Martin Lewis on Wills, Powers of Attorney and Inheritance Tax
In the latest episode of ‘The Martin Lewis Money Show’, the Moneysaving Expert discussed the importance of Wills and Powers of Attorney. He also answered some frequently asked questions about Inheritance Tax.
Since the episode aired last night, we have already seen an influx in enquiries about these matters.
Evidently, Martin Lewis’ ongoing campaign has helped raise awareness about the need to have these important legal documents in place and seek legal advice. We are grateful to Martin and his team for making these complex topics accessible to the public.
You can watch the latest episode here: https://www.itv.com/watch/the-martin-lewis-money-show-live/2a1827
Please note that we are sharing information based on the recent 'Martin Lewis Money Show' as we believe it addressed important legal topics. We are not endorsing Martin Lewis or his show, nor are we affiliated with him in any way. This information is provided for general knowledge purposes only. We always recommend seeking independent legal advice tailored to your specific circumstances.
Jurisdictions: Martin’s panel included experts from the legal jurisdictions of both England and Wales and Scotland. For the purposes of this article, we will refer to the rules of England and Wales. For advice about Wills, LPAs and IHT in Scotland, please contact a local Scottish Solicitor.
Difficult conversations about the future
The theme of the latest episode was ‘Difficult Conversations’.
Although it can be confronting to plan for when you pass away, or if you lose capacity, Martin reiterated how beneficial these conversations are in the long term. The potential stress of a difficult conversation about the future pales in comparison to the stress that could come from losing capacity without LPAs in place, or passing away without a Will.
Below, we summarise the topics Martin Lewis discussed. We also include helpful links to some of our more detailed articles on Wills, LPAs and IHT.
What does Martin Lewis say about writing a Will?
Martin Lewis emphasised that a Will is crucial for determining how your assets are distributed upon your death. Without one, the state dictates the distribution through intestacy rules. This means that your assets could go to people you would not have chosen.
Martin also highlighted the concept of a Mirror Will, where spouses create similar Wills reflecting each other's wishes.
Notably, he explained that leaving 10% of your chargeable estate to charity can reduce your Inheritance Tax rate to 36%.
Do you need a Solicitor?
Of course, we were pleased that Martin strongly advocated for solicitor-drafted Wills! In fact, he considers them the “gold standard” for ensuring accuracy and legality.
- Do I need a solicitor to make a Will? - https://www.crane-staples.co.uk/news/do-i-need-a-solicitor-to-make-a-will/
This discussion about Wills was particularly timely, following last week’s ‘Update Your Will Week’.
- When should you update your Will? - https://www.crane-staples.co.uk/news/when-should-you-update-your-will/
Martin reiterated that marriage automatically revokes a Will in England and Wales, regardless of name changes.
As emphasised in our recent article, he also recommended reviewing your Will every five years.
Additionally, he reminded viewers of the limited legal rights of unmarried couples. This means that unmarried couples should have Wills in place. Otherwise, they are not entitled to inherit under intestacy rules.
Other key considerations were guardianship for children, as well as the protection of digital legacies, including online photos and social media accounts.
He touched upon the potential for structuring inheritance using Trusts to provide for beneficiaries with specific needs. For example, one caller asked about supporting their adult child with mental health issues.
Afterwards, Martin debunked the notion that a Will is unnecessary for those with few assets. He explained that having a Will is advantageous as it significantly speeds up the probate process for your executors. His expert panel humorously added the risk of unexpected wealth, stating, 'you may win the lottery and die from the shock,' further stressing the need for a Will.
What does Martin Lewis say about Powers of Attorney?
Martin Lewis addressed the vital role of Lasting Powers of Attorney (LPAs). In summary, these documents legally appoint trusted individuals to manage your property and finances and/or health and welfare if you lose mental capacity during your lifetime.
He clarified that there are two types of LPAs: Property and Financial Affairs, and Health and Welfare. Notably, the Health and Welfare LPA appoints attorneys to make key decisions, including end-of-life choices.
Does everyone need Powers of Attorney?
Crucially, Martin emphasised that LPAs are not just for older people. He believes that Powers of Attorney are arguably more important than Wills. This is because they make considerations for what happens during your lifetime. For example, an LPA protects your assets while you are still alive, preventing them from being locked away. Therefore, he stressed the importance of selecting a willing, competent, and trustworthy person as your attorney.
Martin explained that LPAs allow you to set preferences and instructions for your attorneys. He also explained that a Certificate Provider - an impartial, unrelated professional (such as a Doctor or Solicitor) - is required to confirm your capacity and that you are making the powers of your own free will.
Furthermore, he warned against the assumption that relatives can automatically access your money if you lose capacity. If someone without LPAs loses capacity, their loved ones must go through the Court of Protection process. One caller explained this process was lengthy and stressful. Sadly, their case is still ongoing after 18 months.
Martin stressed that LPAs should only be activated when necessary. He then outlined the legal safeguards in place for Powers of Attorney. These include notifying designated individuals and reporting concerns to the Office of the Public Guardian (OPG).
- I have power of attorney, now what? - https://www.crane-staples.co.uk/news/i-have-power-of-attorney-now-what/
Do you need a solicitor for Power of Attorney?
He strongly advised seeking professional legal help, particularly for complex financial situations or substantial assets. While DIY LPA applications are possible, he cautioned against them because of the high rejection rate due to form errors. Staggeringly, 51,000 LPA forms were rejected by the Office of the Public Guardian last year. He particularly recommended solicitor assistance for those creating LPAs for individuals who may be losing capacity. He reiterated that, if in doubt, using a solicitor to make LPAs is preferable to a DIY approach.
What does Martin Lewis say about Inheritance Tax?
Finally, Martin Lewis addressed the common misconceptions surrounding Inheritance Tax. He emphasised that IHT affects a relatively small percentage of estates, with only approximately 6% of estates incurring IHT.
He clarified that any assets left to a legal spouse or civil partner are entirely exempt from IHT.
Additionally, he explained that estates valued under £325,000 generally do not incur IHT.
Furthermore, a Residence Nil Rate Band of up to £175,000 can be applied when passing on a main residence to direct descendants. In this scenario, the executors determine what constitutes the main residence.
Martin detailed that IHT is levied at 40% on the portion of an estate that exceeds the available allowances.
He also discussed the transferability of unused IHT allowances between spouses. Here, he noted that only one allowance from a previous spouse can be claimed in the event of remarriage.
Lifetime Gifts
He further explained that regular gifts made from income are generally exempt from IHT, provided the giver survives seven years after making the gift. Alongside this, there is also the annual gift allowance of £3,000. He recommended seeking professional legal advice regarding the complexities of these rules.
- Lifetime Gifts - https://www.crane-staples.co.uk/news/lifetime-gifts/
Gifting Property
A key issue was raised about gifting a property to avoid inheritance tax. This is a very common question and one that Martin, his expert legal panel, and our team strongly discourage! It is crucial to seek professional legal advice before making any decisions regarding property gifting and Inheritance Tax planning.
- Can I gift my house to my children and still live in it? – Inheritance Tax - https://www.crane-staples.co.uk/news/inheritance-tax-can-i-gift-my-house-to-my-children-and-still-live-in-it/
Finally, he gave brief details of upcoming changes in inheritance tax, which we explain further in our latest article.
- Upcoming changes to inheritance tax - https://www.crane-staples.co.uk/news/what-are-the-upcoming-changes-to-inheritance-tax/
Conclusion
Overall, we hope that the latest episode of the Martin Lewis Money Show has helped people with these ‘difficult conversations’. This will help them make plans for their future and have provisions in place for themselves and their loved ones. Thank you to Martin and his panel of experts for raising awareness about these issues.
Please remember to seek trusted legal advice if you need assistance with any of these important topics.
As always, the Crane & Staples team would be pleased to help you. Please contact us on 01707 329333 or email law@crane-staples.co.uk to arrange an appointment.
Government Links
- Wills - https://www.gov.uk/make-will
- Power of Attorney - https://www.gov.uk/power-of-attorney
- Inheritance Tax - https://www.gov.uk/inheritance-tax