inheritance-tax

Author Archives: Jennifer Kitchener

Is your Will tax efficient?

Most people are aware that when you die you can leave a certain amount to your family without paying Inheritance Tax.  This is called the Nil Rate Band (NRB) and it is currently £325,000 per person (provided no gifts over £3,000 were given in 7 years before death).

inheritance-tax

In April 2017 the government introduced a new tax allowance called the Residence Nil Rate Band (RNRB) which can be claimed in addition to the NRB in order to limit or possibly completely avoid your estate paying Inheritance Tax.

The RNRB is an allowance that specifically applies to your home; it is currently £150,000 per person and is due to increase to £175,000 in April 2020.  This means that from next year a person can potentially leave £500,000 tax free upon their death.

This sounds like great news, however there are conditions to the RNRB.  Firstly the property must be left to a direct descendant e.g.  child, step-child, grandchild.  Other more distant relatives such as aunts/uncles or nieces and nephews do not qualify.

Secondly, the property must be left to the person directly without any conditions such as upon the beneficiary reaching a certain age, this is because it means the property is being held on trust, and is not a direct inheritance.  If there is a trust in a Will whether the RNRB is available will depend on the type of trust; if it is of a discretionary nature then the RNRB cannot be claimed.

Thirdly, if your estate is valued at more than £2 million then the RNRB will reduce by £1 for every £2 the estate is over this amount.  So, if your estate in total is more than £2.2 million then you do not qualify for the RNRB.

Finally, if the value of the house is less than the RNRB then the balance of the allowance cannot be used to offset against your other assets.  For example if your estate has a property worth £100,000 and cash assets of £400,000, the £150,000 RNRB would mean no tax is due on your property but the remaining £50,000 of the RNRB cannot be used to reduce tax on the cash assets.

As with the NRB the RNRB can be transferred between spouses.  This is because any gift to a spouse is tax free, so if a husband dies first leaving everything to his wife, there is no tax to pay no matter the value of the estate.  This means he is considered to have not used his NRB or his RNRB, so when the wife dies if she is leaving everything to the children, she can use her own NRB, RNRB and then claim her husbands unused NRB and RNRB, so she could leave a total of £1 million tax to free to their children.

It is important that your Will is written in a way to take advantage of the tax allowances available in order to make your estate as tax efficient as possible.  Seeing a solicitor to take advice and discuss your personal circumstances is the best way to ensure this happens.

For more information and advice contact a member of our Private Client team.

Posted in Private Client, Probate & Estate Adminstration | Comments closed

Should I set up a Trust?

Increasingly our clients consult us about gifting assets to their offspring and family during their lifetime, rather than on death by Will.

There are a number of advantages to giving this course of action consideration.  Many would prefer to see their beneficiaries receive the gift during their lifetime or perhaps the beneficiary has an urgent need for the financial support.  It could be that a child or grandchild requires money for a deposit for a house and our clients often feel a desire to offer a helping hand.  Lifetime gifting can also be important as far as inheritance tax and estate planning is concerned.

Frequently our clients are concerned about the improper use of the money gifted.  Perhaps they wish to ensure the funds are put towards a specific purpose.  Instability or suitability of a beneficiary’s relationship and the capability of a beneficiary to manage their money can also cause concern.

A solution is to transfer the funds into a Trust, rather than make an outright gift and instead of directly transferring ownership of the funds to the beneficiary, a formal document is put in place with a set of conditions and rules.  The client decides who should be the recipient of the funds and who should be responsible for ensuring the conditions are met and the rules adhered to.  They are known as the Trustees and careful consideration should be given to this choice.

The amount of flexibility in decision making given to the Trustees is also determined by the way in which the paperwork is drafted.  It is possible to give the Trustees wide discretion over the decisions they make and they are guided by a Letter of Wishes.  This flexibility allows the Trustees to make decision about the funds in light of a beneficiary’s changing personal or financial circumstances and with continuing consideration to changes in legislation.

The popularity of this course of action is increasing and specific, tailored advice should always be taken.

If you would like to discuss this further with a member of our experienced Private Client team, please do not hesitate to contact us.

 

Posted in Legal Briefs, Probate & Estate Adminstration | Comments closed

Where there’s a Will there’s a way!

A Will is a written document created during your lifetime which determines how any property you own or money that you have at the date of your death will be shared out.  In the event that you do not have a Will the law stipulates who will receive your assets after your death and this may not be the same as your wishes.

There are very strict rules concerning the procedure around creating a Will to ensure that it is valid.  This is currently being reviewed and considered by the Law Commission who has said “The law around wills should be updated and brought into the “modern world””.  Consideration is being given to whether or not more modern forms of communication such as email or text message should be permitted forms of communicating your wishes in exceptional circumstances.

As the law currently stands a Will document must be in writing and signed by the person making the Will, in the presence of two witnesses, who must also sign the Will in the presence of the person making the Will and each other.  If these steps are not followed the Will is not considered valid and your wishes may not be carried out after your death.

Many of our clients comment that had they attempted to make a Will at home, without the assistance of a solicitor, they would have encountered problems or made mistakes.  Our clients also benefit from advice relating to maximising the use of their tax allowances, care home fee planning, protecting their assets for and from relatives and future generations.  Unmarried couples do not have the same automatic tax reliefs and other rights as married couples, regardless of how long they have lived together, a common mistake made by our clients.

We invite you to contact our experienced Private client team to arrange an appointment to discuss making a Will.

Posted in Legal Briefs, Private Client | Comments closed

What is a Lasting Power of Attorney – why might I need one?

Do you know someone who has dementia, Alzheimer’s or has had a stroke? They may have some other illness or problem that means they need help with their day to day life.  Have you ever seen a family struggle to handle someone else’s affairs and come up against confidentiality and data protection, and be able to go no further? Other issues may involve difficulties in paying bills or having to pay expenses out of their own money while they wait to be able to access the accounts of their loved ones. Care decisions may have been made by social workers and doctors instead of by their partner or family.  If you do know someone who has experienced any of these issues you will know that the challenges they face in these circumstances are upsetting and make an already difficult time harder.

It is possible to plan ahead so that should the worst happen to you then your family will not have to worry about how they manage to pay any bills or who will be making decisions about your care. The way to do this is by executing a Lasting Power of Attorney (LPA) whilst you are well enough to do so.  Under an LPA you are choosing who you would like to manage your affairs and make decisions on your behalf if you are no longer able to do decide for yourself.

There are two types of LPAs; property and financial affairs and health and welfare. You can choose to do just one of these but to be fully prepared we would recommend that both are put in place.

Your choice of attorney(s) (you can name up to four) is an entirely personal decision but it is crucial that you trust them as they will be making important and sometimes life changing decisions for you.  It is especially important if you are unmarried and want your partner to have decision making powers in relation to your health care as they do not have any legal standing as a family member and would not be considered your next of kin.  In any event, no person is permitted to deal with assets held in your sole name, should you lose mental capacity, without an order of the Court or an LPA regardless of whether or not they are your next of kin.

You can include guidance or restrictions for your attorneys in the LPA so you can have an element of control over the decisions they make later in your life.

If you are not well enough and have lost mental capacity then an LPA cannot be signed.  This means someone will need to apply to the Court of Protection on your behalf and asked to be appointed as your Deputy (another type of attorney) in order to be able to look after and manage your finances.  It is a costly and lengthy process. There is no guarantee that the person you would choose is the one that will be appointed, especially if your family cannot agree and the court has to decide.  Please note they rarely make Court of Protection appointments for health and welfare, so if you do not have an LPA, those decisions may be made by professionals instead of those who know you best.

The process is fairly straightforward but there are some technicalities involved which makes it important that professional advice is taken in order that the formalities are complied with.

Making an LPA now does not mean it has to be used straightaway and you will not lose control of your assets or your decision making powers by signing it. Instead you are ensuring that you are prepared should your circumstances change so your loved ones will be able to take over straight away.

Making an LPA may seem unnecessary if you are fit and healthy, but things can change unexpectedly and in an instant so the opportunity to prepare an LPA will be lost.  Preparing now is the key for you having the peace of mind that in the future you will be well looked after by people of your choosing.

To discuss Lasting Powers of Attorney further, please contact our Private Client Department.

Posted in Legal Briefs, Private Client | Comments closed

New government proposals signal substantial increase in costs following death

In many cases following a death, it is necessary to make an application to the Court for a Grant of Representation (often known as Probate) in order to administer a deceased’s estate. The government has recently announced plans to increase the fees payable to the Court when applying for a Grant.  Previously, the Court has not charged a fee to extract the Grant for estates with a value of less than £5,000 and a fixed fee of either £215 for personal applications or £155 for applications made through a solicitor for all estates over £5,000.

The new proposed fees, which are subject to parliamentary approval, will be based on the value of the estate, rather than any increase in the administrative role and responsibility of the Court.

The planned structure will result in Estates with a value below £50,000, being charge no fee and those valued between £50,000 and £300,000 the fee will increase to £300.  In the case of estates valued between £300,000 and £500,000 the fee will now be £1,000 and between £500,000 and £1 million £4,000.  The increase in fees continues, with estates valued between £1 million and £1.6 million paying £8,000 and between £1.6 million and £2 million £12,000.  Over £2 million the fee is £20,000.

The reform to the fee structure has been met with much disdain from the legal sector, with feelings of this being nothing more than an additional “death tax”.

Practitioners are frustrated with the proposal which will see the estates of more wealthy clients being subjected to a much higher fee for what is largely the same application.  As the level of work required by the Court does not change there seems to be little justification for changing the fees to a value based structure.  It is claimed that it is to bring it in line with the fees charged for other Court applications; in particular civil claims. It seems to be an opportunity to fund the Court system as a whole by charging those who are presumed as being able to afford it.

In many cases an estate (in particular any which involve a property) cannot be administered and assets passed into the hands of beneficiaries without the Grant. Therefore, estates are being charged high Court fees for what is a compulsory application, a principle which is not reflected in many other applications to Courts.

There are also practical difficulties with the hike in fees.  The fee must be paid before the Grant is issued and in many cases, assets in the estate are frozen until the Grant is issued.  This creates a “catch-22” situation of needing the funds to get the Grant but needing the Grant to get the funds.  In response, the Court has suggested that the Court fee be funded by the executors or beneficiaries personally, who will be reimbursed once assets are available.  Some executors or beneficiaries will be unable or unwilling to find these fees in advance.

The proposals add a new burden to the responsibilities of an Executor, and may result in an unwillingness of executors to accept the role.  Furthermore, creditors may see a delay in settlement of debts while funds are made available to apply for the Grant.

For those families that have recently suffered a bereavement and need to obtain a Grant, it would be worth applying to the Court before May this year if the estate is over £50,000.  It is recommended that legal advice is taken on this issue as soon as possible.

Consideration should also be given to structuring assets to enable flexibility to meet the fees rather than relying on an executor or beneficiary to subsidise an estate until there is sufficient liquidity to repay them.  Anyone opposing the new fee structure can sign a Petition at https://petition.parliament.uk/petitions/188175

For further information please contact Charlotte Pritchard & Jennifer Kitchener who are both Solicitors in our Private Client Department.

Posted in Legal Briefs, Private Client, Probate & Estate Adminstration | Comments closed
  • I have had many unfortunate experiences with solicitors. This experience stacks head and shoulders above the rest.
    Mr K Wolstenholme - Oldham
  • Lisa Wright
    Lisa Wright
    15:05 25 Feb 19
    Cassie was fantastic throughout our sale and would recommend North Ainley if selling or buying a house.read more
    Lynn Findlater
    Lynn Findlater
    18:55 01 Dec 18
    I have used North Ainley for a number of years. They have successfully dealt with my parent's wills and more recently the sale of 2 properties. The staff are exceptional and imparticular Cassie who took care of the whole process from start to finish whilst I was overseas. She diligently chased all third parties and kept me informed at all times. I would recommend North Ainley as they have proved themselves time and again over the last 10 years in all of my family's legal affairs.read more
    Idnan Ahmed
    Idnan Ahmed
    12:57 30 Nov 18
    Excellent service. handled my latest commercial purchase professionally. Would recommend to anyone who is looking for a solicitors who are proffesional and easy to work with. Top service.read more
    Lucy Hoy
    Lucy Hoy
    16:39 27 Nov 18
    Excellent! Very friendly and fantastic communication throughout. Nothing was to much trouble. Thankyou Vinesh and Cassie. Would definitely recommend.read more
    Anil M
    Anil M
    15:11 04 Nov 18
    Fantastic Solicitors firm. Very professional. Close to Oldham Town Centre. Answer all your questions and concerns. Keep you upto date at every stage. I have used this firm for many years in buying and selling property. You can not go wrong using North Ainley Solicitors.read more
    Next Reviews
Menu