Inherit, Inheritance tax, Uncategorized

No Inheritance Tax on estates worth up to £1 million? Not quite!

George Osborne announced the introduction of an additional Inheritance Tax (IHT) Nil Rate Band (NRB) for a person’s main residence in the Summer 2015 Budget. This was good news for with wealth tied up in their family home. The existing NRB of £325,000 per person or £650,000 per couple, on which 40% IHT is not paid, will remain the same. But from 2017/18, an additional Residence Nil Rate Band (RNRB) of £100,000 per person will be introduced, which will increase to: £125,000 in 2018/19; £150,000 in 2019/20; and £175,000 in 2020/21. In 2020/21, this means a house worth £1 million could be passed on tax free. But tax planning is still important, as there are a number of drawbacks you have to avoid in order to make sure you are eligible for the full amount.

Drawback 1 = you need to be married

Spouses* can inherit their other half’s share of an estate tax free so the NRB does not need to be used up. This means the deceased’s £325,000 NRB can transfer to the survivor, who will then have an IHT allowance of £650,000 when they die. The RNRB can also be passed on to the survivor so in 2020/21, this will equal £1 million. Unmarried couples do not have the right to pass on NRBs to each other.

Drawback 2 = only your children can benefit

Spouses who do not have children will miss out on the RNRB. The property must be passed to lineal descendants, such as children (including adopted/foster/stepchildren, children under a guardianship, and their direct descendants) and grandchildren, but not nieces and nephews.

Drawback 3 = the £1 million allowance does not apply now

The allowance will be phased in over the next five years so the £1 million will actually only apply in 2020/21.Drawback 4 = keep your wealth in your home

If you have a large investment portfolio and no house, you cannot benefit from the additional allowance, only the £325,000 NRB. But if your total estate is over £2 million, the RNRB will be tapered away. An estate with a net value of more than £2 million will see the band withdrawn at a rate of £1 for every £2 over the threshold.

Other points to consider

Trusts

The RNRB may be lost where, for example, the property is placed into a discretionary Will trust for the benefit of the children or grandchildren.

Downsizing

The family home does not need to be owned at death to qualify. This helps those who may have downsized or sold their property to move into residential care or a relative’s home. The RNRB will still be available provided that:

  • The property disposed of was owned by the individual and it would have qualified for the RNRB had they retained it;
  • The replacement property and/or assets form part of the estate and pass to descendants;
  • Downsizing or disposal of the property has to take place after 8 July 2015. But there is no time limit on the period between disposal and death.

Multiple residences

Only one residential property will qualify. It will be down to the personal representatives of the estate to nominate which one should qualify if there is more than one. A property which was never the deceased’s residence, e.g. a buy-to-let, cannot be nominated.

*For ease, spouse will refer to civil partner as well.

 

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Inheritance tax, Living Wills, Uncategorized, Wills

New Year…make a Will

Happy New Year!

Welcome to our first Blog of 2016. In the new year, many people like to make a fresh start or may even make a resolution. So now may be a good time to give some serious thought to making a Will?

A Will is the only way to ensure your loved ones inherit what you want them to have. A Will also prevents your estate being distributed in accordance with the intestacy rules. Depending on who survives you, the intestacy rules could result in an estranged relative inheriting your estate. A Will gives you peace of mind knowing that the intended recipient receives your estate.

Appointing Executors of your Will is also an important decision. Executors are the people who are responsible for dealing with your estate assets when you die. You can appoint anybody as an Executor. Most people tend to appoint family members, although some prefer to have a professional, like a Solicitor.

A Will also allows you to appoint Guardians if you have young children and stipulate that money should be held in trust for your children, if necessary.

A Will may also allow you to mitigate inheritance tax and therefore it is important that you discuss this issue with a professional. Putting it off can result in your estate being liable to a large amount of tax. Taking advice from a solicitor is a sensible step.

Above all, making a Will gives you peace of mind. Why wait? Give Morrish Solicitors a call today on 033 3344 9600 and ask to speak to James Shingleton or Charlotte Bandawe at our Pudsey office or Tom Morrish or Monika Volsing at our Yeadon office.

Best wishes for 2016!

Inheritance tax, Tax planning

Season of Goodwill …. and Tax Planning Gifts to the Family

At this season of goodwill it is worthwhile also considering some tax planning. Why not surprise the family with a slightly more substantial gift this Christmas to assist with whittling away against your Inheritance Tax liability?

In general, an individual has an Inheritance Tax-free sum which they can dispose of on their death of £325,000 and for married couples this totals £650,000. Inheritance Tax is charged on your death not only on the value of your estate but on the value of any gifts made in the previous 7 years unless they are exempt. So why not make some exempt gifts?

An individual can give away £3,000 tax-free each tax year. In addition, an individual can give away any number of gifts of £250 to persons who have not received any part of the £3,000. Why not broaden the smile on your grandchildren’s faces by giving them £250 each this year?

Finally, a less well known exemption is when you make gifts out of your surplus income. Regular giving to family out of your surplus income will also be exempt. This applies even if the sums are quite high as long as it can be shown that you are giving away surplus income and not dipping into your capital.

All in all this may well be food for thought. There is no substitute for getting professional advice on the subject (and this email is only a taster – it is always hard to keep the subject of food away from Christmas-related matters!) but why not give it some thought?

Care Home, Inheritance tax

Inheritance tax freeze to fund social care cap of £75,000

The government is expected to introduce a £75,000 cap on the cost of social care, funded by freezing inheritance tax, as it moves to end the “scandal” in which people are forced to sell their homes, Jeremy Hunt has said.

The government is expected to introduce a £75,000 cap on the cost of social care, funded by freezing inheritance tax, as it moves to end the “scandal” in which people are forced to sell their homes, Jeremy Hunt has said.

Ministers are determined to protect people’s inheritance, the health secretary said, as he rejected suggestions that the Tories were abandoning George Osborne’s pre-election pledge to raise the inheritance tax threshold to £1m.

Hunt was speaking on the Andrew Marr Show on BBC1 before his statement to parliament on Monday, in which he will outline the government’s response to the Dilnot report on funding social care.

He recommended a cap on the amount individuals are expected to pay for care when they become elderly and infirm before the state steps in of between £25,000 – £50,000, to be settled at £35,000.

Hunt all but confirmed the cap would be set at £75,000 after Osborne warned ministers the Dilnot proposal would cost at least £2bn.

The health secretary also came close to confirming reports that the £1bn cost of the new cap would be funded by freezing inheritance tax (IHT) at the current rate of £325,000 until 2019. If IHT, frozen since 2009, increased in line with inflation every year until 2019 it would reach £420,000.

Hunt said: “We have a scandal at the moment that every year 30,000 to 40,000 people are having to sell their houses to pay for their care costs. Around 10% of us end up paying more than £100,000 in care costs.

“If you’ve got dementia, which is going to affect a million people in the next few years, you have this double whammy. You are trying to cope with this incredibly difficult condition, the loss of your memory, the impact on your relationships with your family. And then you have the double whammy of having to sell your home. That is what we want to sort out.”

Hunt said the cap was designed to ensure nobody had to pay anything by fostering a culture in which people make provision for their care by making it easier to take out insurance. He said: “There is a misunderstanding about the cap. If you set the cap at £75,000, which is the number the newspapers are talking about this morning, that is not saying we want everyone to pay £75,000 before the state helps.

“Actually we don’t want anyone to pay anything at all. By setting an upper limit to how much people have to pay, then it makes it possible for insurance companies to offer policies for people to have options on their pensions so that anything you pay under the cap is covered.”

In the Sunday Telegraph the deputy prime minister, Nick Clegg, writes that the new system should result in nobody having to sell their homes to fund their elderly care, a promise that depends on people taking up private health insurance to cover that initial £75,000 costs.

“We will make sure no one is forced to sell their home to pay for care in their lifetime, and no one sees their life savings disappear just because they developed the wrong kind of illness,” he writes.

Hunt dismissed claims that the government was going back on Osborne’s pledge in 2007 to raise the inheritance tax threshold to £1m. This was abandoned in the coalition agreement after objections from the Liberal Democrats.

The health secretary said: “The point of what we are doing is to protect people’s inheritance. The worst thing that can happen is that at the most vulnerable moment in your life you lose the thing you have worked hard for – your own house. We are trying to be one of the first countries in the world where people do not end up having to sell their house.”

The shadow care and older people’s minister, Liz Kendall, said: “This would be a small step forward for some people who need residential care in five or more years time. But it won’t be fair for people with modest homes. Andrew Dilnot recommended a cap on care costs of £35,000 and warned that anything above £50,000 won’t provide adequate protection for people with low incomes and low wealth.

“And these proposals won’t do anything for the hundreds of thousands of elderly and disabled people who are facing a desperate daily struggle to get the care and support they need right now. More than £1.3bn has been cut from local council budgets for older people’s social care since the coalition came to power. As a result, many vulnerable people can’t get the support they need and are having to pay more for vital services.”

She called for a bigger and bolder response to meet the needs of the UK’s ageing population. “We need a … genuinely integrated NHS and social care system which helps older people stay healthy and living independently in their own homes for as long as possible. This is what Labour’s policy review will address.”

 

If you have any questions, please contact a member of our elderly client team.

Court of Protection, Disputed Will, heir, Inherit, Inheritance tax, Legacy, Power of Attorney, Probate, Wills

Chief Ombudsman says thousands ‘ripped off’ by unregulated will writers

From the BBC’s website 18 July 2011Last updated at 02:33

Thousands of people are being ripped off by companies providing unregulated services such as will writing, claims the first Legal Ombudsman.

In his first report, Chief Ombudsman for England and Wales Adam Sampson said the most complaints he saw concerned conveyancing, family law and wills.

He called for action to be taken to ensure consumers were not left vulnerable by unregulated services.

Only a tiny fraction of legal services must be provided by a qualified lawyer.

Many others including will writing, divorce, employment and immigration can be done by unqualified and unregulated individuals and organisations.

“One service which crops up a lot is will writing. It’s a service carried out often by will-writing firms who aren’t regulated,” said Mr Sampson.

“Because of this, customers are left with little means of redress when things go wrong.

“We’ve seen similar confusion about claims management companies, with lots of consumers believing they’re getting a legal service even though most of the work is carried out by a non-authorised person. Again, we can’t help.”

‘Unregulated cowboys’The legal ombudsman was appointed in October 2010 and can only act on complaints from those using the services of qualified lawyers.

Consumer organisation Which? and the Law Society have backed the ombudsman and called for more protection for customers.

They said bundling legal services with financial services, including those offered via the internet, had posed serious dangers for consumer protection.

Which? executive director Richard Lloyd said: “As the legal-services market continues to grow in both size and complexity, it’s crucial that consumers who have paid for a legal service that’s not up to scratch know where to turn to get help.

“We want the government and regulators to wake up to the current lack of clarity and to provide a clear and straightforward route of redress for consumers.

“The arrival of a legal-services market in which consumers will, potentially, have complaints about hybrid services poses some serious questions about who they’ll be able to turn to for help.”

Des Hudson, chief executive of the Law Society for England and Wales, said: “The gap in regulation which allows unregulated cowboys to operate in areas like will writing does not just cause unfair competition to solicitors, who provide a regulated, professional service.

“It is also damaging to consumers because the unregulated providers are not insured, do not provide a compensation fund and are not covered by the Legal Ombudsman’s scheme for consumer redress.”

A spokeswoman for the Ministry of Justice said will writing was an important issue and that it welcomed the report.

She added the department will await the outcome of the Legal Service Board’s ongoing work.

Ends.

Want your Will handled by a professional, specialist solicitor? Please contact Tom Morrish or Charlotte Bandawe on 0113 250 7792 or Charles Clough, James Shingleton or Christina Fleming on 0113 224 8084.

Related stories:

The Law Gazette

The Legal Ombudsman’s Annual Report

heir, Inherit, Inheritance tax, Legacy, Probate, Wills

DIY Probate runs risk

News release from Solicitors For The Elderly

It is entirely possible to apply for probate and deal with an estate, without seeing a lawyer, but it’s not without risks warns legal group, Solicitors for the Elderly (SFE).

Many professionally drafted wills contain trusts to save tax, to avoid those who inherit paying care fees and to reduce the likelihood of potential disputes. SFE members have noticed an increase in ‘DIYers’ returning to them to seek advice when they have made a mistake or find the paperwork too tricky. Mrs A’s will had included a tax saving trust, but when her husband administered the estate, he paid the whole estate to himself. The solicitor was thankfully able to sort out the matter and avoid future complications occurring when Mr A eventually dies. In Mr G’s case, he sold some shares that had made a gain during the administration of his late sister’s estate and had to pay tax. If he had transferred the shares to himself first, before selling them, he could have avoided the tax.

Yorkshire Regional Co-Ordinator for SFE, Tom Morrish – a Partner at Morrish Solicitors – today said ‘People aren’t always aware of the complexities and assume probate work is straightforward. It is true that it can be, but it is just as true that sometimes it isn’t.  In all but the most straightforward cases, it is important to seek timely specialist legal advice that can actually save you money and worry.’

Many SFE members’ practices will offer to work in partnership with the deceased’s family to help and support them with the legal and technical work. As elder law specialists, members can even add value to their work, for example by identifying cases where money is owed to the estate for care funding, which should have been met by the NHS and assist in making a claim.

Ends.

Inheritance tax, Probate, Wills

Focus on phoney Wills

Reproduced with kind permission of Leeds & Yorkshire Lawyer.

Is it time for more regulation to prevent unqualified Will writers presenting problems for unwitting clients, asks Tim Walker?

Which of the following statements is true? Making a Will has never been easier. Making a Will has never been harder. 

In truth, you could find evidence to support both. On the one hand, Will writers (let’s forget just for a moment about solicitors) are everywhere – in newspapers, on the net, on the Tube, on the high street. On the other hand, Will writing is possibly the most unregulated of legal processes with almost anyone allowed to set up in business as Uncle Tom Cobley Will Writers Ltd, with all the chaos that leads to.

Meanwhile, the public is largely unaware of the dangers. A recent survey found that two out of three people think that Will writers are solicitors.

So where does this leave solicitors and how can the inexperienced, the uninsured and the unregulated Will writers be stopped in their tracks?

ACCOUNTABLE
Susan Bateson, head of private client department at Lee & Priestly LLP in Leeds, says: “Solicitors face so much regulation in everything we do. We are also accountable for our actions and have to be insured to the hilt to be able to practice. It seems unfair therefore that anybody can set themselves up and start writing Wills – documents that can have massive implications for surviving loved ones.”

In October, the Law Society warned that unregulated Will writers were causing major problems for probate solicitors who were being handed invalid or badly drafted Wills. In some cases, Wills have even gone missing because Will writing companies have been wound up, it reported.

A recent Law Society-commissioned review of regulation, carried out by Lord Hunt of Wirral, said that a ‘fringe legal market’ in Will writing, probate and claims handling was a risk to the public.

Susan adds: “We have to get the message across to people that solicitors have the training and expertise to write sound Wills. We have the experience and we keep up to date with rule changes on inheritance tax and other matters.”

INTESTACY
She also says that the other battle convincing people to make a Will in the first place has still not been won: “Recent changes to rules on intestacy may well confuse the issues. The amount married couples and those in civil partnerships with children can receive upon their partners’ death has doubled from £125,000 to £250,000. The rule change is sensible because it means that the limit now covers the average value of a house, but I just hope this is not seen as a signal that it is acceptable not to make a Will.”

Having said that people should make Wills, what is the profession to do about unqualified Will writers, apart from push for more regulation? Is there a problem with the cost of making a Will – are people just moving in search of a better deal?

Susan thinks there is confusion here and an inaccurate perception that making a Will is more expensive if you use a solicitor. She explains: “Because some Will writers offer a headline cost which seems appealing, it leads people to believe that they will get a good deal.  However, this is sometimes just a basic price and what often happens is that there are all sorts of add-ons to pay for. What we as solicitors can offer is a fixed price, so we need to educate the public that you can have a professional Will at a reasonable cost from your solicitor.”

Rita Leat, president of  The Fellowship of Professional Willwriters and Probate Practitioners, is also pressing hard for more regulation in Will writing.  The Fellowship conducted the survey which found that two out of three people thought all Will writers were solicitors.  She says: “It is quite alarming that the majority of the people we asked thought all Will writers were solicitors, especially as there are many Will writers out there who hold no training nor any type of qualification. People need to check the background of the person who is dealing with their Will to avoid difficulties for their family and loved ones later.

“Here at The Fellowship, we cannot stress enough how important it is for consumers to be aware of exactly who is dealing with their Will. There are a lot of excellent Will writers who offer an excellent service: however, we promote the highest standards of practice by ensuring that all our members have nationally accredited qualifications – namely the BTEC qualifications offered by Edexcel. Consumers should also ask whether the Will writer is a member of a professional body that insists on CRB checks and offers a compensation fund should things go wrong.”

Other survey findings included:

  • When asked to respond to the true or false statement that ‘Anyone can currently set themselves up as a Willwriter, as qualifications are not needed’, 82% of people thought that was incorrect.
  • 45% of people asked said they felt confused by the Will writing process and 21% took the attitude that they would rather write their Will themselves, despite the complications that could crop up.

With this type of ignorance around and with a demand of fast, off-the-shelf solutions, are solicitors fighting a losting battle to retain Will writing? Is the profession keeping pace with developments? How long before a Will writing App is created for your iPhone, for example? Some may scoff at  this, but there is already an App for conveyancing.

SAFE
Susan Bateson believes solicitors need to stress that where both Will writing and probate are concerned, solicitors are the safest pair of hands: “I have even heard that some funeral directors are offering probate services. Obviously that probate work will eventually be under the control of a solicitor, but people need to realise that they may end up paying up to 9% of the value of the estate if they take this route. Compare that to 2% if you go to a solicitor. And where probate is concerned, people need to know that the experience that solicitors have means that they can stand your corner when it comes to a dispute – for example, with the Revenue.

“The Legal Services Act will provide a fresh challenge, so we need to remind people that they can trust established firms of solicitors when it comes to arranging the most tax-efficient gifting of wealth from one generation to another. Probate is much more complex than many in the outside world would assume and this must never be an area which becomes unregulated.”

It seems there is an irresistable force for regulation in Will writing and any moves to deregulate probate further will be strongly resisted, but the battle must surely be one of educating the public that what happens to their estate when they die should not be left in the hands of the uninitiated.

Copyright Leeds & Yorkshire Lawyer 2010.