Writing a will

[nmhermione]

Hi,

Now that we have a child, my husband and I are writing a will.
We co-own our house, and still have a fair bit of mortgage left to pay.

The main purpose of writing our will is to make sure our son will inherit, and to appoint guardians in case we'd both pass away before he's 18.

The main thing he'd inherit would be the house (or at least the amount we've paid for it so far).

We also have to make a decision about the following:

• Property Protection Trust (£500): a form of will for co-owners of property. It enables the surviving co-owner to occupy the property whilst ensuring that the share of the property belonging to the first co-owner to die is preserved for the next generation via inheritance.
• Lasting Power of Attorney for Property and Financial Affairs (£300)
• Lasting Power of Attorney for Health and Welfare (£300)

Does anyone have any experience with this? On the one hand our attorney seems to suggest it's the sensible thing to do (especially the Property Protection Trust), on the other hand it's a lot of money for something that means we'll have less control over our property, which doesn't seem to be necessarily something I'd want? And wouldn't our child get our house anyway, also without the Property Protection Trust?

Perhaps someone could explain this using very easy and straightforward language 😅

Thanks in advance!

I'm assuming you own your home as tenants in common, rather than joint tenants, hence relevance of PPT. From what you've written, if you died tomorrow, you would want your half of the property to go to your son, with your husband having a lifetime interest. The benefit of this is that if your husband remarries and/or has more children, your son's inheritance is preserved.

The downsides are twofold- firstly, depending on the value of your share of the house it may trigger an inheritance tax liability at 40% that will need to be paid out of the estate - does the estate have enough cash to cover it? If your only major asset is the house, possibly not. Secondly, the PPT may well prevent the sale of the house so your husband would be stuck living there until he dies, unless he can afford to buy another house with "his share".

e.g. say the house is worth 500k- if he wants to move he can only afford a house worth 250k (his half), so if circumstances forced a relocation or made it desirable, your son's QOL might be reduced, even though on paper he is cash rich because he's got his inheritance.

Lastly, get life insurance that will pay off the mortgage if either of you dies. This is really important.

Thank you. That really helps.

Can I ask what the difference is between tenants in common and joint tenants? We each own 50%.

We already have life insurance which covers death & terminal illness.

Do you have any thoughts on the 2 types of power of attorney?

Thanks again!

When you bought the property your solicitor would have asked you which you wanted, so can check with them if unsure. Otherwise -

If it is actually stipulated on the deeds transfer that you own 50% each it is tenants in common. This means that you literally own 50% each- i.e that your ownerships can be separated and each of you can gift or sell their share.

Joint tenants is more common for married couples. It means that you both own all of the property. Critically, if one of you dies, the other one automatically owns the whole thing ( because they effectively already owned it- kind of last man standing principle). You can't will away "your share" of a property held as joint tenants. However, you also have the protection that your spouse can't do that either. This may be important if there are any questions about when they stopped having capacity before they died, with say, dementia- i.e as tenants in common they could change their will at a stage where capacity is borderline and leave their share to the cats home/ the re-enactment society/the Tory party or some other crazy thing.

Not sure on PoA- sorry.

You do not need to pay £300 for POA (& yes, you should have it). You don't need a solicitor for it. It is £82 per POA to do it through the gov.uk website.
https://www.gov.uk/power-of-attorney/register

Thank you so much. You've given us much food for thought. Really appreciate it :)

Nice one, thanks! Will have a look :)

agree with this. I did my DM’s for her, very straightforward and the only cost is the fee to register with the office of the public guardian.

Definitely do your own POA, the online forms are straightforward.

It is worth saying that if you do have a "Joint tenancy" ownership of the property then this can be severed by either one of you, reverting the ownership to 50/50 "tenants in common".
https://www.gov.uk/joint-property-ownership is a useful overview.

lasting power of attorney does NOT cost that much, do it yourself online, for about £80 each (well, you need two each, so £320 in all)

Also, life insurance is really important - you need your mortgage paid off if you die, so your son does not lose his home. I would also suggest critical illness insurance.

Typically, you'd grant your spouse to right to continue to live in your share on the house on your death - a "life tenancy" (with potentially provisions that enable the sale of the house and repurchase of another property, restict them from remaining in the house if they cohabit or remarry, etc) with the house then reverting to your final beneficiary on your spouse's death.

This creates an "interest in possession" trust on the first death.
£500 seems steep to write this element into a will.

It's specific reducing term life assurance that you need so that the mortgage is paid off if one of you dies during the lifetime of the mortgage. They used to be a non negotiable requirement for getting a mortgage when we got ours many years ago but I don't think they are now.
Not sure about that Property Protection Trust thing. Just make sure there is a clause in the will leaving your share of the property to your child(ren) but with a life interest to your partner.

The downsides mentioned here aren’t entirely correct. The type of trust being suggested wouldn’t trigger an inheritance tax liability as it would benefit from the spouse exemption. Secondly, if a PPT is well drafted it can be fully flexible allowing your spouse to move and for the share held in trust to effectively apply to a new property instead. It’s important this is prepared by someone who is properly qualified-and insured.
That said, there are drawbacks to a PPT. Your adviser should be able to explain to you the capital gains tax implications of this type of trust, and that your spouse/trustees may need to register the trust on HMRC’s trust registration service.
You should also be considering whether you or your spouse would be comfortable with the role the trustees will have in the future - half the surviving spouse’s home would effectively be owned by trustees who would need to be involved if the survivor needed to sell, and who should be periodically checking the condition of the property and asking for evidence of insurance. For a lot of people this is a level of intrusion that they hadn’t fully grasped, or had properly explained.
PoA on the other hand is a must. One day it could well be worth every penny. And get both types. They are easy to prepare yourself - but also surprisingly easy to get wrong (and often that only comes to light too late) so make sure you read the guidance well, or take advice.