Latest statistics show 18% drop in LPA applications and a jump in digital applications and grants of Probate

The Ministry of Justice has released the Family Court statistics for January to March 2021, revealing that there were 195,734 LPAs received, down 18% compared to the equivalent quarter in 2020.

LPA applications had been steadily increasing, peaking in 2020 – largely brought about by increased publicity and the new online forms introduced in July 2015, making it simpler and faster to apply. As the pandemic took hold LPA applications declined and the first quarter of 2021 saw a significant drop.

Private Client legal adviser at Thomas Mansfield, Emma Howlett, said:

‘The latest UK-wide statistics are interesting. At Thomas Mansfield we have in fact seen a surge of interest in LPAs over the the last 18 months. As much as the pandemic has brought normal life to a halt, it has also sharpened focus on what matters. The future is uncertain and an LPA is a great provision to have made, in the event that you somehow lose the ability to take full care of your property and finances and/or your health and welfare. While the UK-wide statistics show a drop in LPA applications we expect this to increase as the UK exits lockdown and normal life resumes.’

The Family Court statistics also pointed to an increase in the proportion of digital applications and grants issued for probate. Since the Court introduced the online system, simple applications where the person died testate and there are no issues with the Will, have been dealt with efficiently and more quickly than paper applications.

However, the Family Court statistics for the first quarter of 2021 show that where a case has been ‘stopped’ for any reason (in the case of a dispute, issues with a Will or proposed Will, or if an error is identified and a request for further information made), probate grants took 13 weeks on average to be issued, compared to 5 weeks for those that were not stopped.

The full report is available at Family Court Statistics Quarterly: January to March 2021.

Time to change your plans?

The lead-up to the recent Budget was peppered with speculation about how the Chancellor might start to recoup some of the expenditure of the last 12 months and more.

This included predictions about fairly significant changes to the Inheritance Tax (IHT) and Capital Gains Tax (CGT) regimes. But these didn’t materialise. Rather, the government announced that the IHT nil-rate band (currently £325,000) and the residence nil-rate band (£175,000) are to stay as they are until 2026. Also frozen until 2026 is the CGT allowance of £12,300.

Inheritance Tax

The nil-rate band is the amount below which no IHT is payable. So, if the value of the assets you pass on to beneficiaries is less than (currently) £325,000, IHT will not apply. If the value is above £325,000, IHT will be charged at 40% of that excess amount.

The residence nil-rate band is a separate tax-free allowance, which can be combined with the nil-rate band to make IHT payable on a smaller portion of your estate. It applies where you pass your property on to a direct descendant – usually a child, grandchild or a step-child.

It’s important to understand the extent of your available allowance (has it been eaten into by gifts made during your lifetime, for example?) and to factor some of your planning around it. Note that, as well as usually being able to pass your estate to a spouse or civil partner without IHT applying at all, you and your partner can pool your nil-rate bands, potentially leaving a bigger tax-free allowance to apply to the surviving partner’s estate.

Capital Gains Tax

When you dispose of an asset that has risen in value, CGT may be payable on that increase. This is subject to a tax-free allowance, currently set at £12,300. Selling, transferring and gifting are all ways of ‘disposing’.

If you are someone who has put firm financial plans in place for the future, this continuation of the status quo may come as a relief. Your existing arrangements may be able to stay in place, without the threat of assets being ‘devalued’ through the application of more onerous tax rules. But we all know that change will come at some point; if not now, then almost certainly in 2026. And we always advise every client to stay on top of arrangements for their financial future and that of their loved ones.

It is so important to build review periods into your planning, whether it’s your Will, your trusts, your assets. Keeping up to speed with changes in the law and in tax rules – and, better still, anticipating future twists and turns – should mean you can structure your estate tax efficiently. Ultimately, we all want to be able to preserve the value in the things we own, and enable those we care about to inherit as much of that value as possible. But that doesn’t just happen; it needs to be carefully mapped out.

And it’s not just changes to tax rules that need to be taken into account. Any significant changes in family life – marriages, births, deaths, divorces, should prompt you to review your planning. Financial changes, too, such as an increase or reduction in assets and asset values should trigger a call to your advisors to ensure you put the best arrangements in place.

Our team is here to help with any queries about your existing arrangements, and to help you put new plans in place.

Emma Howlett

01892 337540

emma.howlett@thomasmansfield.com

When a Beneficiary Can’t Be Found

The executor of a Will has a hefty responsibility. As the person who must make sure that those entitled to benefit from a deceased’s estate do so, he or she must sometimes handle some tricky situations – not least of which is when a beneficiary can’t easily be tracked down.

It’s not the norm. In most situations, it will be close relatives that stand to benefit from a Will, and those people will usually be on-hand. (When you’re making a Will, include and keep up-to-date as much detail as possible about your beneficiaries; full names and addresses can make the executor’s job far more straightforward.) However, when relationships drift and people lose touch with one another, there is a good chance that the executor will have to invest some serious time in trying to find any ‘missing’ beneficiaries.

This is a legal duty. An executor must take reasonable steps to contact a beneficiary. If that’s not done, the executor could be personally liable to pay the beneficiary what they were due under the Will. It’s a situation that no executor would want to find him or herself in, and many come to us for advice on what to do.

The first, and most obvious, step is to ask around. Family and friends of the deceased are sometimes able to help track down the beneficiary. If that doesn’t work, an advert in relevant newspapers – usually where you expect the beneficiary or others that might know them to be living – is a sensible next step. If that proves fruitless, it might be worth investing in a tracing agent, but perhaps only if the value of the estate would justify that cost.

We have advised on a number of situations in which a beneficiary simply can’t be found. Once all reasonable efforts have been made, it’s time to draw a line. The administration of the estate can’t be delayed indefinitely, so the executor must bite the bullet and move on. But we always advise putting in place some protections to avoid facing personal liability in the event that the beneficiary turns up – which can happen.

There are various options:

  • A reserve fund – hold some money back to pay to the beneficiary.
  • An indemnity from other beneficiaries – they agree to pay the ‘missing’ beneficiary’s share.
  • Insurance – some companies will cover the beneficiary’s entitlement.
  • A court order – the court gives permission to distribute the estate based on a presumption (usually that the beneficiary has died).

Each of those options has pros and cons, and will be more suited to some situations than others. One of the big considerations is the value of the inheritance due to the beneficiary. Not only will that be relevant to the reasonableness of the steps taken to find the beneficiary, but it may mean that the cost of one or more of the protective options is disproportionate.

The good news is that far more often than not, estate administration is relatively straightforward. That is particularly so where the Will is clear and unambiguous and gives plenty of information about future intentions. For the executor, it’s a case of working through each stage of the process – and if that involves having to try to track down someone who has ostensibly vanished, then so be it.

The outcome may not be the one the executor had hoped for; sometimes a beneficiary simply can’t be traced and there’s a degree of uncertainty for years to come about whether or not they might at some point show up looking for their inheritance. As long as the executor is happy that he or she has explored all available options when it comes to trying to contact the beneficiary, and has got some protection against personal liability, there is not much more that can be done. And, ultimately, the executor will be able to say that they took their responsibilities seriously and did their very best.

For advice about tracking down a missing beneficiary, or on any aspect of Wills and estate administration, contact us on 01892 577092 or email info@thomasmansfield.com.