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Centre |
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1. What happens to my Assets if I don’t
make a Will?
2. Are there assets that I can’t include
in my Will?
3. What is the need for a Valid Will?
4. Duties of Executors
5. Duties of Trustees
6. Power of Trustees
7. Trustees Remuneration & Expenses
8. Enduring Power of Attorney (EPA)
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1. What happens to my Assets if I
don’t make a Will? |
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If you die without leaving a valid Will, then those people
entitled to your assets under the intestacy rules must come
forward and take steps to administer your estate. Instead
of taking out a Grant of Probate and distributing the assets
according to the terms of your Will, under intestacy an
administrator must take out a Grant of Letters of Administration
intestate and then follow a similar administration process
as that of an Executor.
The person who has a right to take a share in the estate
is entitled to extract the Grant of Administration Intestate.
A surviving spouse is the first person entitled to extract
the Grant. Thereafter, any one or several of the children
may do so once the surviving parent has renounced. If the
spouse, next of kin and persons entitled to a distribution
are either dead or have renounced, administration will be
granted to the personal representative of any one of those
individuals. The Succession Act dictates the identity and
order of relatives entitled to take out such a grant.
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2. Are there assets that I can’t
include in my Will? |
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(a) Joint Accounts |
Who is entitled
to the money in a joint account on the death of one of the
account holders? Does the joint account go to the surviving
account holder? Does it pass to the beneficiaries under the
Will or to the next of kin? The answers to these questions
depend on the intentions of the parties when the account was
opened or at the date a second or third name was added to
the account.
When a husband and wife or parent and child open a joint account,
it is presumed due to the close relationship between the account
holders that a gift is intended. Unless the situation is clarified
at the time the account is opened (or the extra names are
added to the account), the funds in a joint account will pass
to the survivor on death.
Where a person transfers money into a joint account solely
for administrative convenience then this should be made clear
to the financial institution at the time and then the account
holder will not be entitled to the funds on death. An example
of this type of situation would be where a parent transfers
money to a joint account with a child solely because of the
parent’s failing health or inability to get the bank. The
legal position with joint accounts is complex and it is advisable
to obtain legal confirmation as to the beneficial ownership
of the account before releasing any balance to the survivor.
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(b) Assets in Joint Names |
The legal position
in relation to assets in joint names is complex and in particular
any real property which is held in the joint names of a deceased
person and another party. There are two main ways in which
property can be held: -
- Joint Tenants: Property is held by two or more people
and on the death of one joint tenant it passes to the
survivor(s)
- Tenants in common: Property is held by two or more
people and on the death of one of the owners, that owner’s
share will pass as directed under his/her Will or on intestacy.
In other words a share of property held under a joint tenancy
will pass by survivorship. A share of property held as tenant-in-common
may be included in a Will and passed to the beneficiary of
choice. Where a Will does not exist, then the share will pass
under the rules of the Succession Act.
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(c) Other Assets passing outside the Will
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The following types
of asset pass outside your Will:
- Any asset in which you held a life interest only.
- Death benefits passing under a life insurance policy
or pension scheme where the beneficiaries are specifically
named in the policy.
- Assets passing by nomination, you may leave specific
instructions that policy proceeds etc. are to be paid
to a specified nominee on your death.
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3.
What is the need for a Valid Will?
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In addition to the
basic requirements for a Valid Will, each of the following
should be considered for inclusion in a Will as personal circumstances
dictate: -
- Revocation of previous Wills and testamentary dispositions.
This ensures that the latest dated Will is the one that
will prevail. Care need to be taken if Wills in more than
one jurisdiction are drawn up so that the revocation clause
recognises if all previous Wills are being revoked or
just the Irish or foreign one is to be revoked.
- Appointment of Executors.
- Appointment of Trustees (if required).
- Appointment of guardians (if required).
- Provision for bequests of specific items or cash amounts
(if required).
- The establishment of a trust where it is not intended
to give an outright inheritance on death
- A properly drafted residuary clause that deals with
all eventualities.
- Enabling clauses: advancement, appropriation, apportionment
and miscellaneous.
- A schedule containing additional powers for executors
and trustees.
Most Wills contain basic powers for Executors and Trustees
allowing them to administer the Estate and any resulting Trust.
If however the estate contains business assets or properties
which are to be retained advice should be sought so that sufficient
powers are given to the Executors and Trustees under the Will
to administer these properly. If sufficient powers are not
granted under the Will then they may go to the Courts to seek
additional powers but this can be expensive and cause time
delays.
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4. Duties of executor
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The duties of an
Executor fall into three main categories that are summarised
below. Although it is possible to administer an estate without
the help of a solicitor it is not advisable.
- Identify and gather the assets of the estate
Care must be taken to properly identify all assets of
the estate. Generally it is easier to identify assets
such as houses, land and quoted investments but private
company shares or assets that are not in the sole name
of the deceased can cause problems.
- Pay lawful debts of testator.
Prior to making application for a grant of probate the
Executor must identify all debts and liabilities of the
deceased. There are legal requirements which must be satisfied
including the placing of public advertisements etc. and
legal assistance should be sought in complex or valuable
estates as the Executor could be held personally liable
for the debts if proper procedures are not followed.
- Distribute the estate according to the wishes of
the deceased. In many cases the Will is clear and
unambiguous. An Executor must act. If there is potential
for conflict, especially within the family, the Executor
must be capable of acting objectively and impartially
to avoid friction as far as possible.
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Example of fixed trust
Jane provides in her Will that a life interest in her portfolio
of shares is left to her sister Alison. On the death of Alison
the assets are to be divided equally between Jane’s nieces
and nephews.
During Allison’s lifetime she will be entitled to the income
from the shares and the trustees have a duty to look after
the investments for the benefit of Alison and also for the
future benefit of Jane’s nieces and nephews.
Example of discretionary trust
Jerry provides in his Will that in the event of his dying
while his children are young, his assets will be held on discretionary
trust for the benefit of one or more of the children.
After Jerry’s death the trustees can then exercise their discretion
in deciding how, in what shares and to which beneficiaries
they will distribute the assets depending on the circumstances
of each child after Jerry’s death. Under this arrangement,
the children of the testator have no fixed entitlement to
benefit from the trust funds but merely have a right to be
favourably considered by the trustees for a distribution.
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5. Duties of the trustees
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Certain duties are
imposed by law on the trustees, subject to any contrary provisions
in the trust deed. The trust deed is either the Will or the
actual trust deed if it is an inter vivos settlement. The
trustees are bound by the terms of the trust deed but certain
duties are imposed by law: -
- Duty to collect in trust property
Trustees ensure that trust property is under their control
by transferring the property into their name and custody.
This should be done as soon as possible after being appointed
and should be maintained over the assets throughout their
term of office.
- Duty to invest Trustees have a duty to invest
the trust funds in order to producing income for the life
tenant while at the same time preserving the value for
the ultimate beneficiaries.
- Duty not to profit from the trust
Unless the trust deed allows it, trustees are prohibited
from making any profit from the trust.
- Duty not to mix a Fund
Trustees cannot mix the trust fund with either personal
funds or with the fund of any other trust.
- Duty not to delegate
Generally, trustees cannot delegate their powers but if
the trust deed permits; they may delegate for the purposes
of administration to professionals, i.e. solicitors, accountants,
tax advisers etc.
- Duty to distribute
Trustees may only distribute the income and capital of
the fund as the trust deed permits.
- Duty to maintain equality between the beneficiaries
Trustees must act with fairness and honesty and must not
favour one beneficiary over another.
- Duty to provide accounts and information
Trustees must keep accounts of all dealings in trust property.
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| 6.
Power of Trustees |
There are two main
sources of trustees’ powers: powers given under the general
law and powers given by the trust deed. The Trustees Act is
the main piece of legislation in Ireland which sets out various
powers and duties of trustees. If the trust deed does not
have a specific power, then, unless there is a provision under
general law granting that power to trustees an application
the court must be made by the trustees to extend their powers.
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7.
Trustees remuneration and expenses
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The general rule
is that trustees are not permitted to receive payment for
acting as trustees. There are certain permitted exceptions
for example if the trust deed specifically provides that trustees
should be paid or if a trustee acting in a professional capacity
provides professional services to the trust.
Both professional and lay trustees may be reimbursed for out
of pocket expenses incurred in the discharge of their duties
as trustees. Frequently to avoid disputes with beneficiaries
at a later stage, the Revenue Commissioners’ published allowances
are used.
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8.
Enduring Power of Attorney (EPA)
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The 1996 Powers
of Attorney Act introduced the Enduring Power of Attorney
(EPA). Basically, an EPA if completed in the manner set out
in the legislation and then registered, operates after the
donor has become mentally incapable thus allowing a trusted
person to continue to care for the donor and avoids the inconvenience
and expense of the supervision of the Courts.
There are two types of EPA - one allows the attorney the power
to make only personal care decisions while the second type
allows the attorney to make. business, property and financial
decisions as well as personal care decisions
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| Personal
Care Decisions |
These have to be
made in the donor’s best interest and include, for example:
- Where and with whom the donor should live
- Whom the donor should see or not see
- What training or rehabilitation the donor should get
- The donor’s diet and dress
- Inspection of the donor’s personal papers
- Housing, social welfare and other benefits for the
donor.
The donor may identify a person when completing the EPA as
someone who must be consulted by the attorney before making
personal care decisions on behalf of the donor. Any personal
care decision must be made in the donor’s best interest. In
reaching such a decision then regard should be had to the
past and present wishes and feelings of the donor and the
need to permit and encourage the donor to participate as fully
as possible in any decisions effecting him or her.
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| Business,
Property and Financial Decisions |
An EPA is an extremely
flexible tool and although the Act allows restrictions and
conditions to be imposed on the attorney it is important to
ensure that sufficient powers are given to allow the attorney
to manage all of the affairs and property of the donor. An
attorney is in a fiduciary position and must therefore not
allow him/herself to do anything in which he/she has a personal
interest which could possibly conflict with the interests
of the donor. The Act contains two special provisions:
- Conferring a power to provide for the needs
of the attorney and other persons beside the donor and
- Conferring a restricted power to make gifts.
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| Keeping
of Accounts |
The Act provides
that an attorney should keep adequate accounts of the management
of the donor’s property and affairs and in particular of any
expenditure to meet the needs of persons other than the donor
or to make any gifts authorised by the EPA.
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Procedure
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There are five different
documents as set out in the Act.
- An explanatory information statement which must be
read by the donor or read over to him or her.
- It is the EPA itself that sets out the appointment
of the attorney or attorneys and the scope of their authority
together with any special instructions.
- A statement to be completed and signed by the attorney
or attorneys declaring their understanding and duties
and obligations confirming their qualifications to act.
- A statement to be signed by a solicitor confirming
satisfaction that the donor understood the effect of creating
the enduring power and certain other aspects confirmed.
- A statement signed by a registered medical practitioner
confirming that in his or her belief the donor had the
mental capacity to create the power.
An Enduring Power must be granted in a prescribed form that
makes it clear to the donor that the power will only be effective
if the donor becomes mentally incapable. It also requires
to be executed by the attorney. This ensures that the attorney
accepts that he should be appointed. Once the EPA has been
signed then Notice of Execution must be served on the people
named in the EPA to receive such notice and at least one of
these must be a family member. The attorney must acknowledge
the statutory duty when he later has to register the power.
This duty arises when he has reason to believe that the donor
is becoming or has become mentally incapable. He must then
apply to the Ward of Courts Office to register the power having
already given notice to the donor of the power and to certain
of the donor’s relatives.
The EPA must include full details in relation to the donor,
the attorney or attorneys, the extent of their powers, the
medical specialist who can certify the capacity of the donor,
identity of persons to be served with notice on the registration
of the EP and provision for attorney’s remuneration if applicable.
The donor in the presence of an independent witness must sign
the power. It must comply with all the requirements of the
acts and must be signed by the donor when he or she is mentally
capable. Statements signed by the donor’s solicitor and medical
practitioner must confirm the donor’s mental capacity at the
time of signing the EPA.
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Registration
of EPA
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An ordinary Power
of Attorney comes into legal effect as soon as it is signed
witnessed and delivered. An EPA does not come into effect
until it is registered and this can only happen when the donor
becomes mentally incapable. Registration must takes place
in the Ward of Courts Office and a notice must be served on
the donor and on the persons named in the EPA.
It is possible to object to the registration of an EPA and
those notified have five weeks to object and to specify the
grounds on which the valid objection can be made. Once an
objection is made that the Court will not either register
or refuse the EPA until it has made or cause to be made such
enquiries as it thinks appropriate to the case which is likely
to be after a court hearing.
As already indicated an EPA does not come into effect until
it has been registered. However, once an attorney has made
an application for registration then the attorney can take
action to maintain the donor or to prevent loss to the donor’s
estate or to maintain the attorney or other person in so far
as is permitted under the act or to make personal care decisions
which cannot reasonably be deferred until the application
has been determined.
It is worth noting that an EPA can only be signed by a person
who is mentally capable at the time of signing. The procedures
laid out in the Act must be strictly followed. The EPA does
not operate until it is registered and the EPA will terminate
on the death of the donor. An EPA is a practical and useful
tool for a person to use to ensure that they can continue
to be taken care of by trusted family, friends and advisors
after the onset on any form of mental illness. It avoids the
inconvenience, expense and impersonal nature of having the
donor’s business and personal affairs handled by the Ward
of Courts office.
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