Will Drafting and Administrative Provisions

Question 1

What are the main features in the structure of a will?

Answer 1

• Opening
• Revocation clause
• Appointments
• Non-residuary gifts
• Gift of residue
• Survivorship clause
• Administrative provisions
• Attestation clause

Question 2

What will be contained in the opening of a will?

Answer 2

This identifies the testator and the nature of the document

Full name and address of testator should be stated

Date of execution should appear here or at the end

Can mention expectation of marriage to a particular person here and that they don’t want the marriage to revoke the will

• Marriage will otherwise automatically revoke the will

Question 3

What is the purpose of a revocation clause?

Answer 3

Indicates that all earlier wills and codicils are expressly revoked

Question 4

What are some general points about appointments in a will? What is the maximum number of executors you can appoint?

Answer 4

Testator can choose who is responsible for dealing with their estate

Sometimes sensible to create an express trust of the estate and can be convenient to appoint executors as trustees too

No maximum number of executors that can be named in the will, but only a maximum of four can apply for the grant of probate to the same assets

• Good to have two, so there’s a substitute if one predeceases the testator

Question 5

Who could potentially be appointed executor in a will?

Answer 5

Family members and close friends can be executors – they may be more familiar with the estate and won’t charge it for their time, but they may lack expertise and need a solicitor (paid from the estate)

Solicitor can be executor and would have expertise to administer the estate, but will expect to be paid for their expenses and time working

• Better to appoint a firm, so the individual solicitor doesn’t die

Banks can also be executors; they have expertise, but usually charge a percentage of the value of the estate which can be significant

Question 6

Can executors and trustees charge for their work in that capacity?

Answer 6

An executor is a fiduciary and cannot profit from their position, unless authorised

They can recover out of pocket expenses, but not for time working

A trustee (which includes a PR) however can be paid reasonable remuneration only if they are either:

• A trust corporation
• A trustee ‘acting in a professional capacity’ - this means acting in the course of a profession or business which involves providing relevant services to estates and/or trusts

A sole executor/trustee is unable to recover remuneration; they need consent of co-executors or co-trustees

Wills often contain an express clause allowing for executors/trustees to charge

Question 7

What are some important points to note about non-residuary gifts and how the will might address these?

Answer 7

Pecuniary legacies are a gift of money

Specific legacies are gifts of specific assets; gift of personalty for general things like jewellery, gift of devise for a gift of land

• Issues can arise with ademption (land sold before death etc)

Beneficiaries must be clearly identified; accurately stating name and address is important

Testators can choose to give vested or contingent gifts

• Vested – they get it straight away or held on trust till 18
• Contingent – conditions imposed before receipt

Where beneficiaries die before the testator, the legacy lapses – usually into gift of residue

Where a gift is made to charity, the charitable body must be identified accurately; address and registered charity number should be included

Question 8

What are the general rules around the burden of IHT, costs and charges?

Answer 8

Default rule for IHT is that the IHT on individual legacies is paid out of the residuary estate, but the will can displace this rule by contrary intention

• If the testator gives something, ‘subject to tax,’ they will have to bear the IHT attributable to that gift – giving it ‘free of tax,’ confirms the general rule

If there are costs relating to packing or transporting a gift, unless the will provides otherwise, the beneficiary bears these costs - ‘free from costs,’ would cause the costs to be paid from the residuary estate

Where a house is given, which has a mortgage, the mortgage debt falls on the beneficiary who receives the charged property - ‘free of mortgage,’ would cause the mortgage debt to pass to the gift of residue

Question 9

How should the gift of residue be drafted? What clauses/directions should be included?

Answer 9

If wills don’t have a gift of residue or if it fails, there will be a partial intestacy

Wills should have an express direction for the payment of all debts, expenses and legacies to be paid from the gift of residue, otherwise the statutory order in the Administration of Estates Act 1925 will apply, which can cause problems

To avoid partial intestacy, it is a good idea for the testator to include substitutional gifts to cover the possibility of the primary gift failing

• Also, a good idea to omit names and specific shares, in case one of the class (say one of the three children set to inherit the residuary estate) die – this may cause the one-third share to pass on intestacy

Question 10

What are survivorship clauses?

Answer 10

Unless a will states otherwise, a beneficiary must only be alive at the death of the testator to acquire a vested interest

A survivorship clause allows testators more control over the destination of their property

• £50k to X, if they survive 28 days, but if not, then to Y
• Any beneficiary who does not survive me by 28 days shall be treated as having died before me

Question 11

What are administrative provisions?

Answer 11

PRs and trustees have statutory administration powers, which can be extended or modified by a testator

Some wills will benefit from having extensive express administrative provisions, whereas all wills will benefit from some

Question 12

In overview, what powers are useful to mention/modify in all wills?

Answer 12

• Power to charge
• Extended power to appropriate assets without consent of legatee
• Power to insure assets
• Power to accept receipts from or on behalf of minors
• Self-dealing - Might need to permit self-dealing if an executor is also a beneficiary

Question 13

What is the power to charge?

Answer 13

Allows executors and trustees the power to charge remuneration

• Can be included with appointment clause or other APs
• Should be clear if any profession can charge or only people whose profession involves administering estates and trusts can charge

Question 14

What is the extended power to appropriate assets without consent of legatee?

Answer 14

Statutory AP to PRs to allow assets in the estate to be used towards the satisfaction of any legacy or interest in residue, if this doesn’t prejudice a specific legacy

• Someone owed £1000 can take a £1000 table for example

The original statutory AP requires the legatee’s consent, so it is common to remove the consent element

Question 15

What is the power to insure assets?

Answer 15

PRs have a duty to preserve the value of the estate, so there is a statutory AP which allows PRs and trustees to insure assets against all risks, to the full value of the property + to pay premiums out of income and capital

• Helpful to repeat it in will

Question 16

What is the power to accept receipts from or on behalf of minors?

Answer 16

If there are family tensions, will can be drafted to leave a legacy to trustees to hold for the benefit of the minor rather than to the child itself, as the PRs might be concerned about parents giving good receipt for child’s legacy

Will could also have a clause allowing PRs to accept the receipt of the child if the child is over 16

Question 17

In overview only, what are the powers to include for trustees?

Answer 17

• Power to appropriate assets
• Power to invest
• Power to purchase land
• Power to sell personalty
• Power to use income for maintenance of beneficiaries
• Power to use capital for the advancement of beneficiaries
• Control of trustees by beneficiaries
• Powers relating to trusts of land
• Power to carry on the testator’s business

Question 18

Why do trustees need the power to appropriate assets included?

Answer 18

Need to amend statutory AP to allow trustees to also appropriate assets without legatee consent – original only for PRs

Question 19

What is the power to invest?

Answer 19

Trustees have a duty to invest trust money and duties arising from that

Generally, no need for an express investment clause

Question 20

What is the power to purchase land?

Answer 20

Trustees can acquire land in the UK for investment or beneficiary occupation, but they cannot purchase land abroad or purchase an interest in land with someone else

• Can add an express clause to allow this

Question 21

What is the power to sell personalty?

Answer 21

Can be useful to add a clause expressly stating that trustees can sell personalty

Question 22

What is the power to use income for maintenance of beneficiaries?

Answer 22

When trustees hold a fund for a minor beneficiary, they can use income for their maintenance, education or benefit

When they are over 18, they must pay income to them

• The APs can modify the age from 18 to something else

Question 23

What is the power to use capital for advancement of beneficiaries?

Answer 23

Trustees can advance capital early to beneficiaries who have an interest in it

Question 24

How can the control of trustees by beneficiaries be varied?

Answer 24

Testator can exclude the power of beneficiaries to direct trustees to retire and appoint new ones

• Under s.19 Trusts of Land and Appointment of Trustees Act 1996 (TLATA), if the beneficiaries are all of full age, capacity and between them, absolutely entitled, they can direct trustees to retire

Question 25

What powers arise in relation to trusts of land?

Answer 25

Beneficiaries under a trust of land, who have an interest in possession, have special powers, which the will could amend * Interest in possession arises if a beneficiary is entitled to claim the income of the fund as it arises (life interest or over 18 and entitled to claim income) 1) Trustees exercising any function relating to the land must consult any beneficiary of full age and beneficially entitled to an interest in possession in the land and, so far as consistent with the general interest of the trust, give effect to their wishes * Can be and is often excluded 2) Beneficiary with a beneficial interest in possession, even if not of full age, has the right to occupy land, subject to the trust and its purposes * Cannot be excluded but the will can state that the trust is not for the occupation of land

Question 26

What is the power to carry on the testator's business?

Answer 26

Can extend the powers to run deceased sole trader’s business, which are normally limited to selling it as a going concern

Question 27

What is the purpose of an attestation clause?

Answer 27

Should be used in all wills to show s9 formalities have been complied with Testator must sign in presence of 2 witnesses at same time and witnesses must sign in presence of testator, but not necessarily one another Clause raises a presumption of due execution

Question 28

What are the key professional conduct issues that a solicitor drafting a will must consider?

Answer 28

1) Taking instructions from a 3rd party * Only take instructions from the client for the drafting of a will and not an intermediary 2) Legacies to the solicitor drafting the will * Solicitors should not prepare a will giving significant amounts to themselves, their spouses or family unless the client has received independent advice 3) Appointment of the solicitor as executor * Must not lead a client to think that appointing the solicitor as an executor is essential or the default position when making a will * Before appointing themselves or the firm as an executor, they should ensure the client is fully informed, so they know the other options, including that a non-professional can be an executor * Solicitor should also record the advice they give regarding appointment and the client’s decision