The Essential Legal Documents for Your 2020 To Do List
The start of the New Year is always a time to reflect on the past and look forward, and with 2020 also signalling the dawn of a new decade, this January is perhaps a more significant time to lay out your future plans than other years.
Whether the last decade dealt you a good hand or whether you’re hoping that the 2020’s will be kinder to you, along with considering your grand life plans, there are a number of legal documents that you might also like to think about.
Here, we take a look at the essentials…
The majority of UK residents have an understanding of the benefits of having a will, yet it is still always surprising to read the statistics of how many people choose to forgo putting this fairly rudimentary document in place. Current estimates are that around 54% of UK adults do not have a will – with the most common reason cited for not having one being ‘not getting around to it’.
There are a number of common triggers that increase the need for having a will drafted. These including becoming a homeowner, becoming a parent, getting married/entering into a civil partnership, getting divorced/civil partnership dissolution, or experiencing any other significant relationship or financial change.
Without a valid will, it will be left to the rules of intestacy as to how your property and financial assets are allocated. For those with complex family structures or the growing number of cohabiting couples, the rules of intestacy are unlikely to mean your estate would be divided as you would wish.
Lasting Powers of Attorney
A Lasting Power of Attorney can relate to your financial affairs or your health and wellbeing, or both, and put the provision in place that elects who you want to make decisions on your behalf in the event that you are no longer able to. Although loss of capacity is often associated with age-related diseases such as dementia or Alzheimer’s, there are many other events that could result in losing capacity, such as a serious head injury, that could happen at any time. Having LPA’s in place mean that you can rest assured your affairs will be taken care of by someone you trust.
Another, perhaps less publicised reason for considering LPA’s is the growing issue of financial crime and fraud. Criminals are regularly targeting elderly or vulnerable people, leaving more and more people’s savings at risk. Having Lasting Powers of Attorney means that when it is deemed the right time, financial decisions no longer lie with vulnerable individuals, going some way to protecting their savings from financial criminals.
The Office for National Statistics recently identified that cohabiting couples are the fastest growing family type in the UK. As touched on above, cohabitees are currently offered no protection in the eyes of the law, and therefore stand to benefit by having a will written. Cohabiting couples may also wish to consider having a cohabitation agreement drawn up. This can be tailored to the individual circumstances of the couple, setting out who owns what at the outset and identifying how any assets should be divided in the event of separation.
This year, the full extent of the Residence Nil Rate Band for residential properties will come into play. As of April 2020, individuals will be able to pass on £175,000 in addition to their own nil rate band of £325,000. Married couples or civil partners are able to pass on both their nil rate band allowance and the residence nil rate band to each other upon death, meaning that a total of £1 million will be able to be passed on to ‘direct descendent’ family members before inheritance tax applies.
The main caveat to this is estates that are worth more than £2 million. Here, the RNRB will reduce by £1 for every £2 that the estate is worth more than the £2 million, even if a home is left to direct descendants.
In the light of these changes, individuals may want to carefully consider how their estate is structured, taking advice on inheritance tax and utilising trusts and other estate planning tools to mitigate the amount of inheritance tax that inheritors will be required to pay.
For more information on any of the documents detailed in this blog, please contact Rebecca on 01457 761320 or email Rebecca@odonnellsolicitors.co.uk.
Rebecca O’Donnell is Head of Private Client at O’Donnell Solicitors.