If your estate is subject to inheritance tax, then any gifts to charity would be tax free. The value of the gift would be deducted from the estate before working out the tax owed. In addition to this, if you give 10% or more of your estate to charity then the tax rate on the remainder would be reduced from 40% to 36% of the value over the threshold. There is a particular formula which is recommended to be put in to your Wills to ensure that this applies and so if you would like to review your Will in light of this please do let us know.
I've been advised that beneficiaries of the will cannot also be the executors, is that correct?
Beneficiaries are able to act as Executors of a Will, and so you could appoint your two children if you wish to. However if you think they may not be able to work together successfully then this may not be a sensible step.
When choosing Executors we recommend that you choose people who you consider will get on with the job efficiently and can work together reasonably well so that the administration can proceed smoothly.
You can have up to four Executors if you wish to, and if you do have concerns about your children working together effectively then you might consider appointing an independent third party or a professional Executor such as Nockolds.
(Sarah Browne - 20/06/18)
The short answer is yes- unless your current Will was made ‘in contemplation’ of the marriage in question, it will have been automatically revoked. Until you put a new Will in place, you are technically ‘intestate’ meaning that the statutory rules would apply to the distribution of your estate if you die. Currently these say that your spouse has the first £250,000 of your estate and the excess is divided and shared half to your spouse and half to your children. As you can see, if these rules were applied, your children would receive significantly less than you intended.
It is important that you take professional advice when preparing your new Will as it will also be necessary to consider whether you ought to make any provision for your new spouse - such as allowing them to live in any jointly owned property if you die. The Inheritance (Provision for Family and Dependent) Act 1975 gives Spouses the right to make a claim against your estate if you do not make ‘reasonable financial provision’.
We would be more than happy to see you to discuss preparing your new Will and would cover this as part of our discussions.
(Vicky Tassell - 28/03/18)
Please can you confirm whether this is correct?
It is correct to say that there is no inheritance tax on assets passing between spouses, regardless of the value. Whether you need to obtain a Grant of Probate depends on the nature of the assets and the estate, rather than whether it is taxable. If all assets are owned jointly with your Aunt then Probate may not be required. Any jointly owned bank accounts will automatically be amended in to your Aunts sole name once the bank receives the death certificate for example. However if your Uncle owned any assets in his sole name then probate may be required and the banks or investment companies will advise you whether they need Probate in order to release or transfer the funds, as the threshold for this varies between institutions.
If any house or land is jointly owned by your Aunt and Uncle then whether Probate is required will depend on the ownership type. If this is owned as what is called ‘Joint Tenants’ then this will pass to your Aunt without the need for Probate, but if it is owned as ‘Tenants in Common’ then probate may be required and we will be happy to advise you on this further. We would be happy to advise you and your Aunt on this further if you would like to come in and discuss the estate.
(Sarah Browne - 14.02.18)
You should have a Power of Attorney for Property and Finances in place if you are dealing with somebody’s affairs on their behalf. Although you are managing to access online banking currently ,if you need to deal with any of your father’s other assets, or if circumstances change regarding the bank account, the institutions will require a Lasting Power of Attorney in place before speaking to you, and so it is better to put this in place sooner rather than later. It will need to be your father that makes the decision regarding putting the Lasting Power of Attorney in place, and he would still need to have the necessary mental capacity to do this.
We would be happy to assist your father in putting a Lasting Power of Attorney in place and so if this is something he would like to discuss, please contact us. There are also Lasting Powers of Attorney for health and welfare decisions and so your father may also wish to consider whether this is something he would like to put in place.
If somebody no longer has the necessary capacity to make a Lasting Power of Attorney then an alternative is a Deputyship Order, where you apply to the Court to be appointed to act on their behalf.
(Sarah Browne - 13.12.17)
After someone has passed away, within two years of their death, any beneficiary inheriting under their Will has the power to vary or change their entitlement under the terms of the Will. This does not mean that they can increase their entitlement but instead that they could re-direct it to another beneficiary if they wanted to do so.
The most common reasons for altering the provisions are to improve the Inheritance tax position of beneficiaries. For example, you may inherit from your mother but decide you would rather your children have the funds. You could therefore make a lifetime gift of the money which would potentially impact your own inheritance tax position for a further seven years. Alternatively, you can complete a Deed of Variation so that you re-direct your entitlement to your children the gift takes effect as though it was actually made by your mother rather than you (avoiding the seven year rule).
In some cases, a beneficiary may simply want to redirect their inheritance to another person or charity because they feel the Will was not reflective of the Deceased wishes. The new beneficiaries do not have to be previously named in the Will and can be chosen by the beneficiary who is changing their entitlement.
Changes should be made in a document known as a Deed of Variation, which needs to be properly signed and witnessed in order to be validly executed. It also needs to include valid elections to make sure that the gift will take effect retrospectively or both Inheritance Tax and Capital Gains Tax.
I would recommend taking professional advice if you are considering making any changes to a Will, or making any lifetime gifts following an inheritance so that we can discuss the potential implications.
(Vicky Tassell - 01.11.17)
Enduring Powers of Attorney (EPA’s) are still valid documents as long as they were created before 1 October 2007.
Any attorneys who have been appointed under the document will still have the authority to act on your behalf in respect of any property or financial decisions, subject to any restrictions which have been included in the EPA.
EPAs are not registered with the Office of the Public Guardian (OPG) until the attorneys deem that the donor is losing or has lost capacity. Once that has happened, a duty arises on the attorneys to register with the OPG.
In October 2007, Lasting Powers of Attorney (LPA’s) were introduced to replace the Enduring Power of Attorney. These can be obtained in respect of Health and Welfare decisions, in addition to Property and Financial decisions. They operate similarly to EPA’s; however there are slight differences as to when they can be registered and how they may be used.
For more information, please contact a member of our Probate team.
(Vicky Tassell - 01.11.17)
Legally an executor is responsible for sorting out a person’s estate when they die. This includes working out what assets they have (e.g. bank accounts, property, shares and insurance policies) and paying any debts (including any Inheritance Tax payable). They would then pay the money to the beneficiaries of the estate. An executor will not usually be personally responsible for any debts of the person who has died but can be held personally accountable to the beneficiaries or to people who are owed money where they do not follow the legal rules for sorting out an estate. It can mean a lot of work and may be quite a burden and so before accepting this you may want to ask your friend about his estate and what would be involved. Many executors ask solicitors to help them carry out the work so you may also ask your friend whether he would be happy for you to instruct a solicitor to advise you on your duties and to carry out some or all of the work and for the costs to be paid from the estate. The solicitor will help you carry out your job in accordance with the law and so protect you.
It is our experience that executors often accept this appointment without knowing what is involved and so you should give this careful consideration.
(Sarah Lockyer - 20.09.17)
Most people think trusts are complicated and this puts them off using them but the basic idea is very simple: People (called ‘Trustees’) are appointed to look after money or property (usually called ‘Trust Assets’) for the benefit of other people (called ‘Beneficiaries’). There are different types of trusts. In some types of trusts (called Flexible or Discretionary Trusts) it is completely up to the Trustees which Beneficiaries have the use of any Trust Asset. For example, they can decide that one Beneficiary may live in a house but that, on his or her death, the property will pass to another Beneficiary. In other trusts a Beneficiary may have the right to have the income from the Trust Asset (e.g. the interest on a building society) but will not be able to spend all the money which is preserved for another Beneficiary.
Trusts can be used to hold money for young children until they are a specified age and also to provide for a number of different Beneficiaries where your personal situation is uncertain. In a nutshell, do not be afraid of trusts as they may be a useful tool for you to provide for your family.
(Sarah Lockyer - 20.09.17)
People are often able to deal with bank account balances under a certain limit (generally around £30,000) without the need to obtain a Grant of Probate, under each banks own ‘small estates procedure’. However, in order to deal with larger assets, such as a property in your mother’s sole name, the institution involved or the buyer of the property will require proof that you have authority to deal with the asset on behalf of your mother’s estate. This proof takes the form of the Grant of Probate.
You will therefore need to do the relevant Inheritance Tax return (which form to use depends upon the circumstances). This will need to be done irrespective of whether any tax is payable on the estate. Once the Inheritance Tax forms have been completed you will then need to apply to the local Probate District Registry to obtain the Grant itself.
We can assist in all aspects of this process and I would therefore recommend making an appointment to talk matters through.
(Vicky Tassell - 28.06.17)
Your Personal Representatives will be required to investigate and notify HMRC of any gifts made in the last seven years.
If you have made a Will you will have chosen people to act as your Executors. If you have not and your estate will be administered under the intestacy rules then whichever of your beneficiaries ends up dealing with the estate will be your Administrator. Executors and Administrators are both types of Personal Representatives.
Personal Representatives have a responsibility to ensure the correct amount of Inheritance Tax is paid on your estate. In order to work out the tax payable, they must make reasonable enquiries of family, friends, beneficiaries, solicitors and even accountants connected with your estate to establish whether any gifts were made in the 7 years prior to your death. Any gifts that they become aware of must be reported to HMRC.
If a Personal Representative is aware of a gift which they fail to declare they could find themselves personally liable to additional penalties and interest payments. However, where Personal Representatives have made all reasonable enquiries but the recipient of the gift has lied and failed to make the Personal Representative aware, the beneficiary of the lifetime gift (i.e. your children in this case) would be personally liable for both the additional Inheritance Tax along with penalties for potentially lost revenue to the HMRC.
(Vicky Tassell - 28.06.17)
You cannot add an Attorney to an existing Power of Attorney you would need to have a new document drawn up, and this is something we would be happy to help you with. Depending on how long ago your Power of Attorney was made, it may not authorise your daughter to deal with decisions relating to your health and welfare and so this may be worth reviewing in any event.
If your grandmother owned significant assets in her sole name, such as a property or savings, then her Executors will need to obtain a Grant of Probate if she had a Will or if she did not have a Will, then the person who is legally entitled to her estate would need to obtain Letters of Administration. If her assets were bank accounts or investments then the first step would be to contact them and ask whether they require a Grant in order for the accounts to be closed. Where the only assets are bank accounts or savings, there is no fixed sum at which a Grant is required, this varies from bank to bank, but it is usually if savings are over £10,000 or £20,000. A Grant will certainly be required if your Grandmother owned a house or flat in her sole name. If this is something you would like to discuss further, please let us know.
The youngest that anybody can legally inherit property is 18, although people often state in their Wills that this should be older, say 21 or 25 where money is left to children. In your Will, you would choose who you would like to act as your Executors and Trustees and they would be in control of the money and look after it on your children’s behalf until they reached whatever age you chose for them to inherit.
The money can be advanced to the children before that age or spent on their maintenance, but this would be at the discretion of your Trustees.
It is important to choose as your Trustees, someone who you would trust to have this responsibility when writing your Will. The maximum number of Executors and Trustees you can choose is four and this can be any combination of relatives, friends or a professional such as your solicitor, if appropriate.
The Trustees would not necessarily have responsibility for the welfare of your children as this would be the job of the guardians that you choose in your Will. It is important that you consider the Guardians and the Trustees can work together if required, and they can be the same people, although do not necessarily need to be. If you would like further information on how a Trust for children would work, please contact us.
If somebody makes a lifetime gift of assets when it is foreseeable that they may require care, then if they are assessed for what they can afford to pay towards care in future, the local authority may ignore this gift and treat them as if the funds are still in their bank account when calculating what they can afford to pay. They consider this a ‘deliberate deprivation of assets.’ We also do not recommend an outright gift of assets such as a home as should your children divorce go bankrupt or should there be a family rift, then this would leave you in a vulnerable position. It may be sensible to review your Wills and look at using Life Interest Trusts if you are married or have a partner, so that you and your partner can each protect your respective half of any assets should the survivor require care. Please contact us if this is something you would like to discuss further.
(Sarah Browne - 22.02.2017)
Any gifts to charity are free of Inheritance Tax and so the value of your estate when calculating tax will be reduced by the value of the gift itself. However, if the amount that you are gifting to non-exempt beneficiaries (ie. your spouse or a charity) is above the Inheritance Tax threshold then you will still have to pay Inheritance Tax. If you gift 10% or more of your estate to charity, then the rate of Inheritance Tax, if the estate is taxable, is likely to be reduced from 40% to 36% and so if the value of the gifts that you are considering making are in the region of 10%, then it may be worth considering this when preparing your Wills, as it may reduce the Tax payable overall. If you would like to review this in your wills please do get in touch.
(Sarah Browne (22.02.2017)
It is very common for clients in a second marriage to want to ensure that their spouse is looked after if they are to die first, but also to ensure that some part of their inheritance is ultimately passed on to their children of a previous marriage.
If you make an outright gift of your estate to your second wife through your Will, she is then absolutely entitled to dispose of her inheritance as she wishes, whether or not this includes your children.
It is often better to secure your children’s inheritance directly through your Will. This could be done by making provision for your children and wife at the same time, for example by leaving a cash gift to each child and the remainder to your wife. However often, if your home is your main asset, there are no funds to make such a gift without sale of the home which your wife requires to live in!
An alternative is to ring-fence part or all of your estate for your wife to enjoy during her lifetime, including living in the matrimonial home, but directing that your estate must pass on to your children when your wife dies. This is a form of trust known as a life-interest which can be very effective in circumstances like yours.
(Vicky Tassell - 11.01.2017)
If your Will was made before your marriage, it has been revoked by your marriage. This is always the case unless your Will specifically states that it was made in contemplation of your marriage, specifically, to your new spouse.
If your Will has been revoked you are now intestate and the intestacy rules will apply; these vary depending on your circumstances but the general position is that your wife will inherit the first £250,000 and half of the remainder. Your children will then share the remaining half of whatever is left.
In order to avoid the Intestacy Rules you must put a new Will in place.
In these circumstances, issues also arise if no provision is left for your spouse in your estate - whether they are in agreement or not, they may be able to lodge a claim against your estate when you pass. It is therefore important to take full advice on drafting a new Will.
(Vicky Tassell - 11.01.2017)
When moving in together it is important that you get advice on how best to structure the purchase and it is very helpful if you can set out individual contributions in a document called a Declaration of Trust. This document can include the fact that the deposit belongs to one individual and that, for instance, the balance over and above that is split 50:50. It is helpful if you can seek advice at the earliest opportunity and work through how you would like to arrange affairs between you and your partner.
(Sarah Lockyer - 23.10.16)
Although the headlines are that this is the case, the rules are complicated and it is necessary to consider your own personal circumstances. There is a new Residential Nil Rate Band which starts in March 2017 at £100,000 but this is only relevant where you leave your home to a direct descendant. Therefore, you should seek advice on your own situation.
(Sarah Lockyer - 23.10.16)
It is a good idea to review your Will every 5 years. Although your circumstances may not have changed, you may find that in fact there are parts that need updating. More importantly, it is likely that there will have been changes in the law since you made your Will which means it is no longer suitable. For example, the changes in Inheritance Tax law both in 2007, and the upcoming change in April 2017 have had a big impact on how tax efficient Wills are. Wills made before the announcement of the upcoming changes may not make full use of the new Residential Nil Rate Band allowance coming into force. This could cost some estates up to £140,000 in additional tax if not properly utilised.
(Vicky Tassell, 12.10.16)
Enduring Powers of Attorney made prior to 2007 are still valid provided that the document was signed by all parties before the deadline. However, there are some differences in procedure between Enduring Powers of Attorney and Lasting Powers of Attorney.
Enduring Powers of Attorney do not need to be registered unless the Donor has lost, or is losing, capacity. There is a duty on the Attorneys of an Enduring Power of Attorney to register the document when this happens.
In order to register the documents the Attorneys must serve notices on both the Donor of the Enduring Power of Attorney and on other relevant family members; which family members are served depends on which relatives are alive at the time of registration.
Once the notices have been served, a certificate of service along with a registration form must be sent to the Office of the Public Guardian. The document will then be registered and returned.
If your father is having capacity issues, it would appear that your duty to register the document has arisen and I would advise you to complete the registration before using the document.
(Vicky Tassell, 12.10.16)
It is difficult to comment on George Martin’s circumstances without knowing all the circumstances of the case.
However, as a rule it is possible for certain categories of people, including the Deceased’s children, to make a claim against an estate where they deem they have not received ‘reasonable financial provision’. The categories of claimant also include spouses, cohabitees and persons who have been maintained by the Deceased and the definition of ‘reasonable financial provision’ will vary depending on the circumstances.
It is important to take proper advice before making a Will in these circumstances to ensure that any risk of a challenge to the Will is reduced.
(Vicky Tassell, 12.10.16)
It is possible to state in your Wills who you would like to be legal guardian of any children under the age of 18 in the event of the death of both parents. You can choose whoever you think is most appropriate to act as legal guardian and they do not necessarily have to have custody of the children should they be appointed. The guardians make parental decisions for any children in the event of your deaths, such as where they go to school, consenting to medical treatment, etc. They would not have authority over assets left for the children children as this would be the job of those you choose to be your Trustees, although you can appoint the same people to act as guardians and Trustees if you wish to do so. This is something we would discuss with you if you contact us to put new Wills in place.
(Sarah Browne - 20.07.16)
Enduring Powers of Attorney (EPAs) are still valid for dealing with decisions relating to your property and financial affairs. However, you should be aware that if you begin to lose your mental capacity, then your attorneys are under a duty to register this document with the Office of the Public Guardian. This registration can take some time and so they should be aware that this is required in advance, if they are involved in a property sale on your behalf for example. The EPAs do not allow your attorneys to make decisions regarding your health and welfare in the way that the new Lasting Powers of Attorney (LPAs) do and if this is something that you would like them to be able to do on your behalf then please contact us and we will be able to advise you.
(Sarah Browne - 20.07.16)
You can have up to a maximum of four Executors in your Will. Your Executor can be a Beneficiary who is inheriting under the Will, and can be a relative such as a spouse or children. If you only appoint one Executor, then we would recommend that you state who you would want to act if they were unable or unwilling to act or if they died before you, to ensure that your estate is dealt with by those who you would wish to deal with it.
You may wish to have your estate dealt with by a professional, particularly if you believe that there may be family conflict or if your assets are complicated and is possible to have a professional Executor, such as Nockolds, appointed.
If you are leaving money to children who are not yet 18 or if you are using Trusts in your Will, then it may be a good idea to appoint two or more Executors and this something we would be happy to discuss with you, if you would like advice on your new Will.
(Sarah Browne - 08.06.16)
This will depend on the type of Power of Attorney that you have in place and whether your father is still able to make his own decisions. If you have a Lasting Power of Attorney for Property & Affairs that has been registered with the Office of the Public Guardian, then you will be able to sell the property on your father’s behalf so long as you are either the sole Attorney or are appointed jointly and severally with another Attorney. If you are appointed jointly with another Attorney then you will both need to sign any paperwork. However, you must consider your obligations under the Mental Capacity Act and follow your father’s instructions if he still has sufficient capacity to make his own decisions.
If the Power of Attorney that you have is an Enduring Power of Attorney, then if your father no longer has capacity, this will need to be registered with the Office of the Public Guardian before it can be used.
Please contact us if you would like further advice on the types of Power of Attorney, assistance with registering this with the Office of the Public Guardian or if you would like to discuss your obligations as an attorney under the Mental Capacity Act.
(Sarah Browne - 08.06.16)
The threshold for Inheritance Tax is currently £325,000 per person. Any assets above that are taxed on death at 40%. The exception to this is property passing between spouses or to charities, which is exempt from Inheritance Tax. If on death everything is left to a surviving spouse, then the spouse also inherits the Inheritance Tax allowance and so they then have a threshold of £650,000 available to their estate.
This is not expected to increase for some time but, next year the Government are introducing a new, additional residential nil-rate band. This means that each person will have an additional band available to them, which is going to start at £100,000 and increase to £175,000 so long as they are passing their principal private residence to a spouse or onto issue. There will also be exemptions for people who have recently sold a property, for example to go into a care home.
If you would like further information on this or think you may need to review your Will in light of the changes, then please contact us.
(Sarah Browne - 27.04.16)
The first step would be to register your aunt’s death and arrange the funeral. Assuming that your aunt has assets in her sole name, then the next step will be to obtain a Grant of Administration or Probate. As you cannot find a Will amongst your aunt’s papers, it would be worth checking with any solicitors that she has used in the past or local to her area as to whether they are storing a Will on her behalf, as well as checking with your aunt’s bank. We at Nockolds sign all the Wills we hold up to the Certainty database and so we could assist you with checking whether your aunt has any Will registered with them.
Assuming your aunt did not have a Will, then you will be considered her next of kin if she has no surviving spouse, children, parents or siblings. If this is the case, then you can apply for a Grant of Administration from the Court which will enable you to realise her assets. Her estate would be distributed according to the laws of Intestacy which we can advise you on. I would recommend that you get in touch with us to discuss this further and what you need to do next.
(Sarah Browne - 27.04.16)
...Can I just gift this money straight to my grandchildren or does it need to be done through a solicitor?
If you receive money from the Will of somebody who has died or from an Intestacy and you wish to redirect this money to another beneficiary, then you may wish to consider a Deed of Variation. If you gift the money from your own assets, then this will count as a gift from you for Tax purposes which may not be sensible if you are currently undertaking Inheritance Tax planning, depending on the value of your estate.
If you make the gift by way of a Deed of Variation, it will be as if it was written in the Will or from the estate of the deceased. The Deed of Variation must be made within two years for this to succeed for Tax purposes, but if you are Tax planning for your own estate, then it could avoid duplication of Inheritance Tax on the same gift.
If this is something you think you would like to discuss further, then please get in touch with us.
(Sarah Browne - 27.04.16)
This would depend on the value of your estate and how you own your property. Any property owned as joint tenants would automatically pass to the co-owner and so this would include a property owned as joint tenants and most joint bank accounts.
However, any property or assets owned in your sole name or owned jointly on a tenants in common basis would pass via the laws of Intestacy. As you have children, the laws of Intestacy state that the first £250,000 will pass to your spouse and the remainder will be divided in half with one half going to your spouse and one half going equally between your children. If you wish everything to pass to your spouse or you would like to have a choice in appointing an Executor who would administer your estate, please contact me to discuss making a Will.
Please contact me if you would like us to visit your mother’s care home to discuss Lasting Powers of Attorney with her. As she suffers from Dementia there may be a capacity issue. In order to make a Lasting Power of Attorney, the Donor, ie. the person making the Lasting Power of Attorney, must have mental capacity and fully understand the document and its implications. This may therefore depend on a doctor’s assessment of your mother’s capacity. If your mother no longer has the necessary capacity to make a lasting Power of Attorney, then you may need to apply to the Court of Protection for a Deputyship Order in order to manage her affairs or welfare decisions on her behalf. This is a process we can assist with.
We are often asked if you need a Solicitor to extract a Grant of Representation or Grant of Probate. There are some situations that it may be helpful to take advice from a Solicitor particularly if:
- There is no Will and the Intestacy Rules therefore apply
- You are unsure about what part or all of the Will means
- There is a question about the validity of the Will or if you are not sure if it is the last Will
- The Deceased had significant debts or if some of the beneficiaries have been bankrupt
- There maybe inheritance Tax (IHT) payable
- There are assets abroad
- You are not sure how to identify and value assets and liabilities
- You envisage family disputes over chattels or claims of unfair inheritance
- You would prefer not to act as Executor of the Estate
You can give away as much money as you like to your children. The potential difficulty is with inheritance tax implications when you die.
There are ways of saving inheritance tax including giving away some of your assets during your lifetime (cash gifts). Providing that you give away an asset from which you no longer receive a benefit and live for seven years having made the gift then the value of the gift will fall outside of your estate for inheritance tax purposes.
If you were to make a gift and did not live for seven years than the gift would be included in your estate, however, it would be the value of the asset at the date of the gift was made rather than the date of the death.
There are annual inheritance tax exemptions of £3,000 whereby you can make a gift of £3,000 per year. This allowance can be carried forward for one tax year.
You can also make as many small gifts as you like of £250.
If you have worked hard to grow your business then it pays to plan your Will carefully. Here are a few key aspects to consider:
- Will the business continue, be sold, transferred or wound up?
- Will your executors be skilled enough to deal with the business aspects? The choice of executors is important.
- Does your Will contain the relevant powers to enable your executors to deal with the business? If the Will does not include these then your executors may be restricted.
- Does the business occupy a property owned by you and used by the business? What will happen to this?
- How do you maximise Business Property Relief for Inheritance Tax? Business owners pay Inheritance Tax at reduced rates and it is important to take advice on this.
- If you have a company or partnership are there any restrictions or conditions contained in the governing documents which affect your ability to dispose of the shares or your partnership interest?
- Should you be considering taking out insurance to buy out the interests of any business co-owners if they die before you?
We have experience in working with business owners to make sure that their Wills are drafted to address as many of the questions outlined above as possible and guide you through the process.
Death in service benefits are usually payable at the discretion of the scheme administrators and so they ask you to complete an Expression of Wishes form to state who you would like to benefit from the proceeds of this. This usually falls outside of your estate and therefore there is no need to alter your Will (although it may be sensible to keep a copy of the Expression of Wishes form in with the original of your Will). The advantage is that this does not form part of your estate for the purposes of calculating Inheritance Tax. Just like your Will, you should review your Expression of Wishes form from time to time and in the event that your circumstances change (eg. you marry or divorce).
I have been told that if I make a Will leaving everything to my new partner I may be wasting some of my Inheritance Tax allowances. What does that mean?
What you have heard is true. If you inherited everything when your first husband died, there may be a tax efficient way of planning your new Will to minimise Inheritance Tax. You are able to take advantage of the "Nil Rate Band" that is passed to you when a spouse dies and leaves everything to you. Speak to us for more information. You could save your family £130,000!
There are reasons why a person might choose to leave a share in a property to a Trust created in their Will, perhaps as an alternative to an outright gift to a partner or spouse.
This solution is often used where a person has been married before, and wishes their interest in the property to pass ultimately their children, but subject to a partners right of occupation during his or her lifetime.
Sometimes the Trust is used to shelter the deceased’s interest in the property if he or she believes that their partner/spouse is vulnerable and could become exposed to creditors or third parties in the future. The trust would ring-fence the deceased’s asset for future generations.
Unmarried couples and non-civil partners may use a trust to preserve their Inheritance Tax Nil Rate Band which is only transferable between spouses and civil partners. This could result in an IHT saving of £130,000!
Please let me know your requirements and I will be happy to advise if a trust of this nature is appropriate for you.
Unfortunately, it isn’t quite that simple.
Gifts made within 7 years of death are aggregated (added to) the value of your estate on death to calculate if any Inheritance Tax is payable. Gifts like this, if not covered by any other IHT exemptions or reliefs, are called Potentially Exempt Transfers or PETs.
However, where you reserve an interest in the property (ie carry on living there) you will be treated throughout your occupation as still owning it for Inheritance Tax purposes.
You can avoid reservation by entering into a tenancy to allow you to live there provided you pay a proper market rent. If you stop paying, the reservation will apply.
There are other reasons why we might advise against a gift of your home, and we would need to explain these to you and explore your requirements in some detail before you reach your decision. Our advice will depend on a number of factors including whether your son lives with you, and where he is likely to be living in the foreseeable future.
Inheritance Tax (IHT) is payable on the deceased’s estate above the Nil Rate Band (currently £325,000) after reliefs and exemptions (such as the spousal exemption) have been applied.
IHT becomes due at the end of the sixth month after death but must be paid on liquid assets before the Grant of Probate can be issued. We can contact the institutions holding the deceased assets on behalf of the executors and ask that direct payment is made to HMRC to allow the Grant of Probate to be issued.
On certain types of assets such as real property, a 10 year instalment option is available to pay the attributable IHT. The first instalment is due at the end of the sixth month after death and annually thereafter. Interest will accrue on the IHT due and is payable in addition to each instalment. Once the property has been sold the instalment option ends and IHT is immediately payable. Alternatively, if the funds are available you can choose to pay the full amount of tax due at any time.
If you have not created and registered a Lasting Power of Attorney (LPA) and you do not have an pre 2007 Enduring Power of Attorney before you become mentally incapable, those wishing to make Health and Welfare or Property and Financial Affairs decisions on your behalf must apply to the Court of Protection to be appointed as your Deputy.
We can assist with all aspects of the deputyship application. It is a lengthy process and the Court of Protection can take up to 4 months to make an order after the application has been submitted. If you create and register LPA’s before you lose capacity your attorneys have the benefit of being able to use the LPA’s straight. Furthermore, you have peace of mind knowing that you have chosen who is able act on your behalf.
It is very common in these circumstances to make a gift to a trust for the benefit of your child rather than an outright gift to your child. This has the benefit of control as you can chose who should act as Trustees of the trust and therefore make decisions regarding whether payments should be made to the child or on the child’s behalf from the trust. In these circumstances we would encourage our client’s to write a letter of wishes to be stored with the Will giving the Trustees instructions on how they wish the money to be used. Trusts in this situation have the additional advantage of not affecting the child’s right to means tested benefits as the current rules allow the capital of such a trust to be disregarded in the event of a means assessment.
If you would like to discuss whether a trust would be appropriate in your circumstances please contact me.