Archive for the ‘Inheritance’ Category
Trust in trusts
Trusts are sometimes used to distribute assets when someone dies rather than
making specific provisions in a will. This allows the trustees to decide how and who to pass money to and can result in less tax being paid.
The Sunday Telegraph recently reported the case of a family dispute where the trust was set up by a father to benefit his wife and children. His son, a beneficiary and also a trustee, ended up in dispute with his 79-year-old mother and blocked distribution of money due to her.
A costly legal case resulted before she won her share of the money. Lawyers suggested such trusts should have at least one ‘professional’ independent trustee to avoid this type of problem.
Trusts can be useful devices to distribute assets but good legal advice is important when setting them up.
Steve Clark
Turkeys don’t always vote the way you think!
Turkey magnate Bernard Matthews’ business is struggling as a result of family feuding over his will since he died three years ago, reported the Sunday Times.
His children denied his request not to contest a provision of his will leaving a French villa to his mistress (they won a 56% share of it) while only his illegitimate son inherited shares in the business, which is now suffering a lack of investment and may need a £30 million cash injection by an external investor.
Business owners need to take great care with the provisions of their wills regarding their business interests, since it’s essential that there is clarity about ownership and management.
We will work with your accountant and legal adviser to help you find a solution to these issues. Call us if you’d like to arrange an initial meeting at our expense.
Steve Clark
Solicitor prepared will ruled invalid
The England and Wales Court of Appeal has refused to validate a Will involving a lady, Daphne Burgess, removing her son as a beneficiary under her will, even though the Will was apparently drafted and executed by an independent and experienced solicitor who had explained the contents to Mrs Burgess.
The deceased made a Will in 1996, when aged 68, splitting her estate equally between her three children, Julia (a former magistrate), Peter, and Libby. In December 2006, Julia arranged a meeting with a solicitor resulting in the drafting of a different Will leaving the estate to the 2 daughters only.
Peter and Libby were completely unaware of this until after their mother’s death in May 2009. They decided to contest the Will. The Court of Appeal found in their favour, ruling that their mother had lacked ‘knowledge and approval’ of the Will’s contents and Julia had been the controlling force behind the changes.
Hollow victory?
Although Peter and Libby were victorious, the entire £200,000 estate has been consumed by legal costs. Peter said, ‘This was never about money. I simply could not let the assertion stand that my mother, to whom I was very close, would cut me out of her will, and certainly not without talking to me.’
What does this mean?
This case demonstrates the fact that a Will may not end up being legally binding as, while under English law individuals are free to leave their assets to whoever they wish, the Inheritance (Provision for Family and Dependants) Act 1975 exists and allows certain people (including a spouse, former spouse, child, child of the family or dependant of that person) to bring a claim for reasonable financial provision if they feel it is justified.
Financial planning for the end of the tax year
The nights are finally starting to get a little lighter – maybe we can start looking forward to Spring after all. In financial services, Spring means two things; the Budget (on March 20th this year) and the end of the tax year on Friday April 5th.
This article gives some suggestions on financial planning steps to take before the end of the tax year, so that you can make the most of your tax allowances and organise your affairs as tax efficiently as possible. However, the first point to make is a practical one.
Easter is early this year, with Good Friday on March 29th and Easter Monday on April 1st. With holidays bound to impact on administration at some financial institutions, our first suggestion is that if you’re going to act before the end of the financial year, don’t leave it until the last minute. If you want to make sure your transactions are processed in time, look on the week commencing March 25th as the last practical week.
Individual Savings Accounts
The overall personal limit for an Individual Savings Account (ISA) for the current tax year is £11,280 and this will increase to £11,520 for the new tax year commencing on April 6th. It’s important to note that if you are only contributing to a cash ISA then the maximum is exactly half the overall allowance – so £5,640 and £5,760 respectively. The other key point is that if you don’t use your ISA allowances for this tax year then they are lost – they can’t be ‘carried forward’ to the next tax year.
We’d always recommend making use of your ISA allowances if you can – you pay no tax on capital gains which you make within an ISA or income you take from it. For long term investment there is a huge range of funds available within an ISA ‘wrapper’ from the very cautious to the very adventurous: as always, we’d be happy to discuss all the options with you if you’d like some advice.
Capital Gains Tax
Accountants will tell you that CGT is the ‘forgotten’ tax relief – people who religiously use their full ISA allowance completely fail to utilise their CGT allowance. For the current tax year everyone has a CGT allowance of £10,600 – meaning that capital gains made on investments such as shares are free of tax if they are within this limit. Husbands and wives can gift assets to each other without incurring a CGT charge, effectively giving a married couple a limit of £21,200. Like the ISA allowance though, the CGT allowance is an annual one, and cannot be carried forward to a subsequent tax year.
Inheritance Tax
The current individual limit for Inheritance Tax is £325,000 and this will remain the same for the tax year 2013/2014. Remember though, that you can make gifts during a tax year and these will be exempt from IHT if they fall within the Revenue limits: the limit is £3,000 per person, so £6,000 for a married couple. Although these amounts are small they can still help to reduce the value of an estate.
There are, of course, far more complex and sophisticated Inheritance Tax planning measures such as the use of trusts; if you feel that you would like specialist advice in this area then we will be happy to help.
Pensions
Why have we left pensions to (almost) the end? For a simple reason – because whilst there is enormous scope to make tax efficient investments through your pension (especially for higher-rate taxpayers) the legislation and rules are complex and it is an area where specialist financial planning advice is almost always required.
The top rate of tax is shortly being reduced from 50% to 45%, so many very high earners will be motivated to make pension contributions now, and as usual there is the chance to make use of reliefs and allowances which haven’t been used from previous tax years.
Equally, those people who are self-employed or directors of companies may need to think about making sure their pensions are as tax efficient as possible, and set up to ensure that they receive the maximum benefits from the business they are running. It all adds up to an area where specialist advice is essential and we are always ready to sit down with clients and use our expertise and experience to make sure they have exactly the right pension planning.
Hopefully that’s a useful overview of the planning steps you should take before the year end.
The key message is simple: “talk to us.” We’re never more than a phone call or an e-mail away and we’re happy to explain any of the subjects above in much greater detail.
*The Financial Services Authority does not regulate taxation advice or trusts.
Living Together? Your rights on pensions, inheritance & tax
Despite the increasing trend for people to live together many couples are unaware that if their partner dies they might not get everything they thought they would.
This is especially true in relation to what you get from a pension scheme or your partner’s estate.
It’s quite a minefield for most people to navigate . Don’t worry we’ve found for you a great guide for you to read. This looks at your rights if you’re in this position and gives you some great Top Tips to have a look at. You can click through to the guide here.
It’s a sad fact that many couples take longer to organise a two week holiday than they do to sort out what happens if one of them gets sick or dies.
To help further 44 Financial Ltd offers a comprehensive review service that will help you avoid these pitfalls. We’ll look at all your finances and wishes for the future and give you advice and pointers on things like inheritance, pension benefits. and protection for you and your partner if you are sick or die. We’ll also work with your solicitor if you have one to make sure that everything is done properly.
To arrange a free initial consultation email us here.
And last but not least a big thank you to those nice legal people at DMH Stallard for sending us the guide.
Steve Clark