Private Client Quarterly Round Up March 2022

Welcome to the BBS Law Private Client round-up of news and cases of interest from the first few months of 2022.

Probate News

Probate Applications on the Rise

The Ministry of Justice has confirmed that there were 63,414 applications made for Grants of Representation (‘Grant’) in October to December 2021. For the whole of 2021 there was a 7% increase on applications for a Grant from 2020– with a total number of 273,422 applications.

The average time for a Grant to be issued after submission of the application is 8 – 12 weeks with 81% of applications being made digitally using the Probate Service’s online system.

The speed of issuing a Grant is affected if the case has been ‘stopped’ for any reason (which can occur when there’s a dispute about either who can apply for probate or issues with a Will or proposed Will, or if an error is identified and a request for further information made). It takes on average 17 weeks to issue the Grant in these cases.

When a probate case is contested, the Chancery Division of the High Court deals with the matter. In 2021 there were 104 contested probate cases, up from 68 cases in 2020 as there has been an increase in people who seek to challenge Wills.

Probate Fee: Another Price Increase

The Ministry of Justice has announced a fee increase for all users. Previously there were different fee levels depending on whether a solicitor was making the application (£155) or a non-solicitor (£215).

As from 26th January 2022 there is now a single flat fee of £273.

The Law Society of England and Wales president I. Stephanie Boyce responded:

“We support the MoJ’s aim to make a simpler, more streamlined process for users of the probate service, and we understand funds are needed to help this change and development.

“However, we query why the UK government has decided to increase fees at this time, particularly as the probate service is still facing delays… This is unacceptable, the service must be timely and allow executors to settle a loved one’s estate.”

Whilst this is a significant price increase (to which we are all becoming accustomed at present), it is a considerable improvement on the proposals from recent years suggesting that the probate fee should be based upon the value of the estate.

Will News

Remote Witnessing: Time Limits Extended

The government has extended legislation to permit the remote witnessing of Wills until
January 2024.

Prior to Covid it was unthinkable that Wills could be witnessed in any way other than in the physical presence of two witnesses. Indeed, a leading case on this issue dated back over two hundred years, so this was unambiguously settled law.

However, in July 2020, the UK government brought in measures to allow remote witnessing of Wills via video link for an initial two-year period to make this easier during the pandemic period. This has now been extended to 31 January 2024 to support people who are isolating, vulnerable or in case of further restrictions.

A recent Law Society survey found that only 14% of responding solicitors who drafted Wills during lockdown utilised remote witnessing. Indeed, it is always our preference to witness Wills in the presence of our clients wherever possible. However, remote witnessing is a useful tool as a last resort and infinitely preferable to a testator feeling unable to execute their Will at the present time.

Testamentary Capacity: The Benefit of Using an Experienced Solicitor

The recent Court of Appeal case Hughes v Pritchard has raised some important issues about evidence provided when the issue of a testator’s capacity is subsequently challenged.

Mr Hughes (the deceased) was a wealthy farmer who died in March 2017 aged 84, having executed his final will in July 2016 (the ‘2016 Will’) when he was living with moderately severe dementia and was grieving for his son Elfed, who had died a few months earlier.

Mr Hughes left significant land and business interests to his surviving son and executor, Gareth. When the Will was submitted for probate, Elfed’s wife and son challenged the Will on the grounds that Mr Hughes lacked mental capacity in 2016.

The solicitor who prepared the 2016 Will had acted in accordance with the ‘Golden Rule’ for preparing Wills with those who have questionable mental capacity. The solicitor made very detailed attendance notes and asked the deceased’s GP for a medical assessment of his capacity to make a Will. As a result of this, the GP determined that Mr Hughes did have capacity to make his Will.

During the Court hearing the parties also instructed a single joint expert to give his opinion on capacity based on the records from the time. The expert also agreed that the deceased did have capacity to make his Will in 2016.

During the first hearing of the case, the GP changed his opinion as to Mr Hughes capacity. This was on the basis that the GP had thought that the 2016 Will was only making some small changes to Mr Hughes’ previous Will rather than making significant changes. On this basis the Judge stated that the Will should be disregarded and the previous Will would take effect.

This decision was challenged in the Court of Appeal, which overturned the previous judgment and held that the 2016 Will is valid. The Court of Appeal stated that there is a very strong presumption that a Will which has been drafted by an experienced independent lawyer should only be set aside on the clearest evidence of lack of mental capacity. This was also combined with the clear medical opinion which had been obtained at the time that Mr Hughes did have testamentary capacity. The combined contemporaneous evidence of the GP and solicitor, and the subsequent independent expert did not allow for a possible finding of lack of testamentary capacity.

This case is an example of how important it is that a Will is prepared by an experienced professional solicitor. We understand the disputes that can happen and ensure that Wills are prepared correctly so as to minimise future successful challenge.

LPAs

UK Government urges more public awareness of LPAs

Accordingly to UK-wide research by Which?, the general public does not fully understand Lasting Powers of Attorney (‘LPAs’) and often has difficulty getting banks to deal with them correctly.

A wide-ranging survey found that on average only one in seven people have given someone else power of attorney over their affairs due to a lack of awareness, combined with an outdated and difficult system.

Whilst 85% of respondents had heard of LPAs, there was widespread confusion about their use. For example 16& of people thought that completing an LPA meant they lost control of their finances, and 77% of people did not realise that an LPA could not be created by someone who has lost mental capacity.

The survey also found that even those with a valid, registered LPA could experience difficulty in dealing with the donor’s finances.

The Office of the Public Guardian (a department of the Ministry of Justice responsible for registering LPAs) (‘OPG’) is now being urged by the Society of Trusts and Estate Practitioners (STEP) to focus on resolving these issues. Emily Deane, STEP Technical Counsel and Head of Government Affairs stated:
‘A “fast-track” procedure and channel should be established to deal with urgent matters’,
‘We are calling on the OPG to do more to end the emotional, financial and physical abuse of older or vulnerable people, and protect them from controlling or coercive behaviour’,

Deane adds:

‘The government also needs to focus on educating and informing the public about LPAs and why they are so important.’

The Ministry of Justice recently held a consultation on LPA reform in England and Wales and we now await their response and proposals for improvement going forward.

Office of the Public Guardian confirms Attorneys are entitled to see donor’s medical records

New guidance for NHS Staff has been released by the OPG regarding the disclosure of a Donor’s medical information to their Attorneys.

The new guidance clarifies that Attorneys appointed by an LPA should be able to access medical records if these assist them in making decisions which are in the Donor’s best interests.

On this basis, NHS staff should comply in providing access in a timely manner.

Currently there is no current statute allowing an Attorney to make a subject access request for medical records on behalf of an incapacitated person, but the advice given by the Information Commissioner’s Office is that ‘it is reasonable to assume that an attorney with authority to manage the individual’s property and affairs, or a person appointed by the Court of Protection to make decisions about such matters, will have the appropriate authority’.

Discretionary Management Schemes – OPG issues welcome clarification

A question we always ask clients who are preparing a Property and Finance LPA is whether they have any investments managed by a third party – known as a discretionary management fund (where day-to-day management of investments is carried out by regulated financial professionals). Currently we need to insert a standard clause in Property and Finance LPAs to let any such managed investments continue in the event of a loss of capacity.

The OPG has now confirmed that it will change its guidance on the need to have such an express clause.

The news has been welcomed by the Law Society of England and Wales as a positive step as it could mean a reduction in expense and bureaucracy for those who have omitted to include such a clause. Currently an Attorney wishing to invest a donor’s funds in a managed fund would have to make an application to the Court of Protection if the LPA did not include the relevant express provision.

Following discussions with practitioners, including members of the Law Society’s Mental Health and Disability Committee and Wills and Equity Committee, the OPG has agreed to review and revise its position and is now committed to changing its guidance so that an attorney can invest funds via a discretionary management fund without having to make a Court application.

Trusts

New Trust Registration Rules

With the introduction of The Money Laundering and Terrorist Financing (Amendment) Regulations 2022, the deadlines for extended trust registration have been changed with certain low-risk trusts being excluded from the need to register. In addition, from 1 September 2022 the information held on the register will be available to any third party who can demonstrate a ‘legitimate interest’ in the information held on the register rather than only available to law enforcement agencies.

The registration deadline for trusts newly required to register has been deferred until 1 September 2022, and the time limits for trustees to inform HM Revenue & Customs (HMRC) of changes to the information held on the register is extended to 90 days from the previous 30 days.

Certain types of life insurance trusts that pay out only on death, serious illness or disablement are added to the list of excluded trusts, as are bank accounts held on behalf of minors or adults who have lost capacity.

Baroness Penn, confirmed to the House of Lords:

‘This instrument will amend the money-laundering regulations as they relate to trust registration, to ensure that the regulations strike the appropriate balance between providing an effective anti-money laundering tool for law enforcement and minimising the administrative burden on those who use trusts for legitimate purposes’,

HMRC has stated that it will take a ‘proportionate approach’ to any registrable trust that comes to its attention after the 1 September 2022 registration deadline.

Tax

The Spring Budget

The Chancellor did not announce any new changes to the Inheritance Tax regime, with an announcement being made in March that IHT bands will remain frozen until 2026.

Accordingly, those with estates worth more than £325,000 (or £650,000 for a married couple or civil partners, potentially increasing to £1m where the family home is left to direct descendants) who face a future IHT liability can continue to plan and take legitimate steps to mitigate the exposure of their estate to this 40% tax.

Despite the fact that planning can reduce tax exposure, HMRC is receiving increasing revenues from IHT, as more estates become liable due in large part to rising property prices. From April 2021 to February 2022 HMRC received £5.5 billion in IHT receipts, being £0.7 billion higher than in the same period a year earlier.

Looking forward, any changes by the Chancellor to the IHT regime may be influenced by the Office of Tax Simplification’s 2019 report. The headline recommendations of this report were as follows:-
1. Removal of rebasing of capital gains tax (‘CGT’) on death when a relief (such as business relief) or an exemption (such as spouse exemption) is available.
2. Removal of excess income gifting (a very valuable tool when estate planning)
3. Tightening up of business relief and agricultural relief.
4. Removal of taper relief and instead reducing the gifting window from 7 year to 5 years.

It remains to be seen what changes will be made in due course and what impact this may have on existing estate planning. On this basis we always recommend regularly reviewing your Wills to take into account any changes in the law, or in your own personal circumstances.

Kerry Blackhurst
Private Client Solicitor
March 2022