Lasting Powers of Attorney

A legal document which allows you to appoint named individuals (known as attorneys) to make decisions for you if you are unable to make them for yourself. There are two types of Lasting Power of Attorney, one for financial decisions and one for health and welfare decisions. It is important to note that these documents can only be made when you have the mental capacity to understand the nature of the document and the powers you are giving to your chosen attorneys. Often, a Lasting Power of Attorney will not be needed (if at all) until many years in the future. However, it must be made well in advance of this whilst you still have capacity and it is therefore an important part of planning for the future which can be overlooked.

Office of the Public Guardian

A Lasting Power of Attorney must be registered before it can be used and the government body responsible for registering these documents and keeping a record of such registrations is the Office of the Public Guardian. This government body also protects people who may have lost capacity and oversees Lasting Powers of Attorney to make sure that attorneys act in the best interests of those they make decisions on behalf of. The Office of the Public Guardian investigates complaints or concerns about an attorney’s potential misuse of their powers.

Grant of Representation

The collective term given to the Court document issued by the Probate Registry to confirm that the person named on the Grant has the authority to deal with a deceased person’s estate. There are various types of Grant of Representation such as a Grant of Probate (issued where there is a will with executors named who are able to act) and a Grant of Letters of Administration (issued where there is no valid will)

Probate

‘Probate’ is often used to describe the legal process of dealing with a person’s assets and liabilities on their death. This is often referred to as ‘the administration of the estate’. The process usually involves identifying the various assets and liabilities and obtaining their ‘probate value’, which is essentially their value as at the date of death. Once this has been done, it is possible to determine whether there is any inheritance tax to pay and, if so, arrange for this to be paid to HMRC. Following this, it is possible to apply for a Grant of Representation which is usually needed to deal with the assets. Once all assets have been collected in, and all liabilities have been paid, the estate can then be distributed in accordance with the terms of the will or the laws of intestacy (if there is no valid will)

Executor

An executor is the person named in a will to carry out the instructions in the will on death. An executor can also be a beneficiary under the will. The executor will be responsible for administering the estate (see probate definition above). You can have as many executors as you like in a will but it is usually sensible to limit this and often it is better to have named executors with replacement executors who will only act if your first choice(s) cannot act or are unwilling to act.

Trustee

A trustee is the legal owner of any assets held in the trust for the benefit of others. Whilst a trustee is the legal owner, they are not the beneficial owner and are holding the assets in the trust, to be used in accordance with the terms of the trust. This is often a difficult concept to understand and clients often find this confusing (which is completely understandable). By way of a very simplified example, if you ask me to hold the sum of £10.00 for you until you request this back, I am holding this money ‘on trust’ for your benefit. This is why wills often refer to an executor also acting as trustee and holding the estate assets on trust for the beneficiaries.

Will

A legal document that sets out what should happen to your assets on your death. Often confused with a Lasting Power of Attorney but the key difference being that a Lasting Power of Attorney is a document which gives attorneys the authority to make decisions in your lifetime only, whereas a will is a document which gives executors authority to deal with your ‘estate’ on death only.

Guardian

If your have children under the age of 18 years, then it is important that your will appoints a guardian who will be legally responsible for caring for your children in the event that you die before they are 18. The appointment would only come into effect if there was nobody else living with parental responsibility for the child. In simple terms, this means that if you are married and have children, then the appointment of the guardian would only come into effect if both parents die before the child is 18.

Codicil

A legal document often used to make amendments to an existing will without having to re write the entire will.

Intestacy

A person is said to die intestate if they die without making a valid will. In this situation, the law sets out who inherits and in what order. This can often have undesirable consequences. For example, the statutory intestacy rules do not provide for unmarried partners, even if they are living with the deceased and have been in a relationship for many years. The rules of intestacy have no flexibility and therefore is it always advisable to make a will setting out your wishes.

Inheritance Tax

Inheritance tax is a tax which is paid on death, if the value of a person’s estate exceeds a certain threshold. Inheritance tax can also be charged during a person’s lifetime in certain situations. The relevant thresholds are as follows:

Nil-Rate Band- Every individual has a nil-rate band of £325,000 which is taxed at 0%. This band is reduced by the value of any gifts made in the previous 7 years. For example, if a person made a gift of £50,000 the year before they died, then their available nil-rate band would be £275,000.

Residence Nil-Rate Band- If certain criteria are met, such as the deceased owning a property at the date of death and leaving the property (either by will or the intestacy rules) to ‘direct descendants’ then an additional allowance can be claimed which is currently set at £175,000. This band is also taxed at 0%.

Both of these allowances are transferrable between spouses. This is important because assets left to a spouse are exempt from inheritance tax. Therefore, if you are married and you and your spouse have identical wills (often referred to as mirror wills) providing that you leave everything to each other and on the second death everything to your children, then there will be no inheritance tax to pay on the death of the first spouse (regardless of the value of the estate) and on the second death, the estate will be able to claim tax free bands of up to £1 million (Nil-rate band £325,000, transferable Nil-Rate Band £325,000, Residence Nil-Rate Band £175,000 and transferable Residence Nil Rate Band £175,000). Note that this is subject to any deductions for lifetime gifting and also subject to the value of the estate on second death being under £2 million.

For estates with a net value after liabilities of over £2 million, the Residence Nil-Rate Band is tapered by £1 for every £2 over which the estate exceeds £2 million. In practice, whilst the Residence Nil-Rate Band is set at £175,000, this means that once an estate exceeds £2.35 million there will be no Residence Nil-Rate Band available to claim.

The rate of inheritance tax on death is 40% of the value of the net estate after allowances and exemptions (this can be reduced to 37% if 10% of your net estate is left to charity).

Inheritance tax exemptions                

The following are exempt from inheritance tax-

Transfers between spouses (in lifetime and on death)

Gifts to charity (in lifetime and on death)

Annual allowance of £3,000 (available in lifetime only)

Small gifts of up to £250 per person (available in lifetime only)

Gifts out of surplus income (available in lifetime only)

Gifts in consideration of marriage (available in lifetime only)

Business Property Relief (available in lifetime and on death)

Agricultural Property Relief (available in lifetime and on death)

Please note that the rules around claiming these reliefs can be complex and are due to change from April 2026. Please therefore book an appointment with me if you require further information.

‘The 7 year rule’

People often refer to ‘the 7 year rule’ and there can be some confusion about what this relates to. Often, people ask me if they can give away assets, survive for 7 years and then these assets will be disregarded if they ever need to go into a care home in the future. This is incorrect. The 7 year rule is ONLY relevant for inheritance tax purposes, as we have touched on above. If you make a gift of assets (ignoring for now allowances and exemptions) and survive for a period of 7 years, then provided that you have not retained a benefit from the asset (see below) the value of the asset will fall outside of your estate for inheritance tax purposes. This is not the same for financial assessments relating to care home fees (see deprivation of assets below)

Deprivation of assets

If the Local Authority ever need to carry out a financial assessment to determine whether your care should be funded by them, and what, if any, contribution you should make to this care, then this assessment will take into account all assets held in your name. If it is believed that you have intentionally disposed of assets to reduce this contribution, for example by transferring your home to children or into trust, then the Local Authority can effectively assess you as though you still own this asset. This is known as deprivation of assets. There is no time limit for this and in theory, a Local Authority could determine that you have deprived yourself of assets even if you gave them away many years ago. The relevant considerations include the motive behind the transfer and whether you were in good health at the time of the transfer or could have foreseen that you may need residential care in the future.

Gifts with a reservation of benefit

For inheritance tax purposes, if you make a gift of assets but still retain a benefit from the asset, then for inheritance tax purposes you will be treated as though you still own the asset. The most common example is gifting your property to your children, but continuing to live in the property rent free. This could mean that the value of the asset, as at the date of your death, is included in the inheritance tax calculation.

Joint tenants and tenants in common

These terms are used to describe the two ways in which joint assets (usually property) can be owned. Joint tenants is the term used when you and the other legal owner(s) own the whole value of the asset jointly, and not as separate shares. The most common example of this would be a property owned as joint tenants or a joint bank account. Assets owned jointly cannot pass on your death under the terms of your will or intestacy and instead will automatically pass to the surviving joint owner.

Tenants in common is the legal term used to describe a situation where you own a separate share in a property, which can then pass under the terms of your will or intestacy.

By way of example, a couple will usually own a property as joint tenants and a group of friends are more likely to own a property as tenants in common.

You may have heard reference to ‘severing the joint tenancy’ and this simply means changing the legal ownership from joint tenants to tenants in common which is usually a straightforward process and then enables you to leave your interest in a property under the terms of your will.

Please note that this glossary is intended to provide a general overview only and does not constitute legal advice to you. Whilst I have tried to provide as much ‘user friendly’ information as possible, this is only a summary of the relevant information. If you would like to know more, simply have a question, or even suggestions for improvement, please do email me at enquiries@scowcroftlaw.co.uk.