In April the think tank Resolution Foundation published a report stating that Inheritance Tax is “unfit for modern society” and should be abolished. This is not the first suggestion for IHT to be overhauled but they do go further with suggestions as to how it should be amended, providing further facts and figures as to the reasons why.
Spring has sprung and although it appears that we are periodically being plunged into Siberian Winter, this is the traditional time when people turn out their cupboards, rifle through their collections and generally look to find space for items which may fall victim to the next year’s bout of cleaning.
I often work in conjunction with my colleagues in our commercial team, particularly for business owners who are thinking about their own Wills and Inheritance Tax planning. The most frequent area in which my colleagues and I work together relates to the preparation of cross option agreements.
I work in our Private Client Department and manage older and vulnerable clients’ affairs. This position has made me realise how difficult it is for clients who do not have family members close to them. It could be that they do not live close by, or they do not have a close relationship with the client for whatever reason. At Longmores, we act as Attorneys under Lasting Powers of Attorney for Property and Finances where there are no other suitable people to take up this role. Where there are no family members to provide a helping hand my role can include a regular visit to check the client has everything they need, liaising with financial advisors to ensure the client’s money is achieving maximum income, arranging care, arranging meal deliveries, contacting third parties for jobs around the house, etc.
Many of my clients have business interests, which need to be considered at the time of preparing a Will. Such interests may be in the form of a shareholding in a private family company, or an interest in a partnership, or acting as a sole trader. The type of business structure will have an impact on how the Will might be drafted and what, if any, administrative provisions should also be included.
The Office of Tax Simplification has provided details of the scope of its review for the current Inheritance Tax system, and whether and how, it might be simplified. They have advised that this will include both administrative and technical questions, which will include:
The area of private client law does not often go through a period of prolonged change. However, as I reflect upon the year it seems that 2017 has seen a number of development and proposals affecting our day to day work.
If you are in the fortunate position to own valuable antiques, works of art, sculptures or other valuable personal possessions, it may be possible to consider using such items for your Inheritance Tax planning strategies.
Enduring Powers of Attorney (‘EPA’) and Lasting Powers of Attorney (‘LPA’) are both documents which you can sign in order to give authority for your ‘Attorneys’ to make decisions on your behalf. The EPA is restricted to financial and property decisions, whereas the LPA can also include health and welfare decisions (there are two types of LPA; one for financial and property affairs and one for health and welfare).
The term “chattels” invokes the language of a time when Britain still had an Empire and people were concerned with what would happen to things such as their carriages and horses. The statutory definition of personal chattels was updated in 2014 from such delightful but archaic language but the principle remains the same. Any personal goods other than “money, securities for money or property used solely or mainly for business purposes” falls into the definition of chattels.
Letters of Wishes are not a legally binding document. They are not part of a Will, nor a Trust Deed, and they have no legal status when prepared. However, such letters, sometimes known as side letters, do help to exert a sense of moral obligation on those left behind to help administer the estate, or trust.
When individuals are looking at preparing Wills they should discuss such matters with their family. Whilst a Will is, of course, a private document if one is prepared to discuss the issues with the family that will be left behind after their own demise, it can be hugely helpful in maintaining harmonious family relationships.
On World Alzheimer’s Day, make sure that all your affairs are in order before it’s too late. Preparing and registering a Lasting Power of Attorney comes at a fraction of the cost of applying for a Deputyship once capacity is diminished.
Lasting Powers of Attorney (‘LPAs’) allow you to appoint someone to assist you with your affairs. There are two types of LPA; Health and Welfare and Property and Financial Affairs. As the names suggest, one is used to appoint someone to assist you with health matters such as care, medical treatment, etc, and one is to appoint someone to assist you with matters relating to your finances and property such as selling your property, making payments on your behalf, accessing your bank accounts for you, etc.
The preparation of Wills is governed by many pieces of legislation, but the primary statute is the Wills Act 1837, which still details the principal requirements for preparing a valid Will. Time has moved on significantly over the course of the last 180 years and whilst other Acts of Parliament, such as the Trustee Act 1925 and Trustee Act 2000, have updated parts of the legislation, there are many principles that endure from 1837. The Law Commission has began a consultation on significant reforms to this.
So you own a house and your partner moves in. They spend money making improvements and on repairs. You live happily together for some years and you tell them not to worry because half the house is theirs. Unfortunately, you die before you have updated your Will to make provision for them. What next?
In light of figures released by HMRC recently on the amount of Inheritance tax being paid, I am sure more people could do more to avoid or reduce their tax bill. In the 2016/17 tax year the amount of Inheritance Tax (IHT) paid to HMRC exceeded £5 Billion for the first time. Information published by HMRC shows the increasing amount of revenue received for, what many consider, to be one of the most unfair taxes payable.
This is the fourth blog that I have written on the subject of how to save Inheritance Tax. In the first blog I explained that everybody has a Nil-Rate Band allowance of £325,000. Many of you will be aware that in April 2017 the Residence Nil-Rate Band Allowance was introduced.
So far in this series of blogs on Inheritance Tax I have talked about gifts being made, and making use of the annual allowance, small gifts exemption, gifts in contemplation of marriage or potentially exempt transfers. The common factor linking all of these types of gifts is that they are gifts of capital.
This week is Mental Health Awareness Week and in recent days there have been numerous reports, articles and news items on the subject. Footballer Aaron Lennon has been detained under the Mental Health Act, whilst cricketer Andrew Flintoff has talked about the word “stigma” not being used when discussing mental health issues.
Intellectual property rights can easily be forgotten about when preparing Wills. However, if you are an author, musician, artist or have any other protected rights, then you will need to consider this at the time of preparing a Will.
Until recently, no one had an automatic right to see your Will, even if you had lost capacity to make a financial decision. If you wanted to allow your Attorney to see your Will, you would have to have included a specific condition in your Lasting Power of Attorney for Property & Financial Affairs or signed a separate letter to go with your Enduring Power of Attorney.
If you are an animal lover like me you would have been outraged when you heard about the case of Illot v Mitson. This was the case where the mother, Mrs Jackson, left her estate of £486,000 to three charities; The Blue Cross, the RSPB and the RSPCA. Her daughter, Heather Illott, took the matter to court arguing that she had not received “reasonable financial provision”. This was despite being estranged from her mother for some 26 years. If the court disregarded the Will, where does that leave... well, basically everyone with a Will!
From May 2017, the government is introducing a new set of Probate fees based on a banding system – the larger the value of the estate, the higher the fee. In many cases a Grant must be issued by the Probate Registry in order for personal representatives of a deceased person to access their assets. When this happens, upfront costs of around £200 are met by the representative and reclaimed later from the assets of the estate. But what if the upfront cost is £20,000?
As T2 – the sequel to the 1996 blockbuster film Trainspotting – hit cinema screens at the end of January, a new generation were introduced to a world of drugs and addictions. The new film is set 20 years later and with the original cast in their original roles. Despite the structure therefore being the same, it was important for the director to update it.
Choice, a common theme in both films, means that you have a choice whether to keep your affairs in order and up to date. The Trainspotting characters choose to ignore the future and possible problems they might have, and to live life for the moment. But what should you do?
As everybody returns to work and children start back at school, a sense of normality is descending upon us. The fun of a festive season is enjoyable whilst it lasts but it is important to look ahead to the forthcoming year, whether that is for you as an individual, or whether it is your business that you are planning ahead for.
There are a number of legal issues that can arise when children with disabilities move from paediatric to adult care. The transition can present challenges for families, who may need advice on how an Application to the Court of Protection for a Health and Welfare Order can give them the authority to make healthcare decisions for their child after they become a young adult. Without such an Order in place, a parent or member of the family has no legal right to interfere which that young adult’s care.
Whilst it is true that you do not need a solicitor to prepare your Will in order for it to be valid, as with most drafted legal documents, it is often safer for a solicitor to prepare it. They are well used to the legal requirements to make a valid Will and what happens upon a person’s death. This will help avoid uncertainty in the future. The following are some aspects of a Will a lay-person may not be aware of and which highlight the fact that legal advice is important.
If you are a beneficiary of a Trust you may wonder what your rights to information and documentation may be. A distinction may need to be drawn between the type of trust originally created, in particular whether you, as a beneficiary, have a fixed right, often the case with a life interest trust, or whether you are a potential beneficiary of a Discretionary Trust.
A woman who claims her mother was suffering from dementia and having hallucinations when she signed her final Will has lost her case in the High Court. While the judge admitted the facts showed that Doris Harris had begun suffering from dementia in May 2004, there was no indication she was unable to understand the Will she signed less than a year later.
The Office of the Public Guardian recently produced guidance in an attempt to clarify the current rules on deputies and how they should approach family care payments.
It is a common misconception that it is not necessary for a Will to be prepared because, in the case of a couple, everything will pass to the survivor. Whilst this may, in part, be true this is not necessarily always going to be the case.
HMRC are taking a hard line approach when it comes to failing to disclose gifts made by a deceased person. With this in mind, it is crucial that both gift recipients and Personal Representatives have a clear idea of what is expected of them when it comes to disclosure.
High profile figures are calling upon the Government to scrap the UK’s inheritance tax system, following recent revelations that David Cameron’s late mother ‘gifted’ the Prime Minister £200,000 five years ago.
For some of us, the payment of Inheritance Tax is an unavoidable reality. After someone has passed away this can seem like a daunting task when you are already dealing with other necessary arrangements. However, not all Inheritance Tax has to be paid at once. Certain assets can be paid in instalments which can provide you with an extended period of time to take stock and consider options, which is helpful in easing the initial financial burden.
As we approach the Budget, which is due to take place next month, speculation will no doubt amount over what, if any, changes might be made to the Inheritance Tax regime. Whilst one can only speculate prior to the Budget I thought it might be interesting to consider the projected impact of Inheritance Tax, assuming no changes are made.
The Alzheimer’s Society’s recent statistics show that this year there are 850,000 people with dementia and that one in three people born in 2015 will develop dementia in their lifetime.
Frightening statistics indeed, but what do people need to consider now to ensure that, if it happens to them, they have done all they can to make sure their assets and family are protected as much as they possibly can be?
At the time of completing your Will, the intention is that it will cover the scenario of how your estate should be distributed in the event of your death shortly thereafter. There may be provisions included to provide some longevity to the Will, in order that it need not be updated constantly. However, it should still be reviewed from time to time, at least every 5-10 years, although that does not mean it needs to be changed that often.
A quick search on the internet will reveal that each year in the USA approximately “$19billion is lost annually to fraud by criminals and abuse of trust by friends, family members, and paid helpers”. Whilst thefts from estates in this country are still relatively low, there are regular reports in the press about people being found guilty of stealing from the estate of someone who has died. This is one of the reasons we at Longmores are often appointed as a professional Executor, usually alongside a close member of the family, or a family friend.