My colleagues and I have recently dealt with two or three cases where clients have come to us to make Wills having already ‘ring fenced’ their home with an Asset Protection Trust bought for around £4,000 - £5,000 from respectable sounding companies with substantial sounding names. These companies (and there are now quite a few of them) invest in professional looking adverts in the media and produce glossy brochures – but many are not the experts they give the impression of being; they do not employ qualified staff and are not regulated by any professional authority. If they run into difficulty they can simply shut up shop and walk away – and then set up afresh under a new identity.
Sadly, we had to tell these clients that they had wasted their money. Transferring your home into a Lifetime Asset Protection Trust does not remove its value from your estate for Inheritance Tax purposes, as, by continuing to live in it, you will have what is called a ‘reservation of benefit’ in it, meaning that your estate will be taxed as if the transfer into the Trust had not happened. Nor do they protect the value of the house against assessment for care fee contributions as the transfer of it into the Trust will be deemed a ‘deliberate deprivation’ of an asset by the authorities who will means test the client as it they still owned it.
I should add that the position is quite different where an Asset Protection Trust is set up by a Will to come into effect on death; then it can be a useful and effective device - and the cost of having such a Will drafted by a properly qualified professional should not be anything of the order of £4,000.
A couple came to us to update their Wills bringing with them copies of their old ones, prepared by a high street bank. In these the bank had been appointed to act as executor. The clients were shocked to discover that banks charge a fee based on the value of the estate – usually around 4% plus VAT for acting as executor. For an estate worth £500,000, even if all that is in it is a house of that value, the fee would be £24,000, regardless of how much work is involved in dealing with the Probate. For an estate containing only a house valued at £1,000,000 it would be an eye-watering £48,000.
Four new clients have each brought in a copy of a Will prepared for their deceased parent by a Will writer. Again, in each case a condition of the Will writer’s preparation of the Will was that they be appointed to act as executor. Their charge for the probate work? 3% of the value of the estate plus VAT. Some of these Wills were quite astonishingly badly drawn, with absolutely no consideration of prevailing law, or even the particular financial and family circumstances of the testator. In light of that the family members had asked the Will writers to renounce their entitlement to act as executors, but in each case the company involved refused to do that causing huge distress to the family. Again, it is worth noting that Will writers do not have to have a professional qualification and are not regulated in any way. My husband was amused to receive an invitation in the post to become a Will writer by attending a one morning course! (He didn’t go.)
For some people the appointment of a professional executor is desirable – but it should never be a condition of a Will being prepared that the person preparing it is appointed to the role. The choice should be yours.
Are solicitors expensive? I like to think we are good value. Most solicitors acting as executor charge for their work by the hour. In cases where a percentage mark-up is charged the Law Society stipulates that that must be justified on grounds of the complexity of the estate – and even then may not exceed 1.5% of its value plus VAT. We are also fully qualified, regulated by the Solicitor’s Regulation Authority and obliged to carry very substantial indemnity insurance in case an error should ever occur.
Helen Starkie (May 2018) Bath Life