Can your clients’ beneficiaries wait 19 weeks?
According to the Council for Licenced Conveyancers, more than 50% of practitioners are waiting more than 19 weeks for an estate to receive a grant of probate. This means that beneficiaries may be unable to access the funds left to them from the estate for a considerable period. The sale of a house may be jeopardised and shares will not be able to be liquidised until after probate is granted, even if such a delay would result in a significant loss of value. But most difficult could be an inability to access funds in a bank account. This could even affect a spouse where the partners maintained separate accounts: without access to funds independent of the deceased’s account, there could be an inability to pay the council tax instalments, the mortgage or the electricity bill until probate comes through. Final demand letters are the last thing that any bereaved person needs, adding stress and anxiety at an already difficult time.
A solution might be a lifetime discretionary trust which could provide funds for all expenses to be paid during the probate period and, if lifetime planning is done early enough, could take assets out of the chargeable estate to reduce overall tax liability.
Additionally, where beneficiaries have special needs, delays on the part of the probate office can cause difficulties around continuity of care. Where vulnerable beneficiaries rely on the testator for financial assistance, perhaps to pay for a private carer or as a top-up to benefits, a 19 week delay could significantly jeopardise the ability to pay for this ongoing support. Setting up an inter vivos trust as part of an estate plan could protect vulnerable beneficiaries if funds are frozen during a lengthy probate period. In addition, such a trust has the added advantage of being able to provide funds for the benefit of a vulnerable person during the lifetime of the donor without affecting any means tested benefits of the beneficiary. Such funds could still be available if the donor were to go into a care home and required to pay fees themselves, as well as after the death of the testator. Additionally income from the trust can be taxed at the beneficiary’s tax rate rather than the trust tax rate, and if lower than the tax rate of the donor, this can be a significant benefit.
Amounts gifted into a discretionary trust up to the available nil rate band will not attract IHT and this essentially resets every seven years meaning, if started early enough and provided the testator has sufficient income or unrequired assets to make the gifts, significant wealth can be put into trust during the lifetime of the testator which would never form part of their taxable estate and therefore would be unaffected by probate delays. Any amount can be transferred into a qualifying trust for a vulnerable person, and so long as the donor survives the gift by seven years, the transfer will not attract inheritance tax.
Lifetime trusts can be quickly and easily set up in our trust drafting software Arken Lifetime, pulling in data that you have already inputted for your client when creating other documents in Arken for maximum efficiency. Find out more here.