07 April 2020

Estate planning demands during the global coronavirus pandemic

The global coronavirus pandemic has, in less than four months, swept the globe, brought economies to a sudden and grinding halt, put an unimaginable strain on even the best prepared health systems and led to changes in everyone’s working and personal lives as jurisdiction after jurisdiction imposes lockdown measures.

For many people the infection results in mild symptoms. Some people may not even be aware that they are infected leading to widespread underreporting. One consequence of this is that the fatality rate of COVID 19, the disease, caused by the virus, is overstated. At the time of writing, the World Health Organisation puts the rate of death among confirmed cases at 3.4%[1] but due to this underreporting of infections the UK government’s scientific advisers estimate that the chances of dying from a coronavirus infection are between 0.5% and 1%[2]. The elderly and those with underlying health conditions have a far greater risk of dying from the infection but even then the great majority of older people will have mild or moderate symptoms.

Despite this fact practitioners are seeing a rapid surge of instructions from those looking to put in place wills, powers of attorney and more sophisticated estate planning measures. The Law Society of England and Wales reports that some English firms have seen estate planning instructions double in recent weeks as clients seek to put their affairs in order.  Our experience is similar.

Wills and powers of attorney

There is no doubt that the current health crisis is focussing the minds of those who have not yet put in place their succession planning or who have been contemplating making revisions to their existing plans. Putting in place wills or revising wills which have been overtaken by events or establishing trusts or foundations for the benefit of future generations is often towards the bottom of most busy people’s list of priorities. That many people, including the wealthy, are now finding their diaries devoid of pressing engagements gives them the opportunity to focus on what they want to achieve with their succession plan.

A will can be as simple or as complex as the needs of the testator and their family. For those whose personal law allows freedom of testamentary disposition, a will might be all that is required in terms of estate planning. Nevertheless, it is estimated that more than half of all adults in the UK do not have a will[3] leaving their family facing uncertainty and the increased possibility of dispute after death.

Clients who are well advised are likely to already have wills in place and powers of attorney prepared to deal with what might happen in any period of incapacity but there remain some high-net-worth (HNW) clients who have either not put them in place or have not updated them.

In addition to an increase in will instructions from local residents, we are seeing an uptick in instructions from clients who do not live in the Bailiwick of Guernsey but who own assets here and who appear to have taken on board recommendations to have a stand-alone Guernsey will.  Applications for a Guernsey Grant of Probate normally take a few weeks from the start of the process to receipt of the Grant and as such, the deceased’s heirs will have access to the Guernsey assets in substantially less time than it takes to obtain access to funds in other jurisdictions. Probate jurisdiction in the Bailiwick of Guernsey is exercised by the Ecclesiastical Court. The Court is extremely efficient and provided the Court is in receipt of all documents by mid-morning on a Wednesday, the application can be heard that Friday and the Grant will be available for collection the following Monday.

Putting wills in place post the global lockdown is not without its challenges. The draftsman must, among other things, ensure that the testator has capacity and that instructions are given free of duress or undue influence. Taking instructions by telephone may be acceptable but in other cases a video conference may be more appropriate.

Executing the will may also be an issue. The Scottish Law Society has issued guidance that in these unprecedented times the professional will draftsman might act as a witness on a video call provided that they are not an executor. Most other jurisdictions are not as forward thinking. In jurisdictions where the will must be signed in the presence of witnesses it is not normally possible to witness wills by Zoom, Microsoft Teams or FaceTime. The witnesses must be in the 'presence' of the testator. That does not mean that social distancing or isolation rules need to be breached. All that is required is for the witnesses to be able to see the testator sign the will and vice versa. This can be from a safe distance.

There is ancient English authority Casson v Dade (1781) 28 ER 1010 in which a will was upheld where the witnesses signed the will inside the offices of the lawyer whilst the testatrix was in a carriage outside but in line of sight. As a matter of practice, witnessing the will through a window may be the best solution and is a practice we have adopted.

In many jurisdictions it is possible for someone else to sign a will on behalf of the testator at his direction. Historically, this was to enable those who were physically unable to sign to make a will. If this is done, there should be a clear record of this being done both on the face of the will and by other contemporaneous evidence and, perhaps, in these days of the ubiquitous smartphone, consideration could be given to videoing the process.

With regard to powers of attorney Guernsey has yet to implement the ability for a locally domiciled person to grant lasting powers of attorney (“LPA”)[4].  Nevertheless those LPAs granted in other jurisdictions can be recognised and registered in Guernsey on application to the Royal Court. Unlike England and Wales, the ability to have the LPA registered here is only possible once the donor has lost capacity. If the donor wishes their attorney to have control over assets in Guernsey before their loss of capacity, the granting of a Guernsey general power of attorney is preferable for, and often required by, local institutions seeking to rely on the power.

Trusts and foundations

For clients subject to forced heirship regimes that they would rather avoid or for whom a degree of asset protection is required, trusts or foundations may be needed. It is surprising how many HNW clients from forced heirship jurisdictions do not appreciate that the succession to their overseas companies will be governed, absent suitable planning, in accordance with the law of their last domicile and so be subject to the same restrictions on their testamentary freedom as they would experience at home.

Demand for trusts from new clients around the globe has increased during this crisis as people seek, often in compressed time periods, to establish structures as part of their estate planning. A practical difficulty in looking to establish relationships with trust service providers at this time is the difficulty in finding eligible certifiers willing to assist in the production of the necessary client due diligence information. There are solutions that avoid face-to-face meetings and wet ink signatures provided that the service providers are pragmatic.

Frequently, wealthy private clients are reluctant to abdicate control over underlying assets to, sometimes geographically remote, institutional trustees and we have seen, over the past decade or so, the rise of both reserved power trusts and private trust companies[5] where the client has greater control over the composition of the board of the corporate trustee. The volatility in the financial markets caused by the measures to combat the spread of the virus have done little to dissuade them from this thinking. It is at times of crisis that one needs a steady hand on the tiller and people establishing new structures and perhaps new relationships with service providers will be understandably nervous about how trustees or foundation councils will deal with assets, some of which may be distressed. Speaking generally, the greater the level of control over trust assets the weaker the trust is from an asset protection perspective and so care needs to be taken in any given case as to whether these sorts of solutions are appropriate but, at present, reserved power trusts and PTCs are the focus of attention.

The lockdown has complicated the delivery of estate planning solutions, as we all – the professional advisers, the trust and company service providers, the regulators and registrars – collectively work from home just as demand for these services is increasing. Whilst the backdrop of the pandemic is, in our lifetimes, new the issues that need to be addressed and the complexities that each client and their unique circumstances present are unchanged. Business as usual in unusual times.

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[1] As at 3 March 2020

[2] Professor Christopher Chris Whitty as reported by the BBC; see also “Estimates of the severity of coronavirus disease 2019: a model-based analysis” published in ‘The Lancet’ on 30 March 2020 https://www.thelancet.com/pdfs/journals/laninf/PIIS1473-3099(20)30243-7.pdf

[3] 2018 survey undertaken by Macmillan Cancer Support, 2017 research published by Unbiased.co.uk and Certainty.co.uk’s “Write and Register a Will Week” campaign.

[4] Although the draft projet de loi “The Capacity (Bailiwick of Guernsey) Law, 2020” was approved by the States of Deliberation on 28 February 2020 with a view to it coming into force, subject to Royal approval, in 2021.

[5] We are also working with clients looking to establish a PTF as opposed to a PTC.  This is where the trustee is, instead of a company, a foundation.  As a foundation does not have shares there is no need to consider who would otherwise own the shares of a PTC.  Typically the shares in a PTC are owned by the trustees of a non-charitable purpose trust but for some clients this is regarded as an additional level of avoidable complexity.

 

An original version of the article was first published by eprivateclient, April 2020.

© Carey Olsen 2020.