the Senior Courts of England and Wales)
(3)-(9) VARIOUS CHARITIES – [2009] EWHC 2525 (Fam).
ITW – and –
(1) Z
(2) M (by her litigation friend the Official Solicitor to the Senior Courts of England and Wales)
(3)-(9) VARIOUS CHARITIES – [2009] EWHC 2525 (Fam).
Charity Fails to Win Farm in Court – But Seeks Appeal
After a bruising legal battle, which has cost more than £1.3 million in fees, a Yorkshire doctor has won the right to inherit her late parents’ farm, which is valued at £2.3 million.
In 1993, Dr Christine Gill’s parents made wills which left their estates to each other and, on the second death, passed the estate in its entirety to the Royal Society for the Prevention of Cruelty to Animals (RSPCA). It was Dr Gill’s contention that her mother, who was predeceased by her father, was forced by him to write a will ‘mirroring’ his own.
Dr Gill had helped to manage the family farm for many years and had been assured repeatedly that it would pass to her when her parents died.
In the High Court, it was ruled that Dr Gill had a legitimate expectation to inherit the farm. The RSPCA has sought leave to appeal against the decision and is requesting the Court to order Dr Gill to pay £400,000 towards its costs, arguing that it had previously offered to settle the dispute in exchange for a payment of £650,000 by Dr Gill. Dr Gill’s costs are said to exceed £900,000.
The charity’s legal advisers claimed that it was ‘legally obliged’ to fight the case, a claim that was ridiculed by Dr Gill’s lawyers.
Says <<CONTACT DETAILS>>, “With economic times being hard, charities are taking an increasingly tough stance when legacies to them are disputed. It is often thought that charities – presumably because they do good works – will be easygoing in cases such as this. This is often very far from the truth. If you wish to leave a legacy to a charity when you die, we can help you make sure that this is done in a way which will minimise the chance of a successful challenge. If you think you have been unfairly excluded from a will, contact us for advice on your situation.”
Partner Note
Reported widely. See, for example, http://business.timesonline.co.uk/tol/business/law/article6868765.ece.
Court Finds Solution to Funding in Disputed Will Case
When a will is in dispute, one of the concerns of those seeking to overturn it is that the beneficiaries under the disputed will may dissipate the estate assets before the matter can be resolved.
In such circumstances, those disputing the will can ask the court to freeze the assets of the estate until the matter is resolved. This can also cause problems, however, as a recent case shows.
The family of a deceased person disputed his will. The will was made shortly before the man’s death and provided that all of his estate (which was considerable) should be left to his civil partner. An earlier will had been created, the terms of which were very different. The deceased’s family applied to the court to have the earlier will accepted as the final will, alleging that the later will was a forgery.
The surviving civil partner had been granted probate of the will and began to withdraw sums from the estate and also bought a number of expensive cars. The deceased’s family, fearing the assets would be dissipated, sought a freezing injunction to prevent further reductions in the value of the estate. This was granted by the court. The family also sought an explanation for the substantial withdrawals that had been made.
Once the freezing order took effect, the deceased’s civil partner had no other assets and thus no means of funding a legal defence against the allegations, so applied to the court for the freezing order to be lifted to allow him to defend the action and to withdraw living expenses. He failed to provide the explanations sought for his expenditure.
The court agreed that he should not be prevented from being able to mount a proper defence through lack of funds. Procedurally, this would be difficult, but the problem was solved by the somewhat unusual method of the claimants lending him the money to cover his legal bills on the condition that he sold the expensive cars.
The court took account of the man’s lack of cooperation in explaining his expenditure, however, and denied his claim for withdrawals to be made to cover his living expenses.
Partner Note
Re Ikin deceased sub nom Court and others v Despalliers, Ch. 6 October 2009 (see Solicitors Journal, 13 October 2009, p 30).
Disclose and All Will Be Well – Or Will It?
Although HM Revenue and Customs (HMRC) recently extended (until 4 January 2010) the ‘disclosure window’ to allow previously undeclared foreign income to be declared, clients seeking to use the festive season to make a disclosure might like to consider the following, which apply to disclosures made under the disclosure window:
- In order to qualify for the reduced penalty of 10 per cent which is on offer for those making disclosures,HMRC must ‘accept’ the disclosure. This seems to mean that they can treat a disclosure as not being one which qualifies for beneficial treatment if they believe that the original tax return was materially incorrect or incomplete;
- The 10 per cent penalty will not be available where the taxpayer was written to by HMRC with regard to their previous offshore income disclosure ‘amnesty’ in 2007;
- A taxpayer wishing to rely on the disclosure facility must disclose all undeclared tax liabilities over the last 20 years; and
- The offer is limited to undisclosed tax liabilities only – it will not apply with regard to other offences (e.g. regulatory infractions), disclosure of which may result in information being passed to other governmental bodies for enforcement action to be taken.
For more details, see https://ndo.hmrc.gov.uk/ndo/index.jsp.
European Inheritance Law Overhaul Proposed
Owners of properties and other assets abroad will be relieved to hear that the European Union (EU) has brought forward proposals to simplify the administration of estates with a ‘cross-border’ dimension. The EU estimates that there are some 450,000 of these, but with more than 400,000 people in the UK alone said to have foreign property interests, and one in seven marriages in the UK being contracted with someone born abroad, this must surely be an underestimate.
The proposals stipulate that in cross-border cases, the inheritance laws of the state in which the deceased last habitually resided will apply in determining the division of the estate assets, unless the will of the deceased contains an election that the inheritance law of their native country should apply.
The inheritance law in several EU countries is very different from that in the UK and, in particular, many countries require that estates are divided in a certain way. This gives much less flexibility than is available under UK law.
If you own property abroad, it is very important that the inheritance law and tax implications are considered fully and appropriate arrangements made. We can advise you on these issues.
Partner Note
EU announcement, 14 October 2009. See the Solicitors Journal, 27 October 2009 pp 31-2.
Furnished Holiday Lettings – Time is Running Out
Owners of properties used for furnished holiday lettings (FHLs) are reminded that the tax regime relating to these is set to change significantly (for the worse) next April. Under the current tax regime, such businesses have advantages for both Income Tax (IT) and Capital Gains Tax (CGT) which will be removed from 6 April 2010.
As regards CGT, entrepreneur’s relief and roll-over relief will no longer be available. Tax losses made for IT purposes will not be able to be set against income from other sources and income from FHLs will not qualify as ‘relevant income’ for the payment of pension contributions.
There are other changes regarding how profits from such businesses are calculated for tax purposes.
Owners of properties let as holiday lettings should take advice now to ensure they understand the implications of the changes and are prepared for them. Forward planning may well be a very good investment. Contact <<CONTACT DETAILS>> for advice.
Partner Note
There is a good summary of the position at http://www.holidaylettings.co.uk/
HMRC Can See Accountants’ Tax Advice to Client
HM Revenue and Customs (HMRC) recently won a significant victory in a tax case when the court ruled that tax advice given by an accounting firm to its client is not privileged. In other words, HMRC can force accountants to divulge advice given to their clients on tax law matters.
The case involved insurance giant Prudential, but the ruling will be applicable to taxpayers large and small who engage accounting firms for tax advice.
The Special Commissioners ruled that where correspondence with accountants would add to the relevant facts determining tax liability, the issue of a notice requiring disclosure of tax planning advice was valid, and that legal professional privilege did not apply.
Says <<CONTACT DETAILS>>, “Correspondence between solicitors and their clients in which legal advice is given is subject to privilege and will not be disclosed to HMRC.”
Partner Note
R (on the application of Prudential Plc & Another) v Special Commissioner of Income Tax & Another [2009] EWHC 2494 (Admin), 14 October 2009.
Identity Fraud – Americans Be Warned
A new and very convincing attempt at identity fraud is doing the rounds by email.
Aimed at US citizens living abroad, it purports to be from the US Internal Revenue Service (IRS). It requires non-domiciled or non-resident US citizens to complete the form (which is designed in the same style as the usual IRS forms) in order to renew their US non-resident tax status.
The form demands sufficient information (Social Security Number, bank details etc.) for the fraudsters to perpetrate an identity fraud and access funds from the disclosed bank account.
Do not be conned! The appropriate forms for claiming the non-resident deduction (US citizens pay tax on a world income basis, with a non-residence test based mainly on physical presence), which is currently $87,600, are form 2555 or form 2555EZ. These are sent with the package for completing form 1040 (the individual tax return). This package is sent annually to all registered US citizens living abroad. Normally, US citizens MUST file a tax return annually unless their income is less than a minimum amount (currently about $9,000 for a single person).
Identity fraud is a growing problem and businesses have recently been criticised for not doing enough to prevent it. The organisers of National Identity Fraud Prevention Week have published a guide to help combat identity fraud. This is available at http://www.stop-idfraud.co.uk/resource-centre.aspx.
Partner Note
The guide published by the organisers of National Identity Fraud Prevention Week can be found at http://www.stop-idfraud.co.uk/resource-centre.aspx.
Identity Fraud – Americans Be Warned
A new and very convincing attempt at identity fraud is doing the rounds by email.
Aimed at US citizens living abroad, it purports to be from the US Internal Revenue Service (IRS). It requires non-domiciled or non-resident US citizens to complete the form (which is designed in the same style as the usual IRS forms) in order to renew their US non-resident tax status.
The form demands sufficient information (Social Security Number, bank details etc.) for the fraudsters to perpetrate an identity fraud and access funds from the disclosed bank account.
Do not be conned! The appropriate forms for claiming the non-resident deduction (US citizens pay tax on a world income basis, with a non-residence test based mainly on physical presence), which is currently $87,600, are form 2555 or form 2555EZ. These are sent with the package for completing form 1040 (the individual tax return). This package is sent annually to all registered US citizens living abroad. Normally, US citizens MUST file a tax return annually unless their income is less than a minimum amount (currently about $9,000 for a single person).
Identity fraud is a growing problem and businesses have recently been criticised for not doing enough to prevent it. The organisers of National Identity Fraud Prevention Week have published a guide to help combat identity fraud. This is available at http://www.stop-idfraud.co.uk/resource-centre.aspx.
Partner Note
The guide published by the organisers of National Identity Fraud Prevention Week can be found at http://www.stop-idfraud.co.uk/resource-centre.aspx.