UK Wills, Trusts & Lasting Power of Attorney in Cyprus

Posted December 6, 2019 by pavlouc

What you need to know about UK Wills, Trusts & Lasting Power of Attorney in Cyprus

A trust is an agreement between several individuals – the settlor (the person establishing the trust); the trustees (the persons who will look after and manage the assets in trust); and the beneficiaries (who will benefit from the assets held in trust). Instead of your house being owned by Joan Smith, for example, it would be owned by the Joan Smith Family Trust. Trusts have been around since the days of the Crusades so they are, in no way, a new concept.

One significant benefit of having a trust is that it allows your assets to be handed down through the generations to your beneficiaries at a time most convenient to them – for example, not at a time when the beneficiary is going through a divorce, is experiencing financial difficulty or is living abroad in an unfamiliar tax jurisdiction for example.

An easy way to understand the concept of trusts is to think about car financing, which operates in a similar way. If Joan Smith has a car on a personal contract purchase (PCP) plan, she will not own that car. The legal owner would be the finance company. However, the car still does its job perfectly well, and is available any time Joan wants to use it. It doesn’t really matter to anyone that she is not listed as the legal owner.

So who does own the assets held in a trust?

The trust exists as a separate legal entity and so the assets are owned by the trust itself. The trust will have trustees – these are people selected by you, the settlor, because you trust them to carry out your wishes.

The principal thing to remember with trusts is that because you do not own the assets held in the trust in your own name, it is more difficult for those assets to be taken away from you or from the beneficiaries of the trust.

When are trusts useful?

These are the most common situations in which having a trust ensures that your assets go to the people you love the most.

1. Divorce

Trusts are often referred to as ‘bloodline planning’ because they ensure that your money remains with your blood relatives when you’re no longer around.

That might not be true if one of your children got divorced. It wouldn’t even be a huge surprise, given that 45 per cent of UK marriages sadly end that way.

Without a trust, Mr or Mrs Wrong would walk away with as much as half the assets handed down to your child, which is probably not what you want at all. Thanks to the trust, Mr or Mrs Wrong may not get any of your assets.

2. Bankruptcy

Let’s say you’ve passed away and left all your assets outright to your children. Your children use the money to start a business but, sadly, their business fails.

Now the creditors show up. Without a trust in place, the creditors can take everything: the car, the TV and even your child’s home.

Trusts may stop this financial tsunami.

3. Marriage after death

The sad truth is that the people who suffer the most after we’re gone are our partners.

But after the initial shock has passed, your partner may start to feel lonely. Some may go on to find someone new and might even get re-married. It’s completely understandable.

But what happens if your former spouse dies before their new partner? In that situation, your entire estate could go out of the door with Mr or Mrs New. Nothing would be left to any of your adult children.

This can easily avoided with a trust in your Will. It ensures that your money passes to your children after the death of your partner.

4. Long Term Care

Thanks to healthier lifestyles and medical advances, people in the UK are living longer.

A newborn boy can now expect to live to 79.2 years old and a girl 82.9 years old, compared to just 68.1 and 74 if they’d been born in 1960.

This also means that many more elderly people need places in care homes, and local authorities are having to find the money to pay for them.

The way they’re doing that is shocking.

After your death, they will take your home and sell it to pay for the cost of your care. Unless, that is, your house and all your other assets are worth less than £23,250.

It’s pretty unlikely that your house would be worth less than £23,250. So chances are that the local authority will take it, sell it, and grab back the care fees.

After they’ve taken those fees – potentially from several years’ worth of care – there could be very little left for your loved ones.

When set up at a time when the need for care and support is not reasonably foreseeable and where avoiding care costs is not a significant reason for setting up the trust, it is possible that your assets may be afforded some protection against the ravages of long term care costs.

5. Inheritance Tax

We all have to pay inheritance tax if the value of our estate is above a certain threshold, which is called the nil rate band.

That nil rate band is £325,000 per person, and in 2017 the government added an extra £100,000 to this for homeowners.

For a married couple with a property, their combined nil rate band is simply the individual amounts added together.

This rises by £25,000 per person over the three years until 2020, when the amount will be frozen. Currently  the nil rate band for property-owning married couples is £950,000 rising to £1,000,000 on the 6th April 2020.

One million pounds! It sounds like a lot. But imagine what would happen if the NRB remains unchanged for the next 15 years.

If house prices increase as much in that time as they have over the previous 15 years, there’d be a huge inheritance tax claim on your estate.

Trusts – when carefully constructed and often combined with financial advice – may help to reduce the value of your estate for inheritance tax purposes if you survive for 7 years after having set up the trust.

Brief history of the origin of Wills

The idea of Wills seems straightforward. It gives you the legal right to pass on your property and possessions to anyone you like. Perhaps surprisingly, though, people haven’t always enjoyed this freedom.

The invention of Wills is often credited to a statesman called Solon, who lived in Ancient Greece around 600 years before the birth of Christ. Solon’s law let people choose who to leave their estates to, instead of everything going automatically to family members.

There were a few restrictions, though. You had to be a citizen of Athens. It didn’t apply to women, slaves, foreigners, or anyone who was adopted. And if you had sons – too bad. They’d automatically inherit your estate anyway.

If instead, you had daughters, you had the choice of bequeathing your assets to men other than family members. The catch was that these men were then obliged to marry your daughters, thus ensuring that wealth always stayed in the family.

Roman Wills

The concept of a Will was further developed by the Romans, who were also keen to keep things in the family. If you omitted a child from your Will without giving a good reason, it could be considered a dereliction of duty and your Will simply ignored.

One way around this was to leave a pittance to your offspring, as this was proof that you truly were thinking straight at the time you made your Will.

Early Roman Wills were spoken aloud in the presence of seven witnesses. However, this oral method relied on witnesses accurately remembering what they’d heard years later, and so was eventually replaced by written Wills.

Statute of Wills

In England, a major development of Wills concerned property rights. In 1540, during the reign of King Henry VIII, an Act of Parliament called the Statute of Wills enabled individuals to decide who would inherit their land.

Previously, land could only be passed to surviving relatives. If there were none, it would automatically go to the crown. Landowners were understandably unhappy with this state of affairs, and the Statute of Wills was seen as a compromise with the king.

The Statute of Wills was superseded by the Wills Act of 1837. This unified previous legislation governing land and property with rules concerned with personal possessions.

Rules of Intestacy

Many of the rules introduced in the 1837 Act remain valid today. However, a later Act of Parliament was introduced to govern what happens to people who die without a Will, i.e intestate. The Administration of Estates Act was introduced in 1925 – less than a quarter of a century after the end of the Victorian era. It’s fair to say that public morals then were very different to what they are today.

It’s probably not too surprising that the Rules of Intestacy outlined in the Act aren’t favourable towards unmarried people who live together. Even now, if you die without a Will your estate will go to your blood relatives.

The Rules of Intestacy do recognise civil partnerships as well as marriages. But if the person you share your life with is neither spouse nor civil partner, they’ll receive nothing.

UK LPAs (lasting power of attorney)

Why would you require a lasting power of attorney?

The problems of old age aren’t pleasant to contemplate, especially if you’re young and healthy. But sadly many people do run into problems later in life, leaving them unable to make crucial decisions for themselves.

That’s why a lasting power of attorney (LPA) is such a good idea.

What is an LPA?

An lasting power of attorney is a legal document that gives one or more people – known as attorneys – the power to make decisions on your behalf. Despite what the name suggests, attorneys can be pretty much anyone you choose. Typically, they’re family members or trusted friends.

The only restriction is that an attorney cannot be bankrupt or subject to a Debt Relief Order, for obvious reasons! There are two kinds of LPA, and we recommend you have both:

• Property and financial affairs

• Health and welfare

Property and financial affairs

A property and financial affairs LPA would be useful if you have to go into hospital, for example. You might be laid up for a few days and unable to get to the bank. Or you might feel too ill to cope with financial matters. Your attorney could help by withdrawing cash from the bank and making sure your bills are paid.

Health and welfare

The second kind of lasting power of attorney covers health and welfare. This could be vital to you if the unthinkable happens and you fall victim to dementia, for example. It’s surprisingly common, affecting 1 in 14 people over 65 and 1 in 6 people over 80. The symptoms of dementia are associated with a decline in the correct functioning of your brain. It can diminish your mental sharpness, affect your judgement and cause memory loss.

With a lasting power of attorney in place, you’ll have the peace of mind that one of your attorneys can make critical decisions about your health and welfare if you cannot. LPAs came into effect with the Mental Capacity Act of 2005, replacing EPAs (enduring powers of attorney).

There was only one kind of EPA, covering property and financial affairs. If you have one of those, it’s a good idea to have an LPA to cover health and welfare too. This would allow your children to help care for you while you remain in your home. Most people agree that they would rather remain in their own home than be forced into a care home.

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Issued By Wayne Barnett
Website Maplebrook Services Cyprus
Country Cyprus
Categories Health , Insurance , Legal
Tags cyprus , lasting power of attorney , trusts , uk , wills
Last Updated February 11, 2020