How to value the assets of an estate for probate

Lawpack on March 27, 2020

When someone dies, their executors or administrators (known collectively as personal representatives) are responsible for identifying the assets and liabilities of the estate and establishing their value at the date of death.

For inheritance tax purposes, assets are generally valued at their open market value at the date of death. This means the price they might reasonably have been expected to fetch if sold on the open market at that time.

For full information and guidance on probate and estate administration, see our DIY Probate Kit.

To help you with the probate process, here is a list of commonly owned assets and how to go about valuing them.

Valuing the deceased’s property

Property is often one of the most valuable assets in an estate, so it is important to obtain an accurate valuation.

  • Obtain an estimate of the property’s open market value at the date of death. You can initially ask local estate agents for valuations, although a professional valuation from a suitably qualified surveyor may be necessary, particularly where inheritance tax is payable or the value is uncertain.

  • If the deceased owned the property jointly with another person, establish how it was legally and beneficially owned. The deceased’s share should be included in the estate, but it is not necessarily half the property’s value.

  • Notify the mortgage lender of the death and establish how the mortgage payments should be maintained while the estate is being administered.

  • Ask the lender for the outstanding mortgage balance at the date of death. Record this separately as a liability of the estate.

  • Check whether a life assurance or mortgage protection policy was linked to the mortgage. Establish whether the policy provides a payment on death and whether the proceeds are payable to the estate or another beneficiary.

The deceased’s bank accounts

  • Contact the deceased’s banks and building societies, notifying them of the death and providing the required documentation.

  • Ask for the balances of all accounts at the date of death, including any interest accrued but not yet credited.

  • Ask for details of any savings accounts, ISAs, investments, joint accounts, share certificates and deeds held by the institution.

  • Establish which direct debits and standing orders need to be cancelled. Take particular care with joint accounts, where the surviving account holder may still need access to the funds.

  • Ask the bank for details of any interest paid during the tax year of death, including whether it was paid gross or net of tax, as this information may be needed when dealing with the deceased’s final tax affairs.

  • Consider opening a dedicated executors’ or estate administration bank account to receive money belonging to the estate and pay its liabilities.

Valuing stocks and shares

  • Compile a complete list of the deceased’s shareholdings. Share certificates and investment statements may be held at the deceased’s home or by their bank, solicitor, stockbroker or investment platform.

  • Ask a stockbroker or professional share valuation service to provide a valuation for probate purposes.

  • For quoted shares, HMRC provides guidance on calculating their value using the relevant market quotations at the date of death. This generally involves the quarter-up method.

  • For unquoted shares, obtain an appropriate valuation, which may require specialist professional advice.

The deceased’s business interests

If the deceased owned or had an interest in a business, obtain a valuation from a suitably qualified accountant or business valuation specialist.

Provide relevant supporting documentation, which may include:

  • The latest three years’ business accounts.

  • Details of the deceased’s ownership or partnership interest.

  • Any partnership or shareholders’ agreements.

  • Details of business assets, liabilities and outstanding loans.

Business interests can be complicated to value, particularly where the deceased was a partner or shareholder. Professional advice is recommended.

Valuing the deceased’s car

Obtain an estimate of the vehicle’s market value at the date of death.

You can:

  • Ask a local motor dealer or vehicle valuation specialist for an estimate.

  • Consult recognised vehicle valuation guides.

  • Compare similar vehicles advertised for sale, taking account of their age, mileage, condition and specification.

If the vehicle is subsequently sold, keep the sale documentation as supporting evidence, but remember that the actual sale price may differ from its value at the date of death.

Jewellery

Prepare an inventory of the deceased’s jewellery and estimate its open market value at the date of death.

For valuable pieces, such as diamond rings, watches, antiques or other significant items, obtain a professional valuation from a suitably qualified jeweller or valuer.

An overall estimate may be sufficient for ordinary, low-value jewellery, but valuable individual items should be identified and valued separately.

Works of art

Works of art, paintings and sculptures should be valued according to their likely open market value at the date of death.

You may be able to obtain an initial indication of value from:

  • The deceased’s home contents insurance policy.

  • Previous purchase receipts or valuations.

  • An art dealer or specialist auction house.

However, insurance replacement values are not necessarily the same as open market values. Make clear that the valuation is required for probate and inheritance tax purposes.

Other possessions

Prepare an inventory of the deceased’s other possessions, including furniture, electrical equipment, clothing, household goods and personal effects.

Make a reasonable estimate of what these items might have fetched if sold second-hand at the date of death.

Valuable individual items should be identified separately and professionally valued where appropriate. This may include:

  • Antiques and collectibles.

  • Paintings and sculptures.

  • Jewellery and watches.

  • Stamp and coin collections.

  • Boats and aircraft.

  • Other valuable personal possessions.

Do not assume that household possessions automatically belong equally to a surviving spouse or partner. Establish the deceased’s actual ownership and beneficial interest in the items.

National Savings and Investments (NS&I)

If the deceased held National Savings and Investments products, including savings certificates or other NS&I accounts, contact NS&I to report the death and obtain the relevant information.

NS&I can provide details of the deceased’s holdings and explain the procedures for valuing and claiming the money.

You can find the current instructions through the NS&I bereavement service.

Premium Bonds

If the deceased held Premium Bonds, notify NS&I of the death.

NS&I provides an online bereavement service through which personal representatives can report the death and deal with the deceased’s holdings.

You should establish the value of the Premium Bonds at the date of death and follow NS&I’s instructions for claiming the money.

Visit www.nsandi.com for further information.

Outstanding salary or pension payments

If the deceased was employed when they died, contact their employer to establish whether any salary, bonuses, holiday pay or other payments were outstanding.

If the deceased belonged to a trade union or professional association, check whether any death benefits are payable.

If the deceased received a pension, contact the relevant pension provider or scheme administrator to establish:

  • Whether any pension payments were outstanding at the date of death.

  • Whether any payments made after death need to be repaid.

  • Whether a lump-sum death benefit is payable.

  • Whether a surviving spouse, civil partner or other nominated beneficiary is entitled to benefits.

Not all pension death benefits form part of the deceased’s estate. Their treatment depends on the pension scheme rules and the arrangements in place.

Life insurance and pension policies

Contact any life insurance companies and pension providers with which the deceased had policies or arrangements.

Ask for details of any payments due following the death and establish:

  • Whether the policy provides a payment on death.

  • The amount payable.

  • Whether the policy was written in trust.

  • Who is entitled to receive the proceeds.

  • Whether the proceeds form part of the estate for inheritance tax purposes.

Some life insurance proceeds are payable directly to nominated beneficiaries or trustees rather than to the estate.

Taxes and outstanding bills

Contact HMRC to establish the deceased’s outstanding tax affairs.

You may need to deal with:

  • Income Tax up to the date of death.

  • Capital Gains Tax, where applicable.

  • Outstanding tax liabilities.

  • Tax refunds due to the deceased.

  • Tax arising during the estate administration period.

Also identify outstanding household bills, credit card balances, loans, utility bills and other liabilities.

Keep a record of the debts and expenses of the estate, as these may need to be reported when calculating its value for inheritance tax purposes.

Social security payments

If the deceased was receiving the State Pension or other state benefits, the death must be reported so that payments can be stopped and any overpayments or outstanding amounts dealt with.

In England, Scotland and Wales, personal representatives can usually use the government’s Tell Us Once service to notify several government departments and organisations of the death.

The service can notify HMRC, the Department for Work and Pensions, the DVLA and other relevant organisations.

If Tell Us Once cannot be used, contact the relevant organisations directly.

Further information is available at www.gov.uk/after-a-death.

Foreign property and overseas assets

If the deceased owned property, investments or other assets outside the UK, these must also be identified and appropriately valued.

Obtain a valuation in the relevant local currency at the date of death and convert the value into sterling using an appropriate exchange rate for that date.

You should also identify any debts owed to the deceased by individuals or organisations overseas.

Overseas property and assets can involve additional inheritance tax, succession and reporting requirements. Depending on the circumstances, professional advice may be necessary to establish the correct treatment in both the UK and the country where the assets are located.

Further information

For further information and expert guidance on valuing the assets and liabilities of an estate for probate and inheritance tax purposes, read Lawpack’s DIY Probate Kit.

Other useful information

  • Valuing the debts of an estate

  • Do I need a grant of probate?

  • Is inheritance tax due on the estate?

What to do if your spouse ignores the divorce Petition

Lawpack on March 27, 2020

To begin a divorce you need to draft a divorce Petition which sets out the reasons why you want to get divorced. It’s a good idea to send a draft copy of this document to your spouse before you serve it on them. This could just help to diffuse any unpleasantness, you can agree between you what the Petition is going to say and it gives you a chance to see how cooperative your spouse is likely to be.

The court is responsible for sending the divorce Petition and any other accompanying documents to your spouse. You need to give the court your spouse’s correct address. The court will send you a Notice of Issue of Petition to let you know that the Petition has been sent to your spouse. You will usually get this about a week after you give your Petition to the court. The court posts the petition to your spouse using first-class post. You then just have to wait and see if your spouse responds.

Of course you hope that your spouse responds to the divorce paperwork promptly, but what do you do if you hear nothing from your spouse in response to the divorce Petition? Your spouse has seven days from the day the Petition is received to return the Acknowledgment of Service form. This form allows your spouse to say that they’ve received the Petition and whether they wish to defend the divorce or not. If your spouse lives abroad, then they get more time to respond. If, after this time has passed, you still receive no response from them, then it could be because the Petition wasn’t received for some reason, or that it’s being ignored.

If the court wasn’t able to deliver the Petition, then they will let you know by sending you a Notice of Non-Service of Petition. The court will know that the Petition hasn’t been delivered because the Post Office will return the Petition to the court. You then have to find your spouse’s correct address and let the court know so that it can try to deliver it again.

If it appears that the Petition was delivered but is being ignored, then you have to pick another method of service so that you can prove that the Petition has been received. You have four choices:

  1. Personal service;
  2. Deemed service;
  3. Application for service by an alternative method or at an alternative place; or
  4. Application to dispense with service.

Personal service

It’s possible to ask the court bailiff to serve the divorce paperwork for you. If he agrees then his costs are reasonable, usually about £40. He won’t agree to serve the papers if you’ve got a lawyer acting for you. A Request for Service by the Court Bailiff (Form D89) is available from the court or www.justice.gov.uk/forms. You need to give the court a recent photo of your spouse and a description of them. If the service is successful, then the bailiff will file a Certificate of Service at court. If he can’t serve the papers, then he will file a Certificate of Non-Service. In this case you will have to choose another method of proving service.

If you can’t get the court bailiff to serve the paperwork for you, then you need to instruct a process server to do it. You can find them in the Yellow Pages or on the internet. The process server will need a new copy of the divorce Petition (sealed by the court), Statement of Arrangements for Children (if any), Notice of Proceedings (provided by the court) and a blank Acknowledgment of Service form (provided by the court). The process server will also need a recent photo and description of your spouse. If service is successful, then the process server will file a Certificate of Service confirming that personal service has taken place.

Deemed service

If your spouse has responded in some way, such as saying in an email, letter or post on Facebook that he’s received the Petition, then you can use this information to prove that he’s received the Petition. You can file it at court with an Application Notice (Form D11) and a court fee and ask the court for an order for deemed service.

Application for service by an alternative method or at an alternative place

It may be that you think that there is more chance of your spouse receiving the Petition if it’s served at another address (e.g. their parents’ house). You can apply for an order saying this using Application Form (Form D11). You have to file a court fee and the accompanying documents.

Application to dispense with service

You can use this method if all attempts at service have failed. This application can be made in Form D11. You will also need to complete a statement in Form D13B.

Help from Lawpack

All the divorce forms you need – and expert guidance on how to use them – can be found in Lawpack’s Separation & DIY Divorce Kit.

If you need assistance in completing the forms, then you can use our DIY Divorce Service who will complete them for you. With our Managed Divorce Service they will complete them and also file them at court for you.

If you want more in-depth information from a divorce lawyer about all aspects of divorce law then read our guide, How to Get a Divorce by Punam Denley. Packed with tips and expert advice to ensure that you get through the divorce process smoothly.

Other information

How to renounce your role as executor

Lawpack on March 27, 2020

If you have been appointed as executor in a Will and you don’t want to do it, then you are not obliged to do so.

You can abandon your right to act by signing a form of ‘renunciation’ at the outset. This allows you to relinquish your title to the Grant of Probate.

But you can only renounce probate if you haven’t intermeddled in the deceased’s estate. So if you are unsure whether you want to take on the role, you must not interfere in the affairs of the estate until you have decided to proceed.

If you have interfered with the estate, then you cannot renounce your role as executor and you risk liability arising from any improper administration of the estate.

When does the renunciation take effect?

The renunciation must be absolute.

It takes effect once the renunciation document has been signed, but you can withdraw it before it has been lodged with the Probate Registry.

Once it has been lodged with the Registry, you can only retract it with the leave of a District Judge or Registrar.

How do I obtain a ‘deed of renunciation’?

It can be drafted by a solicitor or a probate professional.

Can I appoint another person in my place?

The renunciation document doesn’t confer the right to a Grant of Probate on another person.

If the next of kin has agreed to step in and apply for the Grant of Probate, then they can lodge the renunciation document at the same time.

What happens to the probate process once I have renounced my position?

If other executors have been named in the Will, the remaining executor (or executors) can apply for probate, provided that the Will doesn’t expressly require a certain number of executors.

If you are the only executor appointed in the Will and no alternate executor has been mentioned, then an application must be made to the court to appoint an administrator.

What is there isn’t a Will?

When someone dies without a Will, they are said to die ‘intestate’ and an administrator is appointed to administer their estate. The rules of intestacy determine who will act as administrator.

If there is just one person entitled (e.g. spouse, or sole surviving child), they may renounce their role as administrator. When they do so, the right to act falls to the next in line.

If there is more than one person entitled (e.g. three children), then they don’t need to renounce their role, as the child who wishes to act simply does so, and the others don’t need to formally state that they are not involved.

Does the process of renunciation have to be so official?

If you have been appointed as an executor in a Will (but not as an administrator without a Will), you can unofficially leave the role of the day-to-day running of the probate process to the other executor(s) under the option ‘power reserved’.

This leaves you with the option of being able to step in at a later date, if the other executor(s) become ill or cannot continue with the process.

An executor with power reserved doesn’t sign the forms or attend the Probate Registry.

This option may be appropriate if you are one of three executors who are, for example, children of the deceased and only one of you deals with the deceased’s estate as one sibling lives closer to the parent who has died. The other two can then have power reserved.

How do I obtain ‘power reserved’?

If you are dealing with the probate process yourself, then the Probate Registry will deal with this for you, based on the information you provide on the Probate Application (PA1) form.

If a solicitor or other probate professional is involved, they will draft the appropriate document, known as a “notice to a non-proving executor”.

Related articles

7 steps to filing for divorce in England & Wales

Lawpack on March 27, 2020

 An excerpt from Lawpack’s Separation & DIY Divorce Kit.

Getting a divorce in England & Wales isn’t a complicated procedure. Read our seven simple steps to how you can apply for divorce through the courts.

1. Find your marriage certificate

You need your marriage certificate because you have to file it at court when you start your divorce petition. If you’ve lost your marriage certificate, you can easily obtain a certified copy from the General Register Office.

If you were married outside of England and Wales, you need to get a certified copy of your marriage certificate from the country where you were married.

2. Start your divorce petition in court

You can start your divorce either in the Principal Registry in London, or any divorce County court.

While you can file your divorce petition in any divorce County court, it’s best to choose a court most convenient to where you live because you may need to make several visits to court before the divorce is completed.

To file your divorce petition at court, you will need the following divorce form:

  • Form D8: the Divorce Petition

All the divorce forms you will need – and expert guidance on how to use them – can be found in Lawpack’s Separation & DIY Divorce Kit.

If you need assistance in completing the forms, then you can use our DIY Divorce service who will complete them for you. With our Managed Divorce Service they will complete them and also file them at court for you.

3. Give notice of the divorce petition to your spouse

Once your divorce forms have been completed, your next step is to serve the divorce petition on your spouse.

Sending the divorce petition to your spouse is the responsibility of the court, but it’s your responsibility to provide the court with the
correct address.

You should think about sending a draft petition to your spouse and discussing the contents of the draft petition with them before issuing the petition to prevent any unnecessary unpleasantness.

The court will send you a Notice of Issue of Petition  once the divorce petition has been sent to your spouse. This usually occurs about a week after you file your divorce petition in court.

The court will at the same time post a copy of your divorce petition to your spouse (and any named co-respondent) with an Acknowledgement of Service Form for your spouse to complete.

Your spouse, as Respondent, has seven days from the day the petition was received to return the Acknowledgement of Service.

4. Handling your spouse’s response to the divorce petition

Once your petition is posted to your spouse, one of the following events may occur:

  • The petition may not be responded to, either because it wasn’t delivered or because it was ignoredAssuming the petition hasn’t been returned to the court by the Post Office as undeliverable, you must wait eight days for your spouse to acknowledge receipt.If the petition apparently has been received but your spouse doesn’t acknowledge receipt, then you must arrange for your spouse to be served in such a way that you can prove service.
  • Your spouse acknowledges service and intends to defend against divorceIf your spouse outlines on the Acknowledgement of Service that they intend to contest the divorce, then you must wait 29 days from the day your spouse received the divorce petition and if you don’t receive an answer (or ‘defence to the divorce’) after 29 days, you can ask the court for directions for trial.If you do receive an answer or defence, then you should consult a solicitor to represent you as proceedings from this point onward can be quite technical. You may seek an order for costs
    if the proceedings are defended, to encourage the other side to agree to divorce.
  • Your spouse acknowledges service and doesn’t intend to contest the divorceIf your spouse doesn’t intend to contest the divorce, you can then immediately ask the court to rule whether the reasons stated in your petition are sufficient for the divorce to be granted, and your proposed arrangements for the financial and custodial care of your children are satisfactory.This process is referred to as ‘applying for directions for Decree Nisi’.

5. Applying for Decree Nisi

To apply for Decree Nisi you need to complete the following divorce forms:

  • Form D84: an Application for a Decree Nisi
  • Form D80A through to D80E: a Statement in Support of Divorce/Dissolution/Judicial Separation 

The Forms D80A through D80E coincide with the five facts for divorce. Be sure to use the Form D80 that correlates to the facts used to support the ground for your divorce petition.

6. Getting your Decree Nisi granted

Once your Forms D84 and D80 (and supporting documents) are completed, send them to the court stating that your divorce is undefended.

Your complete file will then be examined by the judge, who will consider whether your documents are satisfactorily completed, you have proper grounds for divorce and the proposed arrangements for your children are in their best interests.

Your Decree Nisi will be sent by the court to you, your spouse (and any co-respondent) shortly after the judge decides that you have satisfied the requirements for divorce. Pronouncement of your Decree Nisi usually takes about two months from the date you first file your Application for a Decree Nisi.

7. Obtaining your Decree Absolute

You’re not divorced until your Decree Absolute is issued.

If you are the petitioner, you can apply for your Decree Absolute six weeks and one day after your Decree Nisi is granted. You cannot apply earlier.

If you are the Respondent, you cannot apply for the Decree Absolute until four-and-a-half months have passed after the pronouncement of the Decree Nisi.

It’s easy to apply for your Decree Absolute, if you are the Petitioner. You simply need to file Form D36: a Notice of Application for Decree Nisi to be made Absolute with the court.

Finally, you will be sent by the court a Decree Absolute which officially ends your marriage.

Related articles

My father left a Will. Do I need to do probate?

Lawpack on March 27, 2020

Most estates do need to go through probate: It’s not a question of whether the deceased left a Will, but whether or not the assets dealt with by the Will are the sort of assets that require a Grant of Probate before they can be dealt with under the terms of the Will.

The purpose of a Will is to carry out the deceased’s wishes as to what will happen to their estate after death.

The Grant of Probate is a document that allows ownership of the assets to be transferred from the deceased to the executors, so that they can give effect to the terms of the will.

Whether a Grant of Probate is required will depend on the assets of the deceased:

Did the deceased own assets in their name at the date of their death? 

If so, depending on the value and type of assets, you will need a Grant of Probate.

A bank account is a good example. If the deceased held, for example, £50,000 in a bank or building society account, the bank/building society will need to be provided with a Grant of Probate before it will release money to the executors to deal with under the terms of the Will.

But if the deceased left a few bank and/or building society accounts, say with only a few thousand pounds in each, along with some personal possessions but nothing else, it is unlikely that the banks/building societies will need to see a Grant of Probate for modest amounts.

Each bank and building society has its own limit but, generally, most institutions will let the amount of around £15,000 be given to executors without seeing a Grant of Probate.

Did the deceased own stocks and shares?

If so, the registrar will need to be provided with a Grant of Probate before they will transfer the shares out of the deceased’s name into the names of the executors or beneficiaries.

But the registrar may not need to see a Grant of Probate if the deceased held just a few shares of a modest total value.

Did the deceased own their home in their own name? 

If so, you will need a Grant of Probate before it can be sold or transferred to a beneficiary.

If the deceased’s home was owned as joint tenants with a surviving spouse (or other party), it will pass to them by survivorship.

What happens where there isn’t a Will?

The basic rules of probate are the same, but the people who administer the estate are known as ‘administrators’ (instead of ‘executors’).

Administrators will apply for a Grant of Letters of Administration (instead of a Grant of Probate) and the distribution of the estate will take place according to the rules of intestacy.

Other information

What are an executor’s duties?

Lawpack on March 27, 2020

When someone dies, many people assume that their ‘next of kin’ will sort out their affairs (called in legal jargon ‘administering the estate’), but this isn’t often the case.

When someone has made a Will and appointed executors in their will, the executors will be responsible for carrying out the deceased’s wishes.

When someone is named the executor of a Will, they are being asked to take responsibility for administering the estate of the person who made the Will, called the testator, upon the testator’s death.

The term ‘estate’ simply refers to all the property a person leaves behind, whether its value be hundreds or millions of pounds.

One person’s assets may include homes, yachts and a Swiss bank account, while another leaves a wedding ring, some changes of clothes and a shoe box full of costume jewellery. Both have left estates to be accounted for and distributed.

What are the duties of an executor?

Duties of an executor involve corresponding with other parties, keeping meticulous records, filling out forms and being answerable to creditors, beneficiaries and the intentions of the deceased, as recorded in the Will.

Executors’ duties include the following:

Administration

  • Taking an inventory of the deceased’s possessions and debts
  • Notifying and corresponding with all relevant organisations to gather together all the assets
  • Paying all bills, debts and charges on the estate
  • Searching for any unclaimed or missing assets
  • Distributing the legacies (whether specific items, cash sums or residue)
  • Preparing and distributing estate accounts to interested parties
  • Distributing the residue of the estate to the beneficiaries
  • Following the testator’s wishes as closely as possible.

Legal

  • Applying for a grant of probate (in England & Wales, and Northern Ireland) or confirmation (in Scotland) to prove that the executors have the authority to deal with the deceased’s assets to those institutions and authorities that hold assets in the deceased’s name
  • Identifying and dealing with any claims against the estate

Tax

  • Completing inheritance tax returns and paying any inheritance tax due
  • Completing any income and capital gains tax returns and paying any outstanding tax

The executors’ aims are to:

  1. Identify the assets of the estate and assess their value at date of death.
  2. Identify the deceased’s debts and pay them.
  3. Distribute the legacies.

Get more detailed information and advice on the duties of executors in Lawpack’s Executor’s Guide.

What happens if more than one executor is appointed?

No matter how many executors are named, for practical purposes it’s usually easier if one of the executors undertakes the administrative tasks on behalf of all the executors.

The executors should meet to discuss the practical side of carrying out their duties, and whatever is agreed should be put in writing and signed by them all.

All the official paperwork may have to be signed by all the executors, even if they agree that one of them is doing the administration.

This isn’t the case in Scotland, however, as the application for confirmation only needs to be signed by one executor.

Can an executor refuse to administer the estate?

Yes. If an executor refuses to take out the grant of probate, any substitute executor named in the Will can step in and apply for the grant of probate or confirmation.

If no executor has been named in the Will or if the executor named cannot or doesn’t wish to act and no substitute executor is named, beneficiaries can apply to administer the estate. Get more information on how to apply for probate and the probate forms you need in Lawpack’s Probate Kit.

Other information

How to cancel a Lasting Power of Attorney

Lawpack on March 27, 2020

How to cancel a Lasting Power of Attorney

In power of attorney terms, the person who grants (and can cancel) the power of attorney is referred to as the ‘Donor’ and the person (or persons) who acts on their behalf is known as the ‘Attorney’.

A Lasting Power of Attorney (LPA) can be cancelled (called ‘revoked’ in power of attorney terms) at any time by the Donor).

An LPA can be cancelled at any time while the Donor still has mental capacity.

If you want to revoke an LPA, you will need a Deed of Revocation form.

How to cancel a power of attorney

To cancel a power of attorney, the Deed must be signed by the Donor and the Attorney must be informed that their power to act has been revoked.

The Attorney’s authority doesn’t cease until they receive notice of the revocation, so a copy of the form should be sent to each Attorney.

The Donor must also demand that the Attorney return the power of attorney to them, to confirm that the power has been cancelled.

If the LPA has already been registered with the Office of the Public Guardian, the Donor must send the OPG a copy of the Deed to ask them to remove the LPA from the register.

When an LPA is cancelled automatically

There are instances when an LPA is cancelled automatically and these are:

  • The Attorney dies and there are no other Attorneys (or the Attorneys can only act together) and there is no replacement Attorney.
  • The Attorney refuses to act by disclaiming the appointment and there are no other Attorneys (or the Attorneys can only act together) and there is no replacement Attorney.
  • The Attorney is married to the Donor (or is the Donor’s civil partner) and the marriage or civil partnership is ended by divorce or dissolution and there are no other Attorneys (or the Attorneys can only act together) and there is no replacement Attorney. The LPA may, though, state that the appointment is not to cease in this case and so will not be revoked.
  • The Attorney ceases to have capacity to exercise the LPA and there are no other Attorneys (or the Attorneys can only act together) and there is no replacement Attorney.
  • In the case of the LPA Property and Financial Affairs only, when the Donor or Attorney become bankrupt.

Lawpack publishes a Deed of Revocation template, which can help you to easily cancel your LPA. The form is lawyer approved and includes expert guidance.

External links:

 

More than one home? Which one is your main residence?

Lawpack on March 27, 2020

At first sight, this may seem something of a straightforward question. If you have more than one home, logic would suggest that this is the property at which you spend the majority of your time. However, as far as the main residence exemption for capital gains tax (CGT) purposes is concerned, this is not necessarily the case.

This article covers CGT and second homes. For other tax tips and information see Lawpack’s Tax Answers at a Glance and 101 Ways to Pay Less Tax bestselling books.

Nature of the exemption

Most people are aware that there is no CGT to pay on any profit that they make if they sell their home. More specifically, the exemption applies where the property in question is the person’s only or main home and it has been used as their home and as nothing else.

Example 1

Lucy buys a flat for £250,000. She sells it five years later for £280,000. It has been her only home throughout the five-year period of ownership.

The conditions for main residence relief are met. Lucy does not have to pay any CGT on the profit she makes from selling her house.

More than one property

If a person has more than one home, they can choose which one is their main residence for CGT purposes. Once a choice is made, they can change it at any time. Of course, there are some conditions that need to be met, but this ability to choose which property is the main residence for tax purposes is a useful planning tool in minimising the CGT liability that may ultimately be payable on the sale of their homes.

To be considered as a main residence for tax purposes, the property must be a dwelling house, or an interest in a dwelling house which is, or which at some point during the period of ownership been, the individual’s only or main residence.  For these purposes a dwelling house is a property commonly lived in as a dwelling, such as a house or a flat.

Example 2

Bella has a flat in London which she lives in for two years. Her job relocates to Cheshire and she buys a cottage in Cheshire, which she lives in most of the time. She decides to keep her London flat and enjoys regular weekends in London.

Both properties qualify to be treated as her main residence and Bella can choose which one is her main residence for tax purposes. Although following her job move to Cheshire she spends most her time in the Cheshire property she can retain the London flat as her main residence for tax purposes if this is more beneficial.

Nominating a property

Where an individual has more than one property that qualifies as the main residence for the purposes of the CGT exemption, the individual has the facility of choosing which property they want to be treated as their main residence for CGT purposes.

A nomination must be made within two years from the date on which the combination of residences changes. In a simple case where a person acquires a second home, a property must be nominated as the main residence within two years of the date on which the second property is acquired.

Example 3

John has a house in Liverpool, which he has owned since 2010. He buys a cottage in the Lake District which he uses as a second home on 31 March 2020. John has until 31 March 2022 to nominate a property as his main residence for CGT purposes.

The clock starts to run on a new nomination period every time a property is either added into the mix or a property ceases to be used as a residence. In each case, a new nomination should be made within two years of the date of the change. This is illustrated by the following example.

Example 4

Luigi has a flat in Milton Keynes which he purchased in 2016 and which he lived in as his main home. On 1 May 2019, he purchased a second property in London, which he lives in during the week. He has until 1 May 2021 to nominate a property as his main residence for CGT purposes. In January 2021, he nominates the London flat as his main residence. The nomination takes effect from 1 May 2019, the date on which the second property was acquired.

On 10 July 2021, he acquires a cottage in Cornwall as an additional residence. He has until 10 July 2023 to nominate a main residence for CGT purposes. In December 2021, he decides to sell the Milton Keynes’ flat. A new nomination period begins as the portfolio of residences has changed and he has until December 2023 to make a new nomination.

Changing your mind

Once a property has been nominated as a main residence the nomination is not ‘set in stone’ and an individual can ‘flip’ properties to make maximum use of the exemption.

Once a nomination is made it stays in place until the earlier of the date on which the combination of residences changes or from the date of a variation of the original notice.

This means that a person can change the property that is the main residence for CGT purposes after a nomination has been made. A notice of variation applies from the date that is specified in the notice and the effective date can be up to two years before the giving of the notice. This provides a lot of flexibility to chop and change which property is the main residence. As the last 36 months of ownership of a property that has at some point been an only or main residence is exempt from CGT, a notice of variation may be made when a sale is imminent to benefit from the final period exemption.

Example 5

Hayley has a flat in Birmingham, which is her nominated main residence, and a second property in Devon. She decides to sell the Birmingham flat. To take advantage of the final period of ownership exemption she makes notice varying her main residence to the Devon property. To gain maximum benefit from the final period exemption the variation is backdated two years.

No nomination

In the event that a person has more than one home and has not made a nomination as to which one is the main residence for CGT purposes, the one that counts as the main residence will be determined as a matter of fact. Although this will often be the property where the individual spends most of his time, it will not necessarily be the case. For example, where someone works away during the week spending weekdays in a city flat, the main residence may be the family home elsewhere.

Married couples and civil partners

Married couples or members of a civil partnership are only allowed one main residence for tax purposes between them. However, when a couple marries or enters into a civil partnership and each has a property, they have two years from the date of marriage to nominate which property is their joint main residence for CGT purposes.

Let property

A property that is let out cannot be a nominated main residence. However, where, for example, a property has been a main residence before being let, letting relief may be available to reduce the gain. The final period exemption will also be available.

Practical tip:

Getting the nominated main residence right can save a lot of tax. Professional advice should be sought.

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