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Dispute After Death: The Dangers of Not Updating Your Will

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The need to regularly review ones Will is paramount. Circumstances change and life takes many unexpected twists and turns. How one expects their estate to be divided is likely to differ as the years pass by, especially if you meet new people later in life who you may feel are more deserving of inheritance.

This was the case for Mr Redmond, who met his live-in partner years after having his Will was drawn up, which left everything he owned to his two daughters, Lynn Leberknight and Jane Redmond. When Mr Redmond passed away, Mrs Taylor was ordered to leave the home she had once shared with Mr Redmond by his daughter Mrs Leberknight. As Mr Redmond had not made any provisions for his life partner in his Will, she was legally left with nothing.

Whilst Mrs Taylor had little rights under the strict letter of the law, Courts are able to apply the principles of “equity” to reach a more fair and just outcome. A notable example is the maxim ‘equity looks to the intention rather than the form’ meaning that equity will not allow a party to rely on the strict wording of the law in a way that would be unconscionable.

The principles of equity therefore prove crucial in a case such as Mr Redmond’s. Mrs Taylor made a claim under the rules of equity against Mr Redmond’s estate. This claim was successful, with judge Stephen Hockman QC finding it ‘improbable that in his deteriorating state of health, Mr Redmond would choose to end a relationship with a woman whom he clearly loved’. The judge followed this by confirming ‘equity regards as done that which ought to be done’. This was found despite claims from the daughters that Mr Redmond and Mrs Taylor’s relationship was an ‘affair’ and that he was ‘not the marrying type’.

While Mrs Taylor’s claim was successful and she was subsequently awarded £325,000.00 out of Mr Redmond’s £1,000,000.00 estate, thousands of pounds in Court and solicitor fees were incurred as well as relationships breaking down. The gruelling nature of this estate battle could have been avoided had he simply updated his Will to provide for his partner.  

Do you think your Will might not reflect your current wishes? Call us today to discuss your position.

01753 486 777

Crime Doesn’t Pay: Son to Pay Back over Half a Million Pounds to Mother’s Estate

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When Mr Richard Willis discovered that he would be receiving less inheritance from his mother’s Estate than his brother’s, he decided to take matters into his own hands. His mother, Audrey, was fearful that Mr Willis would waste his inheritance on frivolous items and so she decided to leave the bulk of her Estate to her other two sons, whom she believed would make better use of the funds.

Mr Willis discovered he would not inherit as much as he had expected when his father passed away 2007. He decided to take out a Power of Attorney for Audrey and exploited his position as an Attorney to syphon large sums of money from her Estate. In the space of just two months, Mr Willis stole £375,000.00 in cash withdrawals from his mother’s accounts. Not satisfied with this, he later sold his mother’s home and moved her into a care facility, using only £29,000.00 from the sale proceeds towards her care fees. He failed to properly care for his mother and when she passed away she owned just two sets of clothes.

Judge Mayo believes the total amount taken from Audrey by her son to be in excess of £713,000.00. Judge Mayo went on to say that as money became available to Mr Willis it “burned a hole in his pocket”, as he used the funds to purchase antiques, guns, cars and wine. Mr Willis also bought and furnished a cottage for himself using the money he stole.

Mr Willis was found guilty of four counts of fraud and sentenced to 6 years imprisonment in 2015 but he was recently released on licence. Northamptonshire police have since used POCA legislation to get an order against Mr Willis who must now pay back over £566,000.00 to his mother’s Estate, which will then be divided in accordance with the terms of her Will. If Mr Willis does not pay the sums back to the Estate within three months of the POCA order then he will return to prison for a further 40 months.

Mr Willis’ greed resulted in him: spending four years in prison; returning the funds he stole; and no doubt has caused family frictions. It just goes to show that crime really doesn’t pay. 

Protected conversations: What are they, when can you use them and crucially, when can’t you?

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111A of the Employment

Since 29 July 2013, employers and employees have be able to engage in confidential, “off the record” discussions about terminating employment thanks to s. 111A Employment Rights Act 1996 (“ERA”).  This has become known as “protected conversations”. However, my experience is that very few employers – or employees – know exactly when these protected conversation can take place – and indeed in what situations they can’t.  

Without prejudice

Nearly everyone has heard of the common law principle of without prejudice.  This still exists and essentially prevents any discussions that are made in a genuine attempt to settle a dispute from being raised in front of a court or being used as evidence.

However, this principle has required updating as without prejudice rules state that a dispute must be on-going before the “without prejudice” rules kick in.  In employment law terms, there are many times when an employer may wish to raise the issue of parting ways with an employee before any dispute has actually arisen.  Indeed, case law tells us that even where an employee has raised a grievance, this is not necessarily enough to be considered as an on-going dispute. 

Protected conversations

s.111A ERA introduced a statutory form of the without prejudice rule but with one main difference; the parties did not need to be in a dispute for it to kick in.  There are however some restrictions on when s.111A can be used.

  1. 111A protection can only be used:
  2. In claims of “ordinary” unfair dismissal – this means that if the claim is one of automatic unfair dismissal (such as a dismissal related to whistleblowing), one of discrimination claims or a breach of contract claim, s.111A protection cannot be relied upon.
  3. Where there is no improper behaviour – this can be for example threatening the employee to accept the terms offered (including pressuring them or not giving them sufficient time to consider), harassment, bullying or discrimination.

Ideal uses

Protected conversations are ideal when an employer may not be happy with an employee’s performance, but wants to give that employee the option of entering into a settlement agreement instead of going through a formal performance review. Indeed, any party can broach the subject of a settlement agreement and an employee may likewise wish to raise the option of a settlement agreement to end their employment.

For any further information or advice on protected conversations or terminating employment, please contact Ilinca Mardarescu.

The changes to tax treatment of termination payments

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From 6th April 2018, new rules on how termination payments are to be treated with regards to tax came into force.  These new rules have tightened the tax treatment of payments made, whether these are made within a settlement agreement or not.  Some of the most common have been highlighted below but obtaining advice in respect of termination payments should be taken to ensure the tax treatment is applied correctly.

Where such payments are made, it is now important to assess the basis on which the payments are made and the factual background in order to assess whether tax is payable or not.  The statute applicable in relation to this matter is the Income Tax (Earnings and Pensions) Act 2003 (ITEPA).

HMRC recommends that the following questions be addressed, in the following order:

  1. Does the payment fall within the category of general earnings (or is it a benefit of the employment) under Parts 2 to 5 of ITEPA 2003?
  2. If not, is the payment for a restrictive covenant taxable under 225& 226 of ITEPA 2003?
  3. If not, and no other income tax charge applies (for example, compensation for loss of a share option), is the payment taxable under s. 401- 416  of ITEPA 2003?

This follows the order of priority in which the statutory provisions are applied.

Sections 401 – 416 of ITEPA 2003 act as charging provisions for termination payments where no other charging provision applies. As a result, they will only apply if the payments are not otherwise taxable under s. 62 of ITEPA 2003 or any other provision such as those above.  It covers payments and other benefits received in connection with the termination of employment or a variation in the duties or earnings from employment.

  1. 401 is widely drafted and is designed to catch all payments and benefits that are not earnings. Therefore, rarely will ex gratiapayments (in excess of £30,000) escape liability to taxation altogether. The first £30,000 of payments that fall within section 401 and is not treated as “post-employment notice pay” (PENP) is exempt from tax and any excess will be subject to income tax in the normal way.

NIC’s

NICs are generally payable in respect of all termination payments to which the employee is entitled under the contract of employment. HMRC may also argue that NICs are payable where there is an automatic practice of making termination payments, even where there is no express contractual right.

Payments within s. 401 – 416 of ITEPA 2003 are not “earnings” for NICs purposes and are therefore not generally liable to NICs, but may be brought into charge by express provisions.

The different types of payments

HMRC continues to scrutinise carefully payments made on the termination of employment where s. 401 – 416 of ITEPA 2003 are being relied on. Careful analysis of the nature of a termination payment is crucial therefore, as this will determine its tax treatment.

Contractual severance payments (other than payments in lieu)

Most contractual payments are liable to income tax under s.62 of ITEPA 2003 and to NICs. This is the case even if the payment is intended to compensate for loss of future earnings.

HMRC also treats payments made on termination as subject to tax under section 62 of ITEPA 2003 if there is an established custom of making these payments.

Benefits in kind

Severance packages often include benefits in kind, such as a company car. Other than specific exclusions such as outplacement costs, the benefits are valued in the same way as benefits provided during. Non-cash benefits will be valued at an amount equal to the cash equivalent of the benefit.

Share options and share awards

Employees may be entitled to exercise share options and/or receive share awards either before or at some point after termination.  The terms of the relevant employee share scheme will govern any right of exercise or entitlement to receive shares. Therefore, the reason for the termination will need to be clearly identified for the purposes of dealing correctly with the employee’s share scheme entitlements.  However, there are many factors which need careful consideration as in relation to shares so individual advice on this is crucial.

Payments in lieu of notice from April 2018

From 6 April 2018, all payments in lieu of notice (PILON) paid on termination of employment will be classed as earnings. Payments will therefore be subject to tax and class 1 NICs.  The tax treatment no longer depends on whether there is a contractual PILON in the contract of employment or not and settlement agreements will clearly need to show which portion of the payment is a PILON.

What is a relevant termination award?

A relevant termination award (RTA) is a termination award excluding specified payments.

A termination award is defined as a payment or other benefit received directly or indirectly in consideration of in consequence of or otherwise in connection with the termination of a person’s employment.  Accordingly, payments or other benefits chargeable to tax apart (such as restrictive covenants and contractual PILONs for example) are not termination awards.

The excluded payments are statutory redundancy pay and approved contractual pay (to the extent that it does not exceed the statutory redundancy pay).   So, these automatically benefit from the £30,000 exemption.

This means that non-statutory redundancy pay is a termination award and, in contrast with statutory redundancy pay is not excluded.

Therefore, non-statutory redundancy is a “relevant termination award” and will no longer automatically fall within the £30,000 exemption.

What must be taxed as earnings?

The slice of the relevant termination award (RTA) that must be treated as earnings under s. 402B is:

  • The entire RTA if “post-employment notice pay” (PENP) is equal to or more than the RTA.
  • PENP, if it is less than the RTA but is not nil.

If PENP is a negative amount, it is treated as nil.

Pay in Lieu of Notice (PILON)

There are a number of different types of PILON’s used and, for the most part, HMRC will consider them all as taxable.  Indeed, there is numerous case law just on this topic.  Certainly contractual and implied PILON’s are usually taxable but PILON’s paid as damages for loss of notice may fall within s. 401 of ITEPA 2003 and can therefore be paid tax free (up to the £30,000 limit).   However, HMRC will look carefully at the reason for the PILON payment to ensure it falls within the definition of damages rather than another sort of PILON so a careful analysis of this is important.  Advice should be taken in each circumstance.

Redundancy

Statutory and enhanced redundancy payments fall within s. 401-416 of ITEPA 2003, provided they are paid genuinely on account of redundancy. No NICs are payable.

Payments which are, in fact, a terminal bonus paid in recognition of an employee’s services during the notice period or during the employment generally will be taxable s. 62 and subject to NICs.

The employer should take care if the employee is retiring, or where some of the redundancy payment will be conditional on staying until a specified date, because HMRC could seek to tax such payments as employment income.

New PENP rules from 6 April 2018

As noted above, statutory redundancy pay and approved contractual pay (to the extent that it does not exceed statutory redundancy pay) automatically benefit from the £30,000 exemption.

Non-statutory redundancy will no longer automatically fall within the £30,000 exemption.

For any queries in relation to the above, or termination payments generally, please contact Ilinca Mardarescu.

Risk of identity fraud changes the face of Conveyancing

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The recent High Court decision of Dreamvar (UK) Limited v Mishcon has alerted the property and insurance markets to significant changes in property transactions. Solicitors, particularly those who act for purchasers in residential Conveyancing transactions, will need to read the judgment of the case carefully to understand the Court’s application of the Conveyancing Protocol & Law Society’s Code for Completion by post.

The facts of the case involved an imposter posing as a seller of a property to a small development company, Dreamvar UK Limited. Just before Dreamvar was registered as the owner of the property, the Land Registry discovered the fraud when carrying out their periodic checks. The fraudster and the money however, had disappeared. Dreamvar was unable to recover the purchase price paid of £1.1m.  Dreamvar therefore brought claims against Mishcon De Reya (Solicitors acting for them on the purchase). The basis of Dreamvar’s claim was that their solicitors were negligent in failing to identify features in the transaction that should have had alarm bells ringing as to the risk of fraud. The judge also held that the purchase monies were to be held on trust by the purchasers’ solicitors, until ‘genuine’ completion of the property had taken place. It was held that a genuine completion did not take place and therefore there was a breach of trust. 

The outcome of this decision has been commented on as being harsh and severe as the judge had accepted the fact that Mishcon De Reya had acted reasonably and honestly. Despite this, the firm were found liable. It is clear that the judge was keen to allocate liability arising out of such a fraudulent transaction and did so by weighing up which party would be best suited for absorbing the loss suffered by the purchaser victim. The judge was mindful that Mishcon De Reya had insurance in place to cover this type of claim, whereas failing to recover the money at all would be catastrophic for Dreamvar. 

The outcome of this case will be that solicitors acting on behalf of a purchaser in conveyancing transactions need to ensure that they obtain a legal undertaking from the sellers’ solicitors that they have taken reasonable steps to establish its client’s identity. From the facts of this case, the sellers’ solicitors had not met the fraudster and had simply accepted a driving licence and TV licence as forms of client I.D. The oddities on the driving licence were not followed up and a TV licence is not a source listed in the Law Society’s Anti-Money Laundering guidelines as acceptable verification. Whilst the sellers’ solicitors accepted that the documents provided were not adequate proof of identity and a face to face meeting should have been arranged, the sellers’ solicitors did not owe a duty of care to Dreamvar; that remained with their own solicitors.

If the sellers’ solicitors’ client due diligence procedure in the Dreamvar case were adequate then the fraud would never have happened.  Mishcon De Reya on the other hand had done nothing wrong – they simply relied on the sellers’ solicitors to perform its client due diligence obligations. The decision shows the real risks of such fraudulent transactions and highlights the fact that the parties in conveyancing transactions must remain vigilant as fraudsters are adopting more and more sophisticated methods.

Firms will now look to avoid the risk of identity fraud by developing risk assessment strategies; asking for evidence of the vendor’s solicitors client due diligence and the buyer carrying out limited checks on the vendor’s identity. Purchasers solicitors will need to ensure they obtain confirmation from the sellers’ solicitors that they have taken reasonable steps to verify their client’s identity in accordance with the Law Society’s Anti Money Laundering Guidance and that enhanced due diligence has been carried out where they have not met their client face-to-face.

Permission was granted in this case for an appeal to the Court of Appeal and the Law Society were to intervene because of the potentially substantial implications for property solicitors and how this may affect a firm’s insurance premiums in the future. This is because the High Court effectively ruled that insured solicitors were best placed to carry the financial burden of fraud, where they had been neither negligent or dishonest. This will affect market choice for those requiring legal conveyancing because firms will need to have sufficient insurance in place to absorb such costs associated with the risk of fraudulent transactions. Furthermore, solicitors acting for purchasers may need to change their retainers to cover themselves from potential liability, which could fall foul of provisions in Consumer Rights legislation. The outcome of this case will undoubtedly bring about massive changes to traditional conveyancing and its processes in England and Wales. 

Ashika Patel, Conveyancing Solicitor

Boomerang Kids, Transfer of Equity and Tax

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Your kids have fled the nest to attend University – to study and get a “good job”. Then, they graduate, but have been struggling to get the job they hoped for and subsequently they return home, unable to take that first step onto the property ladder. This move back home can be very stressful for both children and parents, especially when lifestyles have adapted to the new environment.

You decide you would like to do something to help your child, but all your assets are tied up in your property. Someone mentions a “Transfer of Equity”, whereby you could transfer some or all of the property’s assets to your children and that way, they would have something of their own.

In this case, there are a few matters you need to consider: firstly, the Tax implication of making the Transfer; and secondly, whether your child would be able to draw up a second charge on your property in order to purchase another of their own. Assuming your child is able to obtain the finance for their new property, have you considered what would happen should your child be unable to repay the 2nd charge on your family home? In addition, have you considered the Tax implications? At the very least, there are possible Inheritance Tax implications for you transferring a share of your family home to your children as well Stamp Duty Land Tax considerations for your children as they will be deemed to own two properties.  What if your child becomes bankrupt in the future? The share of your property which they own would automatically form part of their estate and it would be for the trustee in bankruptcy to distribute, along with anything else your child owns, in accordance with their duties.

All of the above factors, and more, need to be considered. This has become an increasingly common situation in today’s property market and we work together with our clients, tailoring our services to their individual needs. If this has raised any queries concerning your personal situation in relation to a potential transfer of a property, Inheritance Tax, Trusts, or you simply find yourself in a position to purchase your first property – we are here to help!

Nicola Darby

Conveyancing Secretary

Squatting: What you need to know about Adverse Possession

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Adverse Possession is more legally the term to describe ‘squatting’. Therefore, it is the process of a person who is not the legal owner of the land but who can then become the legal owner, if they have been in possession of the land for a certain period of time and if they have met the criteria below. The rules have somewhat changed since the introduction of the Land Registry Act 2002, however, the principles remain the same.

Limitation

  • The Land Registration Act 2002(LRA 2002), which came into force on 13 October 2003, introduced a new regime which applies to claims for adverse possession of ‘registered land’ where 12 years’ adverse possession had not accrued before 13 October 2003. Therefore, the new rules require 10 years adverse possession of the land before an application can be made.
  • The old law continues to apply to adverse possession in respect of ‘unregistered land’ (based on 12 years’ adverse possession under the Limitation Act 1980(LA 1980)) and registered land where 12 years’ adverse possession had accrued before 13 October 2003 (under transitional provisions of the LRA 2002).

Criteria

  1. Factual Possession of the Land – You will need to demonstrate sufficient degree of ‘exclusive physical control’. This is dependent on the use of the land; it may be sufficient grounds to mow the grass, plant flowers, and place signposts up for advertising. A major point that must be considered is that when you are exercising the said factual possession, you are in essence excluding the world at large when doing so. It is usual for someone to fence land off/erect locked gates in this regard; though this is not always determinative it can be exceptionally helpful.
  1. Intention to Possess – You need to establish for the last 10 or 12 years that it has always been the intention to possess the land exclusively.
  1. Occupation without the Owners Consent – Consent can be either formal or informal, for instance a license to occupy or a conversation confirming your use of the land.

If the above criteria are met, then you will be in a position to make an application to the Land Registry. In support of your application for adverse possession you will need to provide supporting historic evidence in the form of a statutory declaration, stating the circumstances of your occupation.

If you are considering making an application for adverse possession, contact our experienced litigation department today. Our dynamic team think outside the box to assist you in finding the best solution based on your needs and circumstances.

An AI Just Defeated a Group of Lawyers

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AI has taken a big swing at chess players, poker players, go players and now lawyers! A showdown between some of the best lawyers in the world and an AI intelligence platform LawGeex, over an interpretation of contracts resulted in the humans losing, again.

The challenge had twenty lawyers go up against the AI platform in consultation with law professors from Stanford University, Duke University, School of Law, and University of Southern California – both were given four hours to review five non-disclosure agreements (NDAs), identifying 30 legal issues, this included things like arbitration, confidentiality of relationship and indemnification. The scoring happened by accuracy in indemnifying each issue.

Humans took another tumble against the rising force of smart machines with an 85% accuracy rate. The AI smashed that out of the water with 95% accuracy. What makes this even scarier is it took the humans 92 minutes on average, but the AI completed it in 26 seconds.

This is a task lawyers undertake daily, but this still didn’t assist in the competition. The AI scoring the highest result achieved 100% accuracy in one contract, against the human whose highest result is 97%.

So, what does this mean for the legal industry?

When a computer can complete intricate and complicated jobs like this, it’s easy to see the threat posed to the industry as a whole, we see the looming threat of computerised legal offices dealing with every need in mere moments, but it’s not as dystopian as that.

“Having the AI do a first review of an NDA, much like having a paralegal issue spot, would free up valuable time for lawyers to focus on client counselling and other higher-value work,” said Erika Buell, clinical professor at Duke University School of Law, who LawGeex consulted for the study. 

These tools will come into the market, and there is a place for them, but like the computer on your desk it’s simply a tool and will only serve to make the process easier and quicker for both the solicitor and their clients. We feel there’s only good to come from this, but it’s a fascinating step into the future at the very least!

Aston Bond attend the Slough careers fair

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Aston Bond solicitors gave their time supporting young students and giving general careers advice at the Slough Careers Fair this week.  The Slough Aspire Careers Fair brings a local schools together with businesses and further education colleges and is run by the charity Learning to Work.  Aston Bond have been keen supporters for the past few years.  It is always rewarding taking part in these events, both on the Q&A panel and meeting students individually at our stall. The level of interest in a career in law is heartening and we were impressed by the calibre and enthusiasm of the young people we met.

Aston Bond at the Slough Careers fair
Aston Bond team at their stall.

Aston Bond Tackles the London Legal Walk again

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London Legal walk here we come!

Here we are again, the 2018 London Legal Walk is on it’s way; 21st May. An ambitious 10km walk all through central London, and it’s something Aston Bond enjoy being part of year in year out, helping to raise money for the London Legal Support Trust. The charity helps raise money for Legal Aid, Legal Aid helps people who are unable to afford legal advice, to obtain needed legal representation.

Giving back and raising money is something that underpins the core values of Aston Bond, and knowing that the sum of our efforts can help bring justice and change to those who are less fortunate or unable to seek basic legal advice is fantastic. The company always hits the pavements of the big city to show their support and raise as much money as possible to help a great charity, who are doing great things.

This year we’re going for an ambitious £600, we’ve now got under four months to make it happen, but we’re hoping with your help we can raise enough money to support the London Legal Support trust; which will all make a difference to their admirable work.

Click here to go to the JustGiving page and donate as much as you can, thank you.

Below are some of the photos from our previous days at The London Legal walk, a fantastic event, which finish the walk with an amazing street festival, complete with exotic food and amazing acts. It really is a great day out and we can’t wait to get there!

Ilinca Mardarescu

Head of Employment

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