WILLS and TRUSTS

Kevin Doughan, BCL, TEPHead of Probate - Holmes O’Malley Sexton Solicitors, Bishsopsgate, Henry Street, Limerick

Monday, 2nd November 2015

www.homs.ie

The statistics• 66% of the Irish adult population do not have a Will

<45 yrs 45 - 64 yrs >65 yrs0

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60

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90

How many people make wills

• A will is important- if you don’t have one, put one in place and review your will regularly

• Focus is to encourage you to make a will if you have not already done so

• Not a DIY Toolkit-always seek professional advice

Advantages of Wills-

1. Allows you to specify your wishes- disinherit less than loved ones!

2. Creates Certainty- you know who is getting what

3. Tax advantageous- can minimise tax exposure

4. Allows you to appoint chosen executors, trustees

5. Allows you to appoint testamentary guardians- to take care of your children

6. Ensures that adequate financial provision can be made for dependents.

7. Ability to set up discretionary trusts for children with particular needs.

• Everyone irrespective of age should have a will• It’s a must have if you have children, property, savings or assets

When should you contemplate doing a will

What is a will• A written document expressing how a person

wishes to dispose of their assets after their death.

• A will speaks from death

• Change as often as one wishes before death

• It should dispose of all of your assets

• Not all property will pass under a will.

• Assets held under Joint Tenancy will pass by survivorship automatically to the surviving joint holder

• Always check the ownership structure especially if owned by more than one person.

• Ademption- occurs where property bequeathed in the will no longer exists at date of death.

• Abatement- insufficient assets to meet liabilities- all bequests reduce in proportion.

• A marriage revokes a will, Divorce does not- Very important to remember.

Things to do before meeting your solicitor • Prepare a note of your personal circumstances- relationship

status and children, next of kin. If divorced/separation bring Court Orders with you.

• Prepare an asset inventory- list assets held solely and jointly with others.

• Have an idea how you wish to appoint as executor, Trustee and Guardian.

• Have reasons for benefiting people, but more so those you are not.

• Bring money laundering documentation- Passport/drivers licence and a recent utility bill

• Bring title deeds for inspection- if available. • For tax purposes- have a rough idea of net worth

Common problems- Why

• DIY Wills

• No Wills/Invalid Will- Intestacy

• Failure to update Wills

• Ensure assets are distributable under the Will- Pitfalls- Joint

property, nominated credit Union accounts, trust property.

• Giving away more that you have- % distribution is a useful

tool- reacts to fluctuations in estate value.

Intestate Estates- Dying without a Will

• Who are the nearest next of kin? They have priority.

• Spouse- 100% or 2/3 (if children also) and children 1/3

• Children/issue (marital, non marital and adopted)- one third.

• Step child/foster child- no automatic rights.

• Provision can be made for such children in a will

• Per stirpes distribution- children of pre-deceased children take

their parents share.

For your will to be valid- Must ensure the following 1. Must be at least 18 or has been married 2. Must be of sound disposing mind3. Test for capacity- it’s a legal test rather than a medical test.4. Must be in writing- no verbal wills5. Must be signed by the testator or by someone instructed by

him while in his presence at the foot or end of the will6. Must have two witnesses to your signature or mark.7. Any alterations to a will must be made before it has been

signed… any changes made after execution have no legal effect.

Basic elements of a will

Name and address of testator- best practice to use name as appears on birth certificate- avoid use of common names

Include revocation of previous wills Appointment of executor, trustees and guardians (if children

under 18) Provision for specific bequests and pecuniary legacies Establishment of a trust (if necessary) Clear residuary clause- always have one Deal with advancement and appropriation Schedule of powers reserved for trustees The date Signature of testator Attestation clause Signature of witnesses- name, address and occupation.

Types of bequests

Pecuniary bequests- A cash amount

Specific bequest- gift of specific items- property, jewellery shares

Residuary bequest- the remainder of the estate after debts, taxes, and legacies

Tips

Avoid benefits to attesting witness or his/her spouse

Nothing wrong with beneficiaries appointed as executors- careful to avoid conflict of interests.

Lapse- Golden rule of Succession is you have to survive to inherit- always include a gift-over in case beneficiary dies before you.

Section 98- exception to lapse-only involves children

Spouses• Spouses- Have a Legal Right Share- 1/2 (if no children) or 1/3 (if

children) of net estate at date of distribution

• Inviolate- cannot be challenged

• If no provision in will- LRS vests automatically

• If Provision in Will- Spouse has right of election

• Time Limit for Election- 6 months from Grant or 1 year from

notification.

• Renunciation of legal right share- Spouse can renounce

• Does not prohibit bequest in a will to a spouse who has

renounced.

Civil Partners & Cohabitants• Civil Partners- Similar to spouse- but may be reduced by children’s claims

• A child can erode the LRS of a Surviving Civil partner but not a surviving spouse.

• Cohabitants- 2010 Act- must be financially dependent

• No automatic rights- Must be a qualified cohabitant- Relationship of 2 years (if children) or 5 years ( if None).

• 6 months from date of representation to apply for provision.

• Provision cannot exceed share to which spouse/Civil Partner is entitled to.

• If deceased is married and co-habiting- the cohabitant cannot erode legal right share of spouse- so leaves very little for cohabitant.

• Cohabitation agreements- An opt out

• Cohabitants- normally strangers- for Capital Acquisitions Tax purposes.

• Any award by court however is exempt from inheritance tax

Testate estates- children

• No automatic rights and no obligation to treat children equally.

• Claims by children of the surviving spouse cannot affect a

bequest in the Will to their parent.

• Section 117 application- application by disappointed child.

• 6 months to institute proceedings- Strict timeline.

• Section 98- exception to lapse- preservation of benefit for

child’s estate

• Minor children- consider trusts- 18/21/25

• Children with disabilities- Discretionary trusts

Divorce & Separation

• Divorce-no longer considered spouses- is there a blocking order in place (Check Divorce Order)- prevents spouse seeking further provision from the estate- does not apply if prior spouse has remarried.

• Separated spouses- always review separation agreement- have succession rights been extinguished- still considered spouses for succession act 1965.

TRUSTS• Can be set up while alive or in your Will• Important consideration for minor children (under 18) or

beneficiaries with disabilities • Trustees are financial custodians, with responsibility to look

after trust funds.• When should trust end? 18/21/25.• Always include provision to allow trustees to discretionally pay

out capital and income to beneficiary for education and maintenance.

• Trustees responsible to trust beneficiaries.• Meticulous accounts are necessary

Discretionary trust is a must- very useful

• Trustees have discretion, when, if and in what manner trust fund are paid out- gives flexibility

• Beneficiary has no right to the funds-only right to be considered

• Emergency plan- are there enough funds there to react• Can be used as form of protection trust- useful if beneficiary has alcohol,

gambling, addictions, and ensures funds wont be depleted by reckless management

• Focus for parent is to ensure care and responsibility for the child can continue after death.

• What about effect on disability entitlements?• What happens to the trust funds on death of beneficiary- ensure provision is

in the Will.

TRUSTS FOR CHILDREN WITH DISABILITES

Contact Details

KEVIN DOUGHAN, SENIOR SOLICITOR, TRUST PRACTITIONER and TAX ADVISORHOLMES O’ MALLEY SEXTON SOLICITORS- Bishopsgate, Henry Street, Limerick.P: 061 313222E: kevin.doughan@homs.ie

Disclaimer• Kevin Doughan and Holmes O Malley Sexton Solicitors accept

no liability for the content of these guidance notes, or for the consequences of any actions taken on the basis of the information provided, unless that information is subsequently confirmed in writing by Holmes O Malley Sexton Solicitors. The information contained in this guide, is for general information purposes only. While the information provided is up to date, no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability is given, with respect to the information contained for any purpose. Appropriate legal advice should be taken at all times. Any reliance you place on such information is entirely at your own risk.

• © Kevin Doughan