What are the STEP Standard Provisions?

Posted on By admin

If you have a will, there is a high chance that they will include mention of the ‘STEP Standard Provisions’. But what does this mean?

The STEP Standard Provisions are a set of ready-made clauses that can be inserted into a will. These clauses provide protections and powers that enable the executors or trustees to effectively deal with the estate.

Since they were first published in 1992, the STEP Standard Provisions have become an important element in the drafting of wills, with will drafters incorporating them into countless wills and settlements.

Please note that this article refers to the England and Wales STEP Standard Provisions. There are separate Provisions that cover the law of Northern Ireland.

What is the benefit of the STEP Standard Provisions?

The STEP Standard Provisions give the executors of the will a number of technical and routine provisions and powers to help them to administer the estate properly. They are written in non-technical language, avoiding legal jargon, so they are easy to understand.

Why is this relevant to me?

Your will is an important document that sets out what should happen when you die. A well-written will can provide peace of mind that your loved ones will be provided for after you’ve gone. With such an important document, it is essential that you fully understand everything contained within it.

What are the different versions?

The England and Wales STEP Standard Provisions were first published in 1992. Since then, STEP has published two new editions: the Second Edition in 2011 and the Third Edition in November 2023. The new editions recognise changes in law.

What changed in the Third Edition?

Trust and will legislation has changed since the publication of the Second Edition in 2011, so the STEP Standard Provisions needed to be updated and modernised.

The most significant amendment is the standardisation of the clauses on trust corporations, which take into account wording from the terms and conditions of trust corporations.

Do I need to change my will if they refer to an older edition?

No, you don’t need to change your will if it refers to the First or Second Edition. These editions still remain valid. You should, however, review your will periodically to make sure it remains up to date. When you do this, the edition can be updated accordingly.

How do I know if the STEP Standard Provisions have been used in my will?

If your will includes the STEP Standard Provisions, there will be a statement included as follows (or similar):

‘The Standard Provisions of the Society of Trust and Estate Practitioners (XXX Edition) shall apply’.

If any of the ‘Special Provisions’ are also included, this will be clearly stated, noting which apply.

A qualified will drafting professional should explain the STEP Standard Provisions when they draft your will. If your will includes any of the Special Provisions, each of these should be explained to you so you understand what is included and why. You can ask your will drafter for a copy of the STEP Standard Provisions when you make your will. Alternatively you can find these at www.step.org/step-standard-provisions

Who should I speak to about making/updating my will?

It is essential to think carefully about who you choose to write your will. Although anyone can write a will, there are some factors you can check that your will writer has to give you peace of mind. These include:

  • Specialist accreditations: are they a member of STEP (a full member can use the letters ‘TEP’ after their name) or a another reputable specialist body?
  • Qualifications: Do they hold any specialist qualifications such as STEP’s Advanced Certificate in Will Preparation or the STEP Diploma?
  • Have they told you who regulates them and which relevant professional bodies they are members of? Are they signed up to an ethical code?
  • How much experience do they have in this specialist area?
  • Insurance: Do they have professional indemnity insurance (PII)?
  • Terms of Business: Have they given you a contract that sets out the service they will provide for you? Are the costs transparent?
  • Complaints: Have they told you who you can complain to if something goes wrong?

You can search for a STEP member here.

How can I gift money without worrying about inheritance tax? And how do gifts affect my Lasting Power of Attorney?

Posted on By admin
Close up of a young family in their living room using a laptop

The following gifts may be made without worrying about inheritance tax:

The Annual Exemption, which is currently £3,000 per tax year, per individual donor (not the person receiving the gift, or ‘donee’). If last year’s has not been fully used, any remaining exemption may also be used. For example, a couple that has not used either last or this year’s exemptions, could gift up to £12,000 in total by using four annual exemptions this year.

Small gift – £250 per donee, but they cannot be used in conjunction with the annual exemption and there is no limit to the number of individual donees who can benefit.

Gifts in consideration of marriage/civil partnership – each tax year, the maximums are £5,000 if gifting to a child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else.

To claim this exemption, the gift must be made on or before the date of marriage or civil partnership and not afterwards. It can be combined with the annual exemption. If the marriage does not take place, the relief is denied and, if not covered by another exemption, the gift is a Potentially Exempt Transfer (PET) and potentially taxable when the donor dies.

Gifts of any amount to a spouse or civil partner.

This is called the ‘spousal exemption’ and any amount may be transferred either during their lifetime or upon death.

Charities – full exemption on lifetime gifts and upon death. Also, the inheritance tax rate reduces to 36% where at least 10% of the net estate is left to a registered charity upon death

Gift Aid – donating through Gift Aid means charities and community amateur sports clubs can claim an extra 25p for every £1 given.

The tax could have been paid on income or capital gains. The charities being supported must be told if you stop paying enough tax. If you pay tax above the basic rate, the difference between the rate you pay, and basic rate may be claimed on your donation. 

Wills and lasting powers of attorney (LPAs)

It is a good idea to consider what your will says before gifting to make sure that the proposed gift does not disturb your intentions upon death.

Having a properly drafted LPA for property and financial affairs, with appropriate preferences and instructions, may allow your attorneys to continue to make payments on your behalf in circumstances where you have lost mental capacity, without first having to obtain an order from the Court of Protection.

Top three tips

  • Take professional advice from a financial planner who is also a registered STEP qualified trust and estate practitioner.
  • Properly consider what you are attempting to achieve because there may be a better way that does not involve gifting.
  • Take a holistic approach and base your decisions on a well thought out and robust financial plan before implementing gifts, particularly where significant amounts are involved.

Robin Melley TEP, Founder and Director, Matrix Capital, Chartered Financial Planners

Should I use an online will-writing service?

Posted on By Liz Skinner
worried woman at computer

Are you thinking about writing your will but are wary of paying for a service you’re not sure you need?

If you don’t usually pay for financial or legal advice, it can be easy to assume that a low-cost online will is the best value option. But while this may be the right choice for some people, this will not be the case for all.

Consider the complexity

While an online will might be appropriate if you have straightforward needs, it can be the wrong answer if your affairs are at all complicated. This includes if you have a large and/or complex estate, have been divorced and/or remarried, have property abroad, own a business, for example. In these circumstances an online will may result in unforeseen tax consequences or ultimately may not achieve what you intended it to.

Read the small print

It is also important to read and understand the small print.

Some low-cost online wills include fees, often only mentioned in the terms and conditions, that mean that the company who set up the will appoint themselves or a firm of their choosing as executors, or as administrators of the estate. This can result in the firm taking a significant fee from the estate. This can cause great distress, particularly for a more modest estate because loved ones end up inheriting far less than they would have expected.

A professional will does not have to be expensive

Making a will need not be expensive. Most practitioners charge a reasonable fee for a straightforward will. A professional can help you consider important questions that you may not otherwise have thought about. A badly drafted will can have unintended consequences that may create difficulties for your loved ones after you pass away. It is important to use a reputable and qualified practitioner to prepare a will that meets your needs.

Will writing is not a regulated activity in England and Wales. STEP developed the Code for Will Preparation in 2014. It sets out the standard of transparency, service and competency you can expect from a STEP member preparing your will.

By using a will preparer who is subject to the Code, you will know they are taking all the necessary actions to plan for your assets’ future.

Find a STEP member in your area

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.