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Can minimising IHT have pitfalls?

If your estate is subject to inheritance tax (IHT), your beneficiaries will have to pay 40% of the taxable amount of the estate to the government, which will seriously diminish how much they will inherit. If you are leaving your estate to your children, you are very unlikely to want this to happen.

The taxable amount of your estate is anything above the nil-rate band (NRB) and the residence nil-rate band (RNRB). Your current NRB is £325,000 per person. Anything you pass to you spouse or civil partner will be exempt from IHT. If you leave your entire estate to your spouse or civil partner, your unused NRB can be claimed by your executors, allowing £650,000 to pass to your heirs, tax free when you die. Since 2017, you are also entitled to an RNRB if you leave property (your main residence) to your direct descendants. The RNRB started at £100,000 per person. It increased to £125,000 in 2018a and will continue to increase by £25,000 per year until 2020/2021, when it will be £175,000, which means that you will be able to leave £500,000 free of IHT to your direct descendants. As with the NRB, this can be passed to your spouse or civil partner.

In order to reduce the amount of inheritance tax people pay, parents often consider entering into various arrangements, such as trusts. However, a book published recently by Manny and Brigitta Davison – “To Trust Or Not to Trust” – gives a heart-breaking account of what can happen when things go wrong with such arrangements.

The Davisons worked hard and built a business empire from nothing. In 2006 Mr Davison reputedly sold his stake in his property holding company for £253 million.

Like most parents, the Davisons wanted to give their children the best life possible. They were privately educated, lived in beautiful homes and enjoyed luxurious holidays. In an attempt to ensure their children had an income, the family wealth was protected for future generations and inheritance tax was minimised, the Davisons put a substantial amount of property and other assets into trust.

However, according to the book, the children began to use the property held in trust, which included Lyegrove – a Jacobean manor house, as their own and wanted autonomy from their parents.

Legal action commenced, and although a settlement was reached, the parents are now estranged from their children and say they have effectively been banned from their beloved home at Lyegrove. The children have, through their lawyer, dismissed the book as lies. Whatever the truth, the parents’ attempts to protect wealth for the future benefit of their children has created family rifts that may never be healed.

There are a number of legitimate ways in which inheritance tax can be minimised, but it is important not to let the tax ‘tail wag the dog’ and end up getting it wrong. If you are concerned about IHT issues, contact Atherton Godfreys’ experts now. The advice we offer is professional whilst being down to earth and making you aware of any possible pitfalls.

Author: Katy Burgin

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LPAs may offer protection in ‘incapacity crisis’

A new study published by Solicitors for the Elderly has suggested that the UK is heading for an ‘incapacity crisis’.

The number of people diagnosed with dementia in the UK is around 540,000. This has increased by more than 50% since 2005. It is estimated that of the 12.8 million British residents aged over 65, one in 14 is likely to develop dementia.

If an individual has not signed a lasting power of attorney and they lose the capacity to make their own decisions, their wishes regarding their health, welfare, care and medical treatment may not be followed.

Before a health and welfare lasting power of attorney can be used it must be registered with the Office of the Public Guardian. Less than one million health and welfare lasting powers of attorney have been registered with the Office of the Public Guardian. This suggests that the majority of individuals at risk of dementia have not made proper arrangements for their care.

Solicitors for the Elderly states

‘Nothing offers more protection than putting a health and welfare lasting power of attorney in place.’

Expert advice about these documents and their implications is essential.

Contact our experts for advice and assistance now. You can also find more information about lasting powers of attorney on our web pages.

Author: Katy Burgin

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Make a will and make it easier on your loved ones

Almost two thirds of the adult population in the UK does not have a Will.

It’s a difficult time when a loved one passes away and by not having a Will in place, it can become even more difficult.

There are many facts to consider when making a Will and understandably, a lot of people do not like to put pen to paper and think about what will happen when they die or they don’t think they need one.

However, by making a Will, you ensure who benefits from your estate and have the reassurance of knowing things will be easier for your loved ones.

Here are a few other things to think about when making a Will:

Firstly, you decide who you want to deal with your estate by appointing a particular person(s) to be your executor(s).

There may be items of sentimental value that you would wish for a certain loved one to have and by making a Will you can make sure this happens.

If you have small children, you can appoint someone of your choice to be their guardians and look after them if you were not here to do so yourself.

You can also state your funeral wishes in your Will, again, this is something that people do not like to discuss with loved ones but by doing so, your loved ones don’t have the worry that what they plan isn’t what you would have wanted.

Have you thought about your pets and what might happen to them when you are not around?  Anyone who has a pet knows that they are just like another member of the family. If you have agreed with someone or know someone that would take responsibility for your pet after you’ve passed away, this can be written into your Will for your peace of mind.
If you would like to make a Will then please contact our Wills and Probate Team on 01302 320621.

 

Author: Rachel Towle