Investments  

How wills and trusts work

  • Describe how trusts work
  • Explain how wills work
  • Identify the importance of Lasting Powers of Attorney
CPD
Approx.30min

6. Settlor-interested trusts

These are where the settlor or their spouse or civil partner benefits from the trust. The trust could be:

  • an interest in possession trust
  • an accumulation trust
  • a discretionary trust.

Wills 

It’s important that clients understand the benefits of a valid will and the risks of not having one. If the client has no will, then you should recommend they seek professional advice from a solicitor or will writing service. 

To make a valid will, two formalities must be followed: the will must be in writing and be properly executed. 

The minimum age for making a valid will under English law is 18. It should be a clear and unambiguous statement of the deceased’s wishes in respect of their estate and must be signed by the testator in the presence of two witnesses. 

The witnesses must not be beneficiaries of the will or the spouses of beneficiaries. If a beneficiary were to be a witness, they would not be able to inherit under the terms of the will. 

The terms of a will only take effect on the death of the testator. Before then, the testator can revoke or modify the will at any time. Modifications are recorded in a document known as a codicil. In the event of marriage, remarriage or entering into a civil partnership, a will is automatically revoked, unless specifically written in contemplation of the change of status.

Powers of Attorney

An attorney is a person who is given the legal responsibility to act on behalf of another person. 

While in good health, your client may be concerned how their affairs will be run should they become unable to manage their own finances due to an illness, such as dementia. Or it may be that they have affairs in the UK but are moving abroad. 

A person who does not have the legal capacity to enter into a contract, for example a minor or mentally incapacitated person, cannot appoint an attorney. 

What is an enduring power of attorney? 

An ordinary power of attorney automatically ceases if someone becomes mentally incapacitated and this can create problems for those responsible for managing the individual’s affairs. 

An enduring power of attorney (EPA) can continue if the donor becomes mentally incapacitated, although it has to be registered with the Office of the Public Guardian if the attorney believes that the donor is losing mental capacity. An EPA can be revoked only with the consent of the Court of Protection. 

What is a lasting power of attorney? 

From 1 October 2007, EPAs were replaced by lasting powers of attorney (LPAs). EPAs made before that date can remain in force, but all new arrangements must be LPAs. There are two types of LPA: