In this digital age, our online presence and digital assets have value – both financial and sentimental. When making a Will or Power of Attorney it’s just as important to manage your digital assets as your physical possessions. However managing digital assets is tricky as they are intangible, hard to access and subject to platform policies and international laws.
Digital assets are any electronic data that exist online or on digital devices. Some examples include:
As technology changes new types of digital assets will emerge so it’s important to review your estate planning regularly to make sure these assets are included.
Physical assets are protected by locks and keys whilst digital assets are protected by passwords, encryption and multi-factor authentication. Without prior planning your executors or attorneys will likely struggle to access your digital assets and lose valuable or sentimental content. Some digital assets, especially cryptoassets, have significant financial value so managing them is important for your estate.
When making your Will or Power of Attorney you need to specify who should manage and access your digital assets. This requires careful planning as some platforms restrict access to the original account holder, regardless of legal documentation. To make managing your digital estate easier consider:
Giving your nominee access to your digital assets can be tricky as security measures are designed to prevent unauthorised access. But you can make this process easier:
One of the biggest challenges with digital assets after death is jurisdictional differences. Many online platforms and cloud storage services are global so the laws that apply will depend on where the servers are located. But as long as your nominee has the necessary access credentials, they should be able to manage the assets in accordance with your wishes regardless of geographical boundaries.
Don’t forget to plan for your digital assets as well as your physical assets. If you want to make sure your online presence and digital assets are managed in accordance with your wishes you need to include them in your Will and Power of Attorney.
Our estate planning lawyers can help you with digital asset management. Here at Lewis Nedas Law, we pride ourselves on our high standards of thorough, professional will writing, estate planning and administration and Trust advice. We offer a personal sensitive service and can:
If you need advice or assistance with Wills or LPAs, please take expert legal advice from Lewis Nedas Law’s private client solicitors.
The NHS reports that there are more than 944,000 people in the UK who have dementia. They also say that 1 in 11 people over the age of 65 has dementia in the UK. They also point out that dementia is increasing because people are living longer. By 2030, they estimate that over 1 million people in the UK will suffer from dementia.
The capacity to make a Will or a Lasting Power of Attorney (LPA) is key. As the figures show, as more of the elderly population have dementia, it is essential to make your Will and Lasting Power of Attorney at a younger age. However, that is not always possible.
With dementia is becoming more and more of an issue as we age, one of the big questions is “Can someone with dementia still make a Will or a Lasting Power of Attorney (LPA)?”. To answer this question, we need to consider the facts and circumstances at the time the individual with dementia has the Will and LPA drawn up.
Mental capacity is the key to making a Will or LPA. In legal terms, mental capacity means being able to weigh up options and make decisions for yourself. The Mental Capacity Act 2005 sets out the rules. It is worth noting that a diagnosis of dementia doesn’t mean you automatically lack capacity. Capacity can fluctuate, especially in the early stages of dementia so each case is individual.
To make a valid Will a person must have “testamentary capacity”. This means they must understand:
If there are concerns about the person’s mental capacity at the time of making the Will it is prudent to get a medical opinion to confirm they understand what they are doing. In some cases, this can prevent disputes later on if the Will is challenged after the person has died.
There are two types of LPAs: one for property and financial affairs and one for health and welfare decisions. An LPA allows someone to appoint trusted people to make decisions on their behalf if they lose capacity in the future.
To create an LPA the individual must have mental capacity at the time of signing. Like making a Will, dementia does not mean someone cannot understand the implications of appointing an attorney. But it is important to make sure the person understands:
It’s also important the LPA is certified by an independent person who can confirm the person understands what they are signing and is not under any pressure.
When capacity is in question taking extra precautions can safeguard the individual and their wishes. Solicitors often recommend getting a medical opinion when there is doubt about mental capacity. It is a good idea to have the medical expert certify the LPA. This can prevent legal challenges from family members or other interested parties later on.
If someone has lost capacity and hasn’t made a Will or LPA they may leave their family in a difficult situation. Without an LPA relatives will have to apply to the Court of Protection to become a deputy to manage the person’s affairs or to seek a Statutory Will. Most types of court processes are lengthy and expensive. Seeking appointment as a deputy or for a Standard Will can certainly fall into that category. All this can be avoided with early planning.
Dementia makes decision making more complicated but doesn’t mean someone cannot make a valid Will or LPA. Early planning is key as it gives individuals the best chance to express their wishes and appoint trusted people to act on their behalf. If you or someone you know has capacity concerns, seek expert legal advice.
Here at Lewis Nedas Law we pride ourselves on our high standards of thorough, professional will writing, estate planning and administration, and Trust advice. We offer a personal sensitive service and can:
If you would like further information on any of the issues covered in this blog, please do not hesitate to get in touch. Please contact us on 020 7387 2032 or fill in our online enquiry form to get help from our experienced team.
An Executor is someone who is named in the Will of a deceased person to be in charge of their estate. Being an Executor is a legal responsibility and requires you to complete a long process known as probate. The complexity of the process and the stress it can cause makes it prudent to seek legal advice if you find yourself as an Executor.
Below is an outline of three of the most common issues people have when they are an Executor. This includes what happens when there is more than one Executor, when a named Executor dies before they become an Executor, and what happens if you don’t want to take on this role.
It is commonplace for more than one Executor to be named in a Will. In fact, this can be good practice to ensure someone will be available to fulfil the role. Typically, friends, family members, or even professionals are named in the Will to act as Executors. Certain rules apply if nobody is named in the Will or if there is no Will. In this case, administrators of the estate are appointed based on their closeness in the family tree to the deceased.
If there are multiple Executors, this does not mean that every Executor has to be active in administering the estate. It does, however, mean that one Executor cannot act without the consent of their co-Executors. If they want to take a more passive role, they can consent to one Executor taking charge.
If all of the Executors can agree on what to do with the deceased’s estate or all are happy to appoint one lead Executor, the process becomes a bit simpler. However, disputes may arise about several things, such as the sale price of an asset, whether to sell an asset, and what counts as expenses in relation to the estate.
There are a few options for Executors who disagree to avoid halting the administration of the estate. The Executor/s in disagreement could agree to have their powers reserved to them, meaning that they agree not to take an active role in the administration of the estate. This allows the other Executors to continue with their plan. The passive Executor can apply for probate and take a more active role later if they so wish.
The Executor could also renounce probate. This more final option removes the Executor for good (although this may not be available if you begin to administer the estate). As a drastic measure, Executors can apply to the Court to have other Executors removed. However, this can be a lengthy and costly process and should generally be avoided.
Seeking independent legal advice from our specialist team at Lewis Nedas Law can help resolve issues among Executors and prevent the escalation of disagreements. This is an option which should be considered carefully to allow for a smooth estate administration.
When a named Executor dies before probate is granted, someone else who has authority will need to step in to take on the responsibility. If there are others named in the Will, they will fill this role. However, when there are no others named or they are also deceased, likely, those entitled to the largest share of the deceased’s estate will step in to become Executors.
It may be that the Executor has already obtained a grant of probate before dying, therefore the first step is to revert back to the Will. When there are other named Executors, they will continue the estate administration. The Executor/s of the deceased Executor’s estate will take over the role on their behalf if there are no further named Executors, a process known as the Chain of Representation. If no Will was left by the deceased Executor, then it is likely that those entitled to the largest shares of the estate will take over, as described above.
If there are multiple Executors to an estate, then it is possible for an individual Executor to have their powers reserved or to renounce their post completely if they do not want to continue the role. Should neither of these options appeal to you, or you cannot use them, it may be possible to appoint someone else to complete the duties through what is known as an Attorney Grant. Alternatively, you can hire a probate solicitor to deal with the estate.
Being named as an Executor can be emotional and stressful. At Lewis Nedas Law, we pride ourselves on being the helping hand you need to handle the process with ease. Whatever position you find yourself in, please contact us on 020 7387 2032 or fill in our online enquiry form to get help from our experienced team.
Without effective planning, inheritance tax (IHT) can amount to large sums of money, so it is only prudent that you should take steps to mitigate the liability of your estate. IHT planning can allow you to provide for dependents and future generations and can give you an element of control over how your heirs use their inheritance. There are several ways to reduce the amount of IHT payable from your estate, but each method takes strategic planning and input from a team that understands the technicalities of this area of law.
In this post, we look at six key ways you can reduce the amount of IHT due from your estate. Our lawyers are specialists in IHT planning and can provide bespoke advice and practical solutions for your specific wishes and assets. If you would like to discuss your circumstances with us, please do not hesitate to get in touch.
Research carried out in 2017 showed that more than half of UK adults did not have a Will. No one likes to think about what will happen when they pass away but avoiding making a Will can have consequences for those you leave behind.
Making a Will [/LINK] can help you reduce the amount of IHT due on your estate in a number of ways. For example, IHT rules allow you to leave your wealth to your spouse or civil partner and take advantage of a total IHT exemption. Further, if your estate qualifies for the residence nil rate band (RNRB) this could mean you are entitled to a higher tax-free threshold. To be eligible for the RNRB you must leave your property, or your share of it, to your direct descendants.
Ensuring you have a properly drafted Will in place will give you the time to plan properly for IHT and take advantage of opportunities to mitigate the tax that applies.
The most straightforward way to reduce your IHT liability is to make the most of exemptions and reliefs available for your circumstances. Our Estate Planning Lawyers will look at your assets and the potential reliefs and exemptions available to you. Examples include:
We have many years of experience helping clients plan effectively for the future. Tax rules are always changing, so we stay ahead of the game to ensure your affairs remain as tax efficient as possible.
When you make a lifetime gift to an individual, it is potentially exempt from IHT. The donation will fall outside of your estate for IHT purposes where you survive for seven years after making the gift. This ties in with our first tip about the importance of starting to plan for IHT early, as this will give you the most considerable amount of time to make lifetime gifts.
If you pass away before seven years has passed, IHT will be due on the gift. However, where you have survived the gift by more than three years, the rate of IHT due will fall by 20 per cent each year.
When structured correctly, assets placed in trust will not be subject to IHT. Trusts are a highly complex area of law, so it is important to work with a legal team that has experience and fully understands the use their use. Many people also choose to use trusts as they can provide an element of control over how subsequent generations use the assets held in the trust.
Certain types of trust can incur additional IHT charges, but we can advise you fully on the most effective trust planning methods for your circumstances.
If you are considering moving from the UK, either to avoid a large tax bill or for other reasons, it is important that you seek legal advice. Moving from the UK does not automatically mean your estate will be exempt from UK IHT. Your estate may still be liable to pay IHT in the UK up to four years after moving away, and tax will still be due on any UK assets even if you were not domiciled there when you pass away.
If paying IHT is unavoidable, it is possible to take out an insurance policy to help you pay the bill when it falls due. You can do this if you are a UK resident or where you are not domiciled in the UK but may have UK IHT liabilities.
Such insurance policies can be tailored to provide control over how heirs use their inherited wealth but without additional IHT. The policy may also be combined with a specific type of trust to pay an ‘income for life’. In this situation, the remainder of the estate can pass to the next generation and would fall outside of the IHT liability of the estate.
Insurance may be a good option for those looking to move overseas, as it is more widely recognised than trust planning.
Our Estate Planning Solicitors have the knowledge and experience to deal with any size of estate. We provide a comprehensive estate planning service, so in addition to advice on effective IHT planning, we also support clients with Writing Wills, Probate and Administration of Estates, Contested Wills and Probate, Power of Attorney and Living Wills.
We understand the sensitive nature of your personal affairs, and so will always treat our discussions with discretion and professionalism. If you would like further information on any of the issues covered in this blog, please do not hesitate to get in touch. Call us today on 020 7387 2032 or complete our online enquiry form, and we will get back to you without delay.
A trust can enable a person to move money out of their estate in order to reduce their inheritance tax liability. It also allows beneficiaries to have access to the assets as quickly as possible without lengthy probate delays. However, the use of trusts can restrict access to some or all of the original assets as well as any growth.
Trusts are legally enforceable agreements that hold assets for the creator of the trust (the settlor) so that others can benefit (beneficiaries). The trust is run by trustees who are the legal owners of the assets and manage the trust for the beneficiaries. Assets including buildings, land or money (including investments and life assurance policies) can be transferred into a trust as either a gift during a person’s lifetime or as a transfer that reduces the value of the settlor’s estate (for example, selling a house at below market value- the loss to the estate is the gift).
Determining what needs to be included when trying to value a trust varies depending on the type of trust concerned. Here we look at what issues that need to be considered.
Generally, inheritance tax is due to transfers that total more than the inheritance tax threshold of £325,000. The value of all transfers (this is calculated by examining the loss in value to the settlor’s estate) and any chargeable gifts that were made in the last seven years need to be calculated and inheritance tax is due on the amount that is above the threshold. If the trustees pay, then the rate is 20%. If the settlor pays, then there will be a more significant loss from the estate and so the amount due will increase. Where the settlor dies within the seven-year period, the rate increases to 40%. Where inheritance tax was not due at the time of the transfer, then this value is included in the estate when determining inheritance tax liabilities.
It is possible to set up trusts to pass on money after death but also to provide a regular income while the settlor is alive (as withdrawals). However, if incorrectly set up the assets can be classed as being part of the estate for inheritance tax purposes and be regarded as “gifts with reservation” where the settlor retains some benefit of the gift. For example, gifting a property but continuing to live there and not paying any rent to the beneficiary. Here there is a 20% rate on the transfer and the gift counts as part of the estate.
A trust can be used to move assets outside of a person’s estate and the inheritance liability will reduce in levels over a seven-year period until they are deemed to be outside of the estate and so no longer liable to tax. Where a debtor dies within the seven-year period, the gifts from the trust may still attract a reduced rate (taper relief). The rates for taper relief depend on the number of years between the date of the gift and the time of the settlor’s death. Taper relief only reduces the amount of tax owed where the cumulative total of the gifts is more than the available nil-band rate:
A transfer out of an estate is either a chargeable lifetime transfer or a potentially exempt transfer and these are treated differently for tax purposes. A chargeable lifetime transfer is a gift into a trust. This cannot be a bare trust since the beneficiary there is named and this not changeable. Where the gift’s value is worth more than the relevant nil-band rate, then inheritance tax can apply at 20%. Further tax may be applicable where the settlor dies within the seven-year period.
It is possible for a gift to be a potentially exempt transfer and so not liable to inheritance tax. These gifts would not be considered as part of the estate once seven years had passed and thus would not qualify for inheritance taxation purposes. If the debtor dies within the seven-year period, then inheritance tax would be due at 40% once the nil-rate band has been deducted.
Trustees have to pay a charge every 10 years if the trust contains property valued at more than the inheritance tax threshold. This charge is based on the net value of any assets that were in the trust on the day before the 10-year anniversary of it being set up. Any debts or relief are deducted from the value to provide the net value.
For gift and loan trusts, where there is an outstanding loan that is due to the settlor, then this has to be deducted from the value of the trust. With discounted gift trusts, the trustees have to give the settlor regular payments (where the settlor is alive) and the value of this has to be deducted from the value of the trust.
The distributions to beneficiaries need to be factored into the periodic charge calculation. Trustees have to bear in mind any previous transfers made by the settlor since these gifts can affect the lifetime of the trust.
Where assets are transferred out of a trust, there is an inheritance tax up to 6% known as an exit charge. This situation arises where the trust ends, assets are distributed to beneficiaries, beneficiaries become absolutely entitled to an asset, an asset becomes part of a special trust (so is no longer relevant property), or the trustees enter a non-commercial transaction reducing the trust fund’s value. However, in some cases there is no exit charge, for example for payments of costs or expenses incurred on assets, where Income Tax is due on a payment of capital, where the assets are excluded property or where the asset is transferred out within three months of the creation of the trust (or the 10-year anniversary). The calculations for this exit charge are incredibly complicated and require expert advice.
Our Wills and Probate department pride ourselves on providing exceptionally high standards of customer service and exceptional trusts advice. Our service is personalised, and we can deal with all sizes of estates and wealth. If you are considering setting up a trust to protect your assets, contact our team today to find out how we can help you.
If you require any further information about setting up a trust or wish to speak to our solicitors, please telephone us on 020 7387 2032. Alternatively, complete our online enquiry form.
A person’s estate is distributed upon their death according to their Will (or under intestacy rules where there is no valid Will). However, disputes over Wills have become increasingly common in recent years, partly due to the fact that assets (especially property) have increased significantly in value and also because family arrangements are now more complicated. The law relating to contested Wills is fairly complex, which can make a challenging time even more difficult. Here we look at when a Will can be contested and how to handle the situation.
Wills are automatically revoked by marriage or civil partnership. A Will is also revoked where another Will or codicil is made, if the testator puts in writing that they want to revoke the Will and this is correctly executed or where the testator in some way destroys the Will to revoke it.
The most common group to contest a Will are family members. There is a defined group of people that can contest a Will and it is anyone that has a beneficial (or potential beneficial) interest in the estate, which generally includes:
Any beneficiary (not limited to relatives) can contest a Will where they have not received their inheritance and where the Will is not being correctly executed in the best interests of the beneficiaries.
If there is the possibility of a Will being disputed, then specialist legal advice should be taken as soon as possible. Someone that raises a potential claim can apply to the Courts for a “caveat” that protects the assets of the estate from being distributed while there is a dispute. The caveat lasts for six months but can be renewed. Where the claim cannot be resolved during the caveat stage, then the matter can be referred to the Court stating that either the Will is invalid or did not sufficiently provide for the claimant’s needs.
For a Will to be valid, various procedural and legal requirements must be met. If these conditions are not satisfied, then the Will could be deemed invalid. These issues include:
Under these grounds, the burden of proof is on the defendant. There is a high burden of proof to show that the Will is invalid based on the balance of probabilities and evidence needs to be supplied to support this. Claims must be made within six months from the Grant of Probate.
It is also possible to contest a Will based on a claim that the deceased promised something to the claimant that they relied on to their detriment. Again, it is up to the claimant to prove this.
Another ground for contesting a Will is based on the reasonable financial provision for family and dependents under the Inheritance Act 1975. Here a dependent can make a claim where the Will does not sufficiently provide for them. The Court will examine various factors, including:
A successful claim under these grounds will result in the Court awarding a lump sum or maintenance payments out of the estate. The Courts are showing a greater willingness to allow these claims and so it is imperative that advice is sought where this is a possible issue.
Contesting a Will can be difficult, it can also be difficult to have a Will upheld when you stand to benefit. However, we can help you through this challenging time and build your case. Our specialist Wills and Probate Solicitors have handled a great number of contested Wills cases in the past, and we fully understand the complexities of these kinds of cases. We pride ourselves on our exceptional customer service and want you to feel at ease with how your case is progressing. We fully understand how stressful it can be to lose a loved one and that Wills disputes can cause further discord in your family. That is why we aim to settle Wills disputes quickly and professionally.
The Wills and Probate Lawyers at Lewis Nedas offer a tailored, focused review of your family circumstances to determine how best to navigate individual relationships and appoint effective administration of your estate. For more information, please contact us on 020 7387 2032 or complete our online enquiry form.
An Advance Decision to Refuse Treatment (previously known as a Living Will) is a document used for people to record their wishes relating to medical treatment and what they wish to refuse in the event that that they no longer have the capacity to communicate their views. So long as these documents are correctly created, they are legally binding documents and take immediate effect from when they are signed and witnessed. This means that a legally valid advance decision has to be followed by healthcare professionals, and if they ignore it, legal action can be taken.
In order to be valid, the document needs to be in writing, signed by the person they relate to and signed by a witness. It must also be shown that the person made the decision on their own and that there was no fraud or duress. Any person over the age of 18 years that has mental capacity can create an advance decision and it allows a person to make clear what their wishes are to friends, family and health care professionals. A valid advance decision takes precedence over the decisions of other people made in your best interests, but it will only be used in circumstances where a person can no longer communicate their wishes.
Advance decisions are only valid if the person they relate to is alive. An advance decision allows a person to refuse medical treatment, such as:
The advance decision must contain a statement that it applies even in cases where the person’s life is at risk if this is the person’s wishes. Only those treatments that are documented in the advance decision are covered and so the wording must be very specific to ensure that the person’s wishes are included in full. The enforceability of the advance decision could be affected by ambiguous wording. Where a doctor suggests treatment that is not covered in the advance decision, then the doctor will be able to determine whether or not to follow this treatment depending on their assessment as to what is best for the person. It is possible to refuse treatment in some situations but not in others, so again the wording has to be very clear to explain the circumstances in which you wish to refuse specific treatments.
There are certain things that an advance decision cannot be used for:
To ensure that the correct wording is used to cover all situations that may be relevant, it is highly advisable for a person to take advice from their GP to discuss what issues should be included and the impact of these decisions. There is no requirement to involve a GP in the decision process or for them to consent to the advanced decision. However, if a GP provides a signed statement to confirm that the person had the requisite mental capacity when they made the advance decision, this can help prove the validity of the document if it is queried.
An advance decision does not have an expiry date, though it is important to make sure it is reviewed regularly. Circumstances and treatments can change over time and that may affect a person’s wishes. The advance decision must be shown to be “valid and applicable”, and if there is uncertainty on whether the person’s circumstances or preferences had changed over time, this could affect whether it is deemed to be valid. A healthcare professional will be more confident about accepting an advance decision that was updated within the last two years. If there is a suggestion from something a person has said or done that contradicts the advanced decision, then this will invalidate it.
Those with an advance decision should make sure that family, friends and healthcare workers know about its existence and where to find it. In the event of a situation that would be covered by the advance decision, it needs to be found quickly. It is possible to keep a copy in a person’s medical records.
An advance decision can be revoked in writing, which is then signed and then the advanced decision and any copies are destroyed.
At Lewis Nedas Law, we help our clients create advanced decision tailored to their specific needs and desires. For example, you may want to direct your family members to remove you from life support if you are terminally ill, but not if you are in a coma. Without advance decisions, it is up to your family members to make these incredibly difficult decisions.
Don’t leave your family members without guidance during this emotional and stressful time. Consult our experienced Advance Decision Lawyers to establish an advance decision and protect your loved ones from conflicts and distress. It is important to consult a legal professional in drafting advance decisions, as the information contained in an advanced decision may allow death to occur.
We are dedicated to protecting our clients’ best interests, and we take pride in offering ‘City firm’ standards of service at reasonable, realistic pricing levels. For more information, please contact us on 020 7387 2032 or complete our online enquiry form.
Inheritance tax is paid on your estate when you die. Before probate will be granted and your assets can be distributed to your designated beneficiaries, any inheritance tax owed must be paid off. Currently, any assets valued up to £325,000 can be passed on tax free and this is known as the nil-rate band. However, many people will build up assets that can be worth considerably more than this and amounts exceeding the nil-rate band are liable to an inheritance tax rate of 40%. Those inheriting the assets bear the liability to pay this tax. The use of inheritance tax planning allows people to legally reduce the amount of tax that will be applied to their estate when they die. Through careful planning, this can reduce the value that the estate is calculated at when the person dies. There are various methods that you can consider to reduce your liability and we look at some here.
To maximise the best use of the nil rate band, everyone should look at their individual circumstances. Married couples and registered civil partnerships have a joint nil-rate band of £650,000 and can transfer any unused part of the nil-rate allowance to their surviving spouse upon their death.
A new residence allowance was introduced in April 2017, which is an additional nil-rate band above the £325,000 threshold in circumstances where residence is passed onto a direct descendant. This rate has increased year upon year since its introduction in 2017 and will continue to increase. The rates are as follows:
Thereafter, from 2021 to 2022, it will rise in line with the Consumer Prices Index (CPI). This rate will also apply to those that downsize or no longer own a home from 8 July 2015 but pass on other assets to their direct descendants.
To ensure that you are planning effectively, the first thing that should be done is to make sure that you have a valid and up to date Will that reflects your wishes. This should also enable your beneficiaries to benefit from the above rates.
Another effective method of passing on assets and wealth is to do this during your lifetime as a gift. There is a £3000 limit on gifts each year that can be given without incurring any inheritance tax. Each tax year, you can also give away wedding or civil ceremony gifts of up to £1,000 per person. Certain relatives can give more for a wedding or civil ceremony gift, with parents being able to give £5000 to each of their children, grandparents giving up to £2500 per grandchild.
Charitable gifts and those to political parties are tax free and have no limit.
Other gifts can be tax free if they are made more than 7 years before your death. Where a person makes a gift but dies within the 7-year period, then there is a tapered relief rate. Within the first 3 years it is the full 40%, but this drops from here to 32% for 3-4 years, 24% for 4-5 years, 16% for 5-6 years and 8% for 6-7 years.
If something is gifted, then the person doing this cannot enjoy any benefit from it or make use of it. For example, if someone gifts their home but continues to live in it without paying rent to the beneficiary, then it is not seen as a gift and will be taxed accordingly.
Trusts can be used to allow someone to control how their assets are used by future generations as well as ensuring that dependants are protected and if set up correctly, reduce inheritance tax liability. However, this is a complicated area and you need to ensure that you have obtained proper advice so that they are set up properly. As with gifts, if you die within seven years of making a transfer into a trust, then the estate will be liable to the inheritance tax rate of 40%.
It is also possible to use discounted gift trusts, which allows you to gift money to a trust and draw an income in your lifetime with the remaining money passing to an heir free of inheritance tax. This is regarded as an investment bond and allows for an income of up to 5% until death. Where the trust is set up seven years before your death then again, it will not be counted as part of the estate. If you die within that period, then the rate is reduced since the income that was being taken from the gift will have its worth.
Both of these can be used to maximise the tax efficiency of passing on your wealth. Where a person dies before their 75th birthday, they can leave any money in a money purchase pension to be paid as a lump sum or regular income for a beneficiary with no tax to pay. If the person dies after they turn 75, then the beneficiary is taxed at their marginal income tax rate. So long as the money remains as drawdown, it will not incur income tax and can be passed down to children, who in turn can pass it to their children etc. This can be a very tax efficient way to pass on wealth through generations.
Whole-of-life insurance policies can also be used to meet or reduce inheritance tax liability. Where it is written into a trust, the proceeds of such a policy are not included in a person’s estate. The policy can then pay out to cover all or part of the inheritance tax owed.
The way you own your home can also affect inheritance tax. In some cases, owning your home as tenants in common rather than joint tenants can make more sense. It allows each partner to own a specific share that can be left to someone else on death (for example, their children) as opposed to automatically passing to their spouse as is the case with joint ownership. This can reduce inheritance tax but does have its complications, and as with all methods, expert advice should be taken before making any decisions.
At Lewis Nedas, our specialist tax solicitors are regularly involved in helping clients organise their estate, to reduce its liability to pay inheritance tax. We provide a service that offers legal advice reflecting your needs. Our team understand and have vast experience navigating the complex and changeable legal framework concerning tax. We will work with you to make sure you understand how the tax laws will impact you, and discuss the options that would suit your particular circumstances. If you have any questions regarding estate planning or inheritance tax issues, please contact us.
For further information or to speak to our solicitors please telephone us on 02073872032, complete our online enquiry form.
Our specialist estate planning and trust lawyers are increasingly asked this question by individuals, anxious to provide for dependents after their deaths.
The ‘baby boomer’ generation in 2016 is asset rich, as a result of having lived in an era of affordable property ownership. However, as a generation, it is also dealing with ‘blended families’ as a result of increased divorce levels, the probability of having to find money to provide for the care of vulnerable/ageing relatives (1 in 4 will need the services of a care home), concerns that their children cannot afford housing, or to educate grandchildren. There are others concerned that their children may not be able to manage large amounts of money.
The answer is to consider the option of setting up a trust, which is the formal transfer of assets (e.g. property, cash, shares) to identifiable individuals, or perhaps a trust company to hold the assets for the benefit of those individuals.
You must take suitably experienced legal and tax advice from the very beginning of the process, because the consequences of a badly drafted trust deed or will trust can be horrendous, and the only possible beneficiaries in that situation would be litigation lawyers, accountants, and HMRC!
You must choose trustees, understand what the duties and discretionary powers of those trustees are to be, ensure that legal and beneficial ownership is separated, and that your wishes or any conditions that you want to have attached to the trust fund are clearly stated.
You must decide what type of trust that you wish to set up, because there are different types of trusts, for example discretionary trusts, and fixed interest or life interest trusts.
There may be property in another jurisdiction, perhaps where the legal doctrine of ‘forced heirship’ governs the division of assets upon death, a doctrine which does not prevail in England and Wales.
If you would like to speak to our specialist team headed by Myles Reback about this issue, please contact us on 020 7387 2032 complete our online enquiry form here.
Quite obviously any professional solicitor will say no, BUT before you leave this page, let us explain why.
This isn’t just about self-protectionism for the legal profession, there are some very solid reasons for avoiding will writers and instructing solicitors to draw your will.
Your will is going to be one of the most important documents that you will ever create, important not just to you but also to your beneficiaries.
Disputed probates/wills is one of the biggest areas of litigation and is growing all the time. In a time of massive social change, including family structures and the worst economic downturn in a century, beneficiaries are resorting to litigation if they feel that they have been unfairly treated by the will maker or that the will is unclear. There are mistakes in over 20% of wills in this country; not only that, but charities are incredibly aggressive in situations where a legacy to them has been identified and have considerable resources behind them when it comes to litigating against other beneficiaries.
Heir Hunters, who deal with intestacy, are also very litigious and won’t hesitate to take on potential beneficiaries if the estate is valuable enough.
More people are relying upon legacies to help them through life and old age, or in turn to help their children on the increasingly elusive property ladder.
Sitting down face-to-face with an experienced, highly-skilled wills and probate lawyer, who is going to ensure that every one of your wishes is clearly and accurately stated and that your estate is protected from such litigation, is vital. After all, any litigation costs will be met from the estate, leaving the value of the estate much reduced. You can’t do any of this with an online will writing service.
Our lawyers can advise you about tax planning and inheritance tax issues, something that wills writers cannot. They can inform you about current HMRC policy on valuations of estates and recent tax tribunal decisions, so that you can have an accurate idea of how much you are likely to leave your beneficiaries.
You will then be confident that you can control your and divide your assets as you wish.
You may have illegitimate children, step-children or estranged relatives and other issues that need to be addressed sensitively, so it’s important that you are dealing with a lawyer who is approachable and sensitive to your individual situation.
Perhaps you are very unwell; we can travel to you at home or in hospital to draw your will and give you peace of mind. An online will drafting service cannot do that for you.
A solicitor will ensure that you are sufficiently competent to state your wishes and make all the necessary decisions; again this is a fast changing area and one of the biggest issues in dispute. The courts recently ruled that somebody suffering from dementia was sufficiently competent to make a will.
Your wishes must be stated clearly, leaving no room for doubt. Assets must be clearly described, so too must the allocation of shares of the assets in order to avoid doubt and confusion.
Specific legacies could fail if there aren’t any replacement clauses, for example.
Perhaps you have assets in foreign jurisdictions who have very different approaches to the distribution of assets e.g. France. The asset will be distributed amongst the entire family of the testator. These issues have to be clearly addressed.
Some will writers offer wills at very low prices BUT will charge high monthly fees to store your will. Most solicitors will store the will for either a low charge or no charge at all.
Will writers often have pre-paid probate packages, however these will only cover to the grant of probate and NOT the full administration of the estate. These packages do not allow the executors to work with experienced professional to administer the estate and don’t allow for the charges of third parties.
Any mistake about any aspect of the will can leave the will invalid and the client intestate, and again that is when the prospect of a disputed will arises. If a solicitor makes a mistake when drawing a will then a beneficiary or executor can sue (because all solicitors have professional indemnity insurance) or complain to the Ombudsman and the Solicitors Regulation Authority. Unregulated will writers are not in that position; if there is a mistake in the will the only redress that your beneficiaries will have will be to embark on expensive complex litigation, and most of these will writing companies are insubstantial with few assets, if any.
There is also the issue of the ‘long stop rule’ to take into account, this is a limitation period of 15 years from the date of the making of the will in which any interested party can sue, but in reality, many people make wills many years before they die and so very often the interested party is time barred from civil action or has only a short time in which to sue, by the time they realise that a mistake has happened. With the solicitor’s profession this is not an issue.
So, we hope that we have explained that there are very many problems when instructing will writers.
If you would like to discuss the making of a will contact us now for a quotation.