This month we continue to look at practical considerations
surrounding making a will. In particular, we will look at the role
of executors and trustees and at specific issues arising in
connection with business assets and digital assets. We will also
consider the pros and cons of avoiding probate by transferring
assets to a trust during lifetime.
Executors and trustees
It goes without saying that you should carefully choose the
people to look after your affairs and carry out your wishes after
your death. In most cases this will be family members. It is usual
to appoint the same individuals as both the executors and the
trustees. If nothing else is said then the executors will also be
the trustees automatically. It is also possible to name persons to
be trustees who are not executors. In some cases, some of the named
executors will not want to act or may reserve their power. If
they are also appointed as trustees then, depending on the wording
of the will, if they do not want to act as trustees they will have
to resign separately.
An adviser may come across this issue when legacies which are
held subject to a trust need to be invested. If a trust has been
created under a will, there should be some form of assent of the
assets from the executors to the trustees, even when the same
individuals act in both capacities. Another important point to
remember is that if a legacy is left to a minor child there will be
an implied trust and the executors will hold the funds as the
initial trustees. If they do not wish to act, they should appoint
new trustees, usually the parents or guardian of the minor
Avoiding probate with lifetime trusts
It is, of course, possible to avoid probate by
transferring assets during lifetime. Until March 2006 a form of
trust, referred to as a "probate trust", used to be popular. Under
such a trust the settlor would retain a life interest which meant
that no transfer of value for IHT purposes would have taken place
when the trust was set up, so the arrangement was neutral for IHT
purposes. It did not mitigate any IHT, of course, but ensured
that assets were kept outside of the estate for probate purposes
and the trustees could deal with the assets and distribute them in
accordance with the trust terms (and so according to the settlor's
wishes) without any of the delays which are often associated with
obtaining probate (or letters of administration if there is no
Unfortunately, since the changes introduced to
the taxation of trusts in March 2006, the tax treatment of these
trusts has changed dramatically, namely a transfer into an
equivalent trust now (unless it is a trust for the disabled) would
be a chargeable lifetime transfer (CLT) so potentially resulting in
an immediate IHT charge and, of course, the assets would still
remain in the settlor's estate by virtue of the gift with
reservation of benefit provisions. However, if the value of the
assets going into such a trust is comfortably within the settlor's
available nil rate band, some people may still consider using this
type of arrangement. In addition to the avoidance of probate,
assets held in such a trust would also be protected from the claims
of creditors, ex-spouses etc.
We touched on this subject last month.
The fundamental question for business owners will be who
inherits the business and, if it is not a family business, is there
a share purchase arrangement in place so that the family will be
compensated and the business can be carried on by the continuing
owners? In a family business, a frequent key question will be
what is suitable compensation for those who are not inheriting the
It is extraordinary how often people confuse the
"business ownership" of assets with the personal ownership of
assets and the consequences can be serious. Especially for a
partnership, where there are often less than formal arrangements in
place, it is essential to be clear which assets are held on the
firm's balance sheet, and so are owned by all of the partners, and
which are owned by the testator but used in the business.
The issues that need to be addressed in conjunction with making
or reviewing the will of a business owner in order to
avoid problems arising on death include checking that the governing
documents (such as the Articles of Association or a Partnership
Agreement) are up-to-date, in line with the client's wishes and in
accordance with their will. All business documents should be
reviewed regularly in conjunction with the client's estate
Any advice on will planning for a business owner would also need
to include a check on whether Business Property Relief (BPR) or
Agricultural Property Relief (APR) would be available. There are
many instances where such reliefs are not available, one of the
most common being a binding buy and sell agreement for purchase on
Another issue to consider is whether there any loans outstanding
and how they will be dealt with after the client's death,
especially if the family continue the business. Is there sufficient
cash to keep the business afloat during the estate administration
period so maintaining the value, possibly for a future
sale/transfer? Some additional life cover may be
It should also be remembered that if there is no specific
provision in the will dealing with the business, then any business
interest that a client owns, whether an interest in a partnership
or a company shareholding, will fall into their residuary estate or
pass under the intestacy rules if they have no will. Does this
accord with any share purchase arrangements that may be in
Again, we touched on this subject last month. It is surprising
how often it is overlooked.
Apart from photos and digital content that has been
purchased, a digital legacy also consists of social media accounts
on sites such as Facebook, Twitter and YouTube and this is where
potential problems for executors may arise. It may come as a
surprise to some that they do not in fact own their online content
and actually only have a licence to use the website's services.
What happens to their profiles on death is governed by the
provider, but often the licence to use the e-platform terminates
and the deceased's online data is non-transferable.
When a person dies, their personal representatives will need
access to these electronic records in order to administer the
deceased's property, but few people plan for this.
Accounts or other assets that are digital-based often leave no
paper trail which makes it difficult for an executor to locate the
assets or even know they exist.
Even if an executor has knowledge of the assets, if they do not
know the relevant passwords, they will be blocked from accessing
them by layers of cyber security.
An additional problem is that accessing someone else's account
without their specific authority arguably breaches section 1 of the
Computer Misuse Act 1990 and may contravene the service provider's
provider separately in order to establish their rights to access
and manage the assets.
These potential pitfalls can be avoided by taking certain steps
and advisers should discuss these with any client reviewing their
will. These include:
- Making an inventory of all digital assets and keeping the list
up to date. This should be stored alongside the will (although bear
in mind that such information should not be included in your will
because it becomes a public document on death). It is also
advisable to make a record of all passwords but, for security
reasons, this should be stored separately.
- Updating a will to include gifts of the digital assets. While
sentimental assets (such as digital photos) can be gifted under a
personal chattels clause in your will, digital assets with a
significant financial value or any associated intellectual property
rights will need specialist treatment.
specify what will happen to the account on the death of the account
holder. Appropriate guidance can then be given to the executors.
For example, you may want your Facebook profile to be changed to an
'in memorium' page or deleted.
- Specific authority should be given to the executors to access
and manage the digital assets.
As you can see, there are many practical issues to consider when
arranging one's will and, what is more, new topics keep
emerging. There is plenty to discuss with clients seeking
advice on their estate planning.