GOOD WILL HUNTING . . .

Previously we considered the importance of making a will; this week we explore legal options that may suit your particular circumstance.

Since a will is a bespoke document, it must be strictly tailored to fit your situation. This requires a professional assessment of your family’s needs, the extent of your assets at death, and the tax consequences that may arise. Only then can you properly frame the structure of your will.

ASSESSING FAMILY NEEDS

Discuss the position of adult children with your solicitor. Does one need more help than the other? Has any received a prior gift, money toward a wedding or a deposit for a house? Is one more attached to the family home than another? Is one likely to receive a gift from another source? If willing your farm what provision should be made for others? These are relevant considerations.

Whilst individual circumstances vary widely, some general principles do apply in shaping a good will as described hereunder.

DIFFERENT TRUSTS

Fixed Trusts – If you have a child (or relative) with special needs, a fixed trust is the best mechanism to ensure that they are properly provided for when you die. Such trusts can be established in lifetime or, more commonly by will. A “trust fund”, ring fenced just for that child is set up and trustees, appointed by you, decide when, and in what amount that fund is distributed. There are CAT benefits, and the trust can continue for the lifetime of the beneficiary.

Discretionary Trusts – These structures are most appropriate for parents of minor children where trustees are given full discretion on distribution of the trust funds among the children if both parents die. Typically, the trustees will apply income towards the support and education of the minor children, in accordance with a Letter of Wishes prepared (by their parent) when making the will. Trustees can also resort to capital where needed.

The trustees decide when, how and to whom the remaining trust funds are ultimately allocated. In that way discretionary trusts offer great flexibility to trustees since you cannot anticipate the future needs and outcomes of your minor children.

Trust for Sale – This is a device whereby the testator (person making will) directs their executor to sell specific property and to distribute the sale proceeds amongst specified beneficiaries. A power to postpone such sale is given to facilitate negotiation and for the wishes of the children to be heard. The parent simply wills the asset on trust for sale with the proceeds (not the asset) to be divided equally.

This can be a favourable option where a parent wishes to treat children equally and it can avoid stirring family tensions, in situations where land or a house is given equally to children who have different demands and conflicting views, on what should ultimately happen to the property.

Normally a trust for sale results in an amicable arrangement where a sibling’s share in the property, is bought out by agreement and those seeking cash, receive it, without court proceedings and partition. If no agreement can be reached, the default position applies, and the asset is sold by the executor on the open market.

OTHER OPTIONS

Financial Charges – To spread assets between family, you can leave your house or land to one person but subject to a condition that they pay a specified sum to another. This gets registered on title to secure payment. Alternatively, one member gets the property on condition that they pay off your loans, with the residue going debt free to others.

Right of Residence – This allows you to will your residence to one party subject to the right of another individual to reside there free of charge for life or for a specified period. Such rights can either be exclusive or held in common with the owner.

Options to Purchase – Another way of dividing assets is for the beneficiary to be given the option to purchase an asset from your estate at a specified percentage of its market value.

Tax Free Bequests – If inheritance tax (CAT) is likely to be payable, you might consider benefiting your grandchildren (or others) with legacies up to their tax-free threshold rather than willing the entire amount to your adult children (taxable at 33%).

For example, the current threshold for grandchildren, blood nephews and nieces is €32,500. By planning your will in this manner, you reduce the overall tax liability maximise the amount the amount for your family. This useful tax planning device is not confined to children; it is also available to nephews, nieces and strangers who have a tax-free threshold amount of €16,250.

Investment in Agricultural Property – Agricultural Relief is a valuable tax planning tool to be considered where appropriate. If claimed, it can reduce CAT liability by circa 90%. Many people believe that this relief is confined to farmland but, not so. This generous relief can also be obtained, if you will cash subject to a condition that it be invested in agricultural property within two years.

Life Interests – Where a single person ultimately wishes to leave a residential farm to a niece or nephew but has a sibling living with them, a life interest may be appropriate. Here the sibling is given the use (and all income) of the farm for the duration of their life and thereafter it goes directly to their nephew or niece. This can be a tax efficient device particularly where the sibling is elderly.

Gifts Over – Rather than naming just one beneficiary, we suggest a “gift over” provision in wills. This ensures that a bequest does not fail by virtue of a beneficiary predeceasing you. Instead, their share will go to substitute beneficiaries that you have already named in your will.

This is crucial for elderly people who may become mentally incapable, or simply omit to make a new will. Such provision will avoid an unnecessary intestacy where default rules of intestacy decide to whom, and in what shares your estate is divided.

Mutual Wills - These are similar to Gifts Over but more complex. They are based on mutual promises and restrict the parties from changing their will after the death of the other.

These legal mechanisms illustrate the wide range of options available. A will is a critical document, the detail and implication of which must be carefully considered, and correct. By meeting with your solicitor, you can find a solution that is tailored and suitable for your circumstances.

This is the final part of a three-part series on wills by Alison O’Mahony BCL, STEP a solicitor in the firm of Anthony Carroll & Co Solicitors, Fermoy, who specialises in wills, probate, administration of estates and powers of attorney. She is a qualified member of the Society of Trust and Estate Practitioners (STEP) in Ireland and has a particular interest in Law for the Elderly.