I’m getting divorced. Do I need to revise my Power of Attorney?

Posted on By Joanna Pegum
estranged couple
If you are one of the nearly 100,000 couples getting divorced every year, there will be a lot on your mind. There will be meetings with your solicitor, paperwork to prepare and sign, and you may have a property to dispose of. However, it is very important that you review both your will and your Power of Attorney. This applies equally if you are dissolving a civil partnership. Let’s look at Lasting Powers of Attorney (LPAs) and ask whether:
  • divorce ends your spouse’s appointment as your attorney;
  • divorce terminates the rest of your LPA;
  • before the divorce, your spouse can renounce his or her appointment as your attorney;
  • before the divorce, you can revoke your LPA or terminate your spouse’s appointment.

Lasting Powers of Attorney

There are two types of LPA:
  • A Property and Financial Affairs LPA allows you to give someone (your attorney) authority to manage your finances if you become physically or mentally incapable of managing them yourself. He or she can pay your bills, operate your bank accounts, and sell or rent your home.
  • A Health and Welfare LPA gives your attorney permission to make decisions about where you live, how you are looked after, and your medical treatment if you become unable to make those decisions yourself.

1.Will divorce end my spouse’s appointment as my attorney?

A divorce will usually end a spouse’s appointment as your attorney. In fact the only exception is if an LPA specifies otherwise. To consider this, let us take the example of Henry and Wilma who are married with two adult children. Henry has made an LPA appointing Wilma to be his attorney. If Henry and Wilma divorce, then the appointment of Wilma as Henry’s attorney will end on the dissolution of their marriage. The only exception is if Henry’s LPA specified that Wilma’s appointment was not to be revoked on divorce. For example, if it specifically included a clause stating ‘The dissolution of my marriage to Wilma shall not terminate her appointment as attorney of this Lasting Power of Attorney’.

2.Will divorce terminate the rest of my LPA?

The answer depends on how your attorneys were appointed.

Appointment of Attorneys

When making an LPA you can appoint just one attorney, or more than one. You can also decide whether you appoint replacement attorneys in case your original attorney dies, or is unable to act. If you appoint them ‘jointly and severally’ then they can make decisions on their own or together. If you appoint them ‘jointly’ then they must always act together and agree on every decision.

Sole attorney, no replacement attorneys

So to use the example of Henry and Wilma, if Henry appointed Wilma as his only attorney, with no replacements, then if the attorney cannot act, the LPA will end as there is no one else appointed to step in.

Sole attorney, but replacements attorneys appointed

If Henry appointed Wilma as his sole attorney and appointed the children as replacement attorneys, then the LPA would continue to be effective, but with Wilma’s appointment having terminated. Therefore, the children would be able to step in and make decisions for Henry if he became incapable.

More than one attorney appointed ‘jointly’

If Henry appointed Wilma and their children to act ‘jointly’ then because they must always act together, the LPA would be terminated on the couples’ divorce.

More than one attorney appointed ‘jointly and severally’

Had Henry appointed Wilma and his children to act ‘jointly and severally’, meaning that they could make decision on their own or together, then the LPA would not be terminated on divorce. Wilma’s appointment as an attorney would end, but the children would continue to be his attorneys. In summary, divorce will terminate your LPA, if your spouse was appointed to act alone or jointly, and there are no replacement attorneys appointed.

3.Can the attorney disclaim their appointment before the divorce?

Yes. Continuing the above example, Wilma could disclaim her appointment as an attorney under the LPA. She might want to do this if she wanted her appointment to end immediately rather than having to wait for the divorce to be finalised. She would need to complete and sign form LPA005 (Disclaimer by a proposed or acting attorney under a lasting power of attorney). The original signed form would need to be sent to Henry, and a copy to any other attorneys and replacement attorneys. If the LPA is registered with the Office of the Public Guardian (OPG) then she would also need to send it a copy of the form, together with any copies of the LPA that she has. Whether the disclaimer revokes the entire LPA or not will depend on whether Henry appointed Wilma ‘jointly’ or ‘jointly and severally’ and whether there are any replacement attorneys appointed.

4.Can I revoke my LPA or terminate my spouse’s appointment prior to divorce?

Yes. So again, using the example, Henry could decide to revoke his entire LPA and make a new one, or revoke Wilma’s appointment as attorney by signing a Deed of Revocation. He would need to give Notice of the Deed to the OPG, so it can either cancel the registered LPA, or amend its records to remove Wilma. Henry would also need to give notice to any other attorneys or replacement attorneys.

5.I have an Enduring Power of Attorney. Is the position the same?

Before 2007 you could put in a place an Enduring Power of Attorney (EPA) to appoint someone to manage your finances if you became incapable of managing them yourself. Although no new EPAs can be made, existing EPAs continue to be valid. The Enduring Powers of Attorney Act 1985 makes no provision for a situation where the donor and attorney were married when the EPA was made, but then divorce. If you have made an EPA and are now getting divorced, you may want to revoke the EPA, so the position is clear, and make a new LPA.

Related posts

Alison Craggs TEP is a Senior Solicitor at The Burnside Partnership in Witney, Oxfordshire

Getting married? Protect your family business with a pre-nup

Posted on By Joanna Pegum
couple walking

You’re getting married! Congratulations! This is an exciting time for you and your partner. In the whirlwind of excitement, practical considerations such as a pre-nup are often far from your mind. But if you own all or part of a family business, or you expect to inherit shares in a family business, then it is important to plan for all eventualities – one of which is the possibility (however unlikely ) that your marriage or civil partnership might not last.

What happens to business assets on divorce?

The starting point for the division of assets on divorce or dissolution is an equal division, and this might include a share of the business, which could cause issues for its survival.

It is subject to the discretion of the court as to whether there should be a departure from equality. Under the Matrimonial Causes Act 1973 the court will consider a range of factors when exercising its discretion as to how assets should be divided including: each party’s financial needs and resources, length of marriage, age of the parties and standard of living.

In cases involving family businesses, there is no certainty that the business will be ‘ring-fenced’ from the division of assets. The court will consider whether the business is matrimonial property and therefore whether it forms part of the matrimonial pot.

Is a pre-nuptial agreement binding?

While a pre-nuptial agreement is not automatically legally binding in England and Wales, it will be one of the factors taken into account in the court’s discretionary approach. The decision in the case of Radmacher v Granatino [2010] UKSC 42 found that more weight can be attached to a pre-nuptial agreement provided it is freely entered into by each party, with a full appreciation of its implications.

Therefore it is likely that the court will uphold a pre-nuptial agreement if the following elements have been met:

  1. Both parties obtained independent legal advice prior to entering into the agreement.
  2. Both parties entered into the agreement freely without any pressure or undue influence and the agreement was executed at least 28 days before the marriage/ civil partnership.
  3. Prior to entering into the agreement both parties provided the other with full financial disclosure.
  4. Both parties understood the implications of the pre-nuptial agreement.
  5. The agreement was validly executed as a deed.

When considering whether a pre-nuptial agreement is fair, the court will also consider whether there have been any unforeseen changes in the parties’ circumstances that may render the pre-nuptial agreement unfair; or whether the agreement would prejudice the needs of any children of the family. It is unlikely that the court will uphold a pre-nuptial agreement that is inherently unfair to either party or any children.

Provided that the court is satisfied that a pre-nuptial agreement follows the above criteria, it can provide protection for individuals with family businesses by ensuring the business interest remains within the family. It will provide clarity for each party at the outset of the marriage or civil partnership about which assets are intended to form part of the matrimonial finances, and allow parties to plan what will happen in the event of divorce or dissolution. It may also help to alleviate the possibility of contested financial proceedings upon the breakdown of a marriage or civil partnership, which can be a stressful and expensive process.

Seek advice

Everyone’s situation is different. Before embarking on any course of action, you should speak to a qualified advisor with expertise in issues relating to family businesses.

Related articles

Amanda Simmonds TEP, Senior Associate, Private Client, Lupton Fawcett, Leeds.

‘One day, all this will be yours’: passing on the family farm

Posted on By Joanna Pegum
farmer and cows in countryside

It can be a very proud moment for a parent to look around a farm and to say to their child, ‘one day, all this will be yours’.

Family farms are often passed from one generation to the next and the value of land means that farms can have a considerable value, even if at the time cash is tight. Often two or three generations of the same family work together on the same farm.

But sometimes, unexpected things happen: parents get divorced and remarry, or family arguments drive a wedge between parent and child. In these circumstances, a parent may change their mind and make a new will, leaving property in different shares or, perhaps, leaving it to a new partner.

Can I change my will?

Anyone is generally free to change a will at any time. When making a will under English and Welsh law, a person is entitled to be capricious, whimsical or unfair if they wish to act in that way. Sometimes a new will is made just to reflect a change in circumstances.

An individual is perfectly free to make a promise to leave a property to someone – only to change their mind later. This situation is quite common.

So what’s different for family farms?

Family farms, however, face a unique situation when it comes to owners changing their minds. For example, a property-owning farmer may say to his daughter: ‘one day, all this will be yours’. He promises this on many occasions over a long period of time, and so the daughter continues to work on the family farm and turns down opportunities to work elsewhere (perhaps for a higher wage). This encourages her to stay working on the farm for a low salary precisely because one day the family farm will become hers.

If the farmer later decides to change his mind, this starts to stray into a more complicated legal situation.

If a property owner makes a promise to someone (for example to leave them the farm), and that person relies on that promise and acts to their detriment (for example by turning down the opportunity to work elsewhere for a higher wage), then the property owner can be held to that promise – even if they make a will to the contrary.

This legal principle is known by the slightly unusual word ‘estoppel’.

Sadly, there have been numerous recent cases that have gone all the way to trial in precisely these circumstances: a property-owning farmer has made a promise to leave the farm to a particular beneficiary, only to change their mind later. These are some of the saddest cases to come to court, since they reflect a tragic breakdown of family circumstances.

Try to resolve things amicably

If you find yourself in this situation and promises have been made and then broken, a good lawyer should take steps to try to resolve any family dispute amicably, without the worry, risk and expense of a trial.

Many people embark on a process of mediation in the hope that a family relationship can be salvaged and the work of the farm can continue. Statistically, mediations have a very high prospect of success: in the region of 85 per cent of cases referred to meditation settle, with considerable benefit for family members so that they can meet again around a kitchen table rather than at in court.

Don’t make promises you can’t keep

The best defence, however, is to avoid this sort of situation arising in the first place. It may be tempting as a short-term fix to offer to leave a farm to one beneficiary, rather than to someone else. Sometimes these promises are made on the spur of the moment or in the heat of an argument. These promises can, however, have serious consequences for the future of the farm. In short, promises should never be made unless they can be kept.

Stephen Lawson TEP is a Partner and Head of Litigation at FDR Law LLP, Frodsham, UK

Do I need a prenuptial or postnuptial agreement?

Posted on By Louise Polcaro
prenuptial agreement,divorce,marriage

Family Court judges have wide discretion as to the division of assets on divorce. At a time when families and their assets are becoming increasingly complex and often spread across different countries, you can protect your own or family wealth by entering into a prenuptial or postnuptial agreement with your spouse, or spouse to be, to set out how assets would be split if you were to divorce.

Prenuptial agreements

Prenuptial agreements are contracts entered into before marriage. Although still perceived as an American phenomenon, they have long been normal practice in many countries across the world. It was only in 2010, however, that they became legally enforceable in the UK, after the landmark case of Radmacher v Granatino. Since then, they have steadily gained popularity as an effective way of future-proofing a relationship.

Whilst, unlike commercial contracts, prenuptial agreements are not binding, they are considered to have ‘magnetic importance’ and will only be disregarded by the Family Court if they are obviously unfair.

Postnuptial agreements

Postnuptial agreements are the same in principle as prenuptial agreements, but are made at any point during a marriage.

If a couple includes in their prenuptial agreement a clause to review the contract every few years, then it will become a post-nuptial agreement if and when it is amended.

Postnuptial agreements currently carry more legal weight than prenuptial agreements, but the best way to ensure that a judge respects your wishes is by having both types of contract.

Why make a nuptial agreement?

By determining who gets what in advance, nuptial agreements allow couples to avoid protracted and acrimonious litigation in the event of divorce. Some couples choose to cover just their main business and trust interests or inheritance, and others address the relationship more comprehensively.

Some uses of nuptial agreements are:

  • in first marriages to demarcate what is matrimonial property and what is non-matrimonial (such as inherited wealth).
  • in subsequent partnerships to ensure you provide for any children from previous relationships, especially where there are more significant sums involved.
  • within family businesses, making nuptial agreements a prerequisite is a prudent addition to a family constitution in order to prevent any disruption to the business.

Do it properly

However they are used, nuptial agreements must be entered into with proper legal advice and full disclosure of assets in order to best ensure, as far as possible, that they are upheld by the Family Court. You should not enter into a nuptial agreement unless you intend to be bound by its terms.

Related articles

Hannah Southon TEP, Consultant, Litigation; and Xanthy Papageorgiou, Senior Associate; both with Sinclair Gibson

Divorce and the effect on wills in Scotland

Posted on By admin
divorce, will

Finalising a divorce is a vital time to bring your personal affairs up to date – particularly your will, power of attorney and potentially your title deeds.

Many people assume that divorce will automatically invalidate a will, power of attorney or Survivorship Destination, but that is only part of the story.

Although the law has tried to accommodate the likelihood that people will not wish their ex-spouse or civil partner to benefit from their estate, the legal treatment of existing arrangements can potentially give rise to a further set of complications, which can easily be avoided by carrying out a review with a qualified advisor.

Changes to Scots Law

Under Scots Law prior to November 2016, a divorce had no impact on a will, but recognition of the change in families and relationships has resulted in recent changes to modernise Scots Law and bring it more in line with other parts of the UK. Now, like the rest of the UK, an ex-spouse or civil partner is treated as though they have died before the granter of the will. In other words, the will is not automatically revoked but instead it is read as it stands, but ‘missing out’ the former spouse or civil partner.

Why do you need to review your will?

Although a step in the right direction, this can leave your will in a bit of a mess, for example:

  • an appointment of your former spouse or civil partner as executor, trustee or guardian of children will fail, unless the will specifically states otherwise;
  • if the will does not provide for an alternative executor, an appropriate person (usually another beneficiary) will have to apply to the Court so that the estate can be administered;
  • if you have made legacies solely to your ex-spouse or civil partner, these will fail and they will fall into the residue of estate; where there is no substitute beneficiary, the estate may be intestate and will have to be claimed by eligible family members.

As a result, you will need to undertake a review of your personal affairs on divorce or you run the risk of a complex estate, which is not administered as you would have wished.

Dara Richards is a Private Client Associate, Notary Public and Solicitor for the Elderly at Ledingham Chalmer

I am getting re-married – will my children still inherit?

Posted on By admin
remarriage

Many people don’t know that when you get re-married your existing will becomes null and void, so you will need to make a new one if you wish to ensure your loved ones are provided for if you die. (NB this is the case in England and Wales and Northern Ireland; it’s different in Scotland – see section below.)

If you don’t have a will, your estate will be distributed under the rules of intestacy, which direct that your spouse will automatically inherit the first £250,000 of your estate and all of your personal possessions. There are more complicated rules if your estate is valued over £250,000, depending on which of your relatives are still alive. (There is a useful tool on GOV.UK to work out who inherits if someone dies without a will.)

This may mean your children will not inherit as much as you would like them to, so it is essential to arrange a new will as soon as practicable after you have re-married. You can, in fact, make a will in anticipation of getting married, in which case your advisor will incorporate a clause stating that the will should be read as though you are already married. However, you may find it simpler to make your new will as soon as possible after you are married.

Providing for your family

If you have children from your first marriage, then you will probably want to make sure that your children and your new spouse and perhaps any step children are provided for in the event of your death. You may wish to consider setting up a trust in your will that will allow your second spouse to benefit from your assets during his or her lifetime with the certainty that your children will receive the assets later on.

Having experienced the breakdown of your first marriage, you may wish to put some plans in place in case this second marriage doesn’t last. A prenuptial agreement would enable you to protect some assets for your children if your marriage breaks down.

Home ownership

If you own your matrimonial home as joint tenants it may be more appropriate to change the ownership to tenants-in-common so that you have greater control over who should inherit your share of the property if you die. With a tenants-in-common ownership your share passes into trust on your death rather than automatically passing to your second spouse.

If you do this you should draw up a Declaration of Trust that sets out each co-owner’s stake in the property so that your children will inherit the right amount. You can also stipulate whether the surviving partner would have the right to continue to live in the property until they pass away or wish to sell. Without this in place, your partner may be forced to sell the property in order to give your children their inheritance.

NB: Home ownership options are similar but with slight variations in terminology and process across the UK. You can find out more in our article: ‘Should we own our home as joint tenants or tenants-in-common?’

Proper planning

Planning for all eventualities can be complex, so it is important to speak to a qualified advisor to make sure you have covered all bases. With proper planning you can ensure that your second spouse and your children are both protected and maintain control over how your assets are distributed on your death.

What about in Scotland?

In Scotland, your will is not revoked upon marriage but it is still important to review your will to ensure everyone you want to provide for is included. In addition, Scotland has different rules in relation to inheritance, with a spouse/civil partner and children entitled to a ‘legal right’ to inherit a set portion of your estate.

It’s never too soon to make a will

Posted on By admin
young man with cat

What have you got planned for later life? A cruise might be nice, or a cottage by the sea, but what about money? Do you know if you could afford a care home? Have you made a will? Do you know who would care for your family?

If your answers are no, you’re not alone. Apart from having a pension, research from savings organisation NS&I has shown that over half of us have not made any further financial plans.

More than a third haven’t made provision for long-term illness, nursing or care home fees, either for ourselves, or for other family members. Another third have thought about it – but haven’t put any plans into place.

Even such a basic step as making a will seems to elude most of us, even though almost everyone agrees it’s important.

Many people feel that they are too young to make a will, even those in the 45-64 age bracket.

It seems to be the big steps in life that finally prompt people to take action, notably getting married and having children.

However, it’s worth thinking of your family at every stage in life. If you die without making a will, they can be put under enormous strain trying to work out your wishes. They may face higher tax bills too.

If you don’t make a will, standard rules known as the intestacy rules will apply, and your estate could be divided up in ways you’d never have wanted.

For example, if you had been married and separated, but never got divorced, your ex-husband or wife would automatically benefit, even if you had spent many years with a new partner. If you had not married, but lived with a partner, your parents or siblings would inherit, and your partner may get nothing.

‘Many people assume their possessions will simply pass automatically to their partner or children, or believe their assets are too insignificant to need a formal arrangement’, says Emily Deane TEP from STEP.

‘But if you die without making a will, the intestacy rules will be applied, and this may not be what you want,’ she added. ‘The only certain way to ensure that your partner or relatives inherit in line with your wishes is by making a will.’

The donor’s dilemma

Posted on By admin
mother thinking of handing over house

If you are thinking about transferring your house to your children during your lifetime, you should first consider the seven Ds…

  1. Divorce

If any of your children were to divorce then there would be a risk, however remote, that any assets in their name, including your house, could be taken into account in the divorce settlement.

  1. Debt

In the event of any of your children getting seriously into debt or becoming bankrupt then there would be a risk, however remote, that their creditors may seek to force them to sell your dwelling-house in order to discharge the liability.

  1. Death

If any of your children were to die before you without making appropriate provision in their will in relation to your dwelling-house, then there is a risk that their share of your house would pass to an in-law. Indeed, the problem may be compounded if your son-in-law or daughter-in-law should subsequently remarry.

  1. Disagreement

You may subsequently want to sell your house and apply the sale proceeds to buy another house. There is a risk that your children will not agree with your request. In addition, there is a risk that your children may wish to sell your house without your agreement and seek to have you put out of your own home.

  1. Deliberate deprivation

Health Trusts/local authorities have rules against deliberate deprivation of assets. If it can be proved that you deliberately deprived yourself of an asset in order to get government help towards nursing home fees, then the value of your house could be clawed back from your children. There is no time limit on this, although the longer the period of time between your transferring ownership and going into a nursing home, the less likely it is that the transfer will be challenged.

  1. Deprivation feeling

It is very important that you should try and envisage how you would feel if you have given away ownership of your house and other assets to your children. Will you feel deprived? Will you feel out of control? Will this feeling cause you to lose sleep and wish you had not done it?

  1. Doubt

If you are in doubt about what you are doing, it is better to postpone any action until such time as you are sure.

A qualified advisor can talk you through your options, ensuring all angles have been considered.

Peter M Thompson TEP, Thompson Mitchell Solicitors, Portadown, Northern Ireland

Getting divorced? Make sure you review your will

Posted on By admin
Divorce

With all the other issues to think about when going through a divorce, updating your will can easily fall between the cracks.

But while divorce does not automatically revoke your will, it can leave it in a bit of a jumble. This is because the will remains valid, but it will be read as though your ex-spouse is not in it. So any provisions that include your ex-spouse will be excluded from your will and any gifts made to your ex-spouse will fall back into your estate to be divided among the other beneficiaries.

And don’t forget that in the days/weeks/months leading up to your divorce, your will is still valid. So if you die prior to the decree absolute, your spouse will inherit in accordance with your will. If this is not what you would want, you may wish to think about reviewing your will as soon as you are aware that you are going to get divorced.

Another thing to be aware of is what happens if you re-marry. Marriage or civil partnership automatically revokes any previous wills, so you must make a new will at this point too.

Key points to consider when reviewing your will

Below are some points you may wish to consider:

  • Did you appoint your spouse as executor? If so, you will need to consider who you would like to instruct in their place. You may appoint more than one executor.
  • Did you leave the bulk of your estate to your spouse? If so, if you don’t amend your will you will effectively die intestate and it will be distributed in accordance with the intestacy rules. You will need to amend your will to reflect who you would like to leave your estate to.
  • You will need to consider your inheritance tax liability. Married couples benefit from a transferable nil-rate band, enabling them to transfer up to £325,000 tax-free to their spouse on their death. You may therefore need to consider your tax planning strategy in light of your divorce.
  • You may wish to appoint a guardian for your children in your will in the event that something happens to you and your divorced spouse.

I’m getting divorced in Scotland. Is this different?

As of 1 November 2016, Scottish succession law was amended in relation to divorce and wills so that it echoes the position in England and Wales and Northern Ireland – see the article ‘Divorce and the effect on wills in Scotland’. Unlike in the rest of the UK, however, in Scotland your will is not automatically revoked on remarriage, and there are different rules in relation to inheritance, with a spouse/civil partner and children entitled to a ‘legal right’ to inherit a set portion of your estate.

Seek advice

Divorce and remarriage can make providing for your loved ones a little more complicated, so it is always wise to speak to a qualified advisor to ensure all angles have been considered.

Related articles