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Inheritance Tax - Deed of Variation

will-pic-1 Tax Planning - Deed of Variation

Well- informed beneficiaries of an estate will know of the wonders of beneficiaries varying the terms of a Will after death to legitimately save tax; as ever, knowing something exists and having a fully operational understanding of a law are two entirely different things; Take this neat example of a saving that can be made since George Osborne's introduction of the Residence Nil Rate Band (RNRB) in 2015 and which is currently a £150,000 allowance (and come 5th April will reach its maximum of £175,000):-  In his will Testator gave his £300,000 home to his unmarried cohabitee and £300,000 cash to son.  Whoops! Total estate £600,000 and Inheritance Fax of £110,000 payable (being 40% of £275,000 (£600,000-£325,000 being Nil Rate Band (NRB).
Foster Harrington would advise the two beneficiaries to alter the will by a Deed of Variation switching the two gifts. Why? The RNRB is only available to lineal descendants of the deceased; the son is one such and the co-habitee isn't!  By switching gifts the RNRB is fully utilised and the Inheritance Tax payable is reduced from £110,000 down to £50,000 (£60,000 being 40% of £150,000 RNRB)  Deeds of Variation are technical and have options taking into account Inheritance Tax with or without Capital Gains Tax implications . We have specialised in such documents since the 1980s and are well-positioned to save inheritance tax for the familyIt is worth noting that wills should be revisited periodically ( every 5-10 years and certainly after a major Inheritance Tax change like the introduction of RNRB).   In addition wrinkles and qwerks from new legislation appear gradually and we are on top of all such developments for you.  

Well- informed beneficiaries of an estate will know of the wonders of beneficiaries varying the terms of a Will after death to legitimately save tax; as ever, knowing something exists and having a fully operational understanding of a law are two entirely different things; Take this neat example of a saving that can be made since George Osborne's introduction of the Residence Nil Rate Band (RNRB) in 2015 and which is currently a £150,000 allowance (and come 5th April will reach its maximum of £175,000):-  In his will Testator gave his £300,000 home to his unmarried cohabitee and £300,000 cash to son.  Whoops! Total estate £600,000 and Inheritance Fax of £110,000 payable (being 40% of £275,000 (£600,000-£325,000 being Nil Rate Band (NRB).

Foster Harrington would advise the two beneficiaries to alter the will by a Deed of Variation switching the two gifts. Why? The RNRB is only available to lineal descendants of the deceased; the son is one such and the co-habitee isn't!  By switching gifts the RNRB is fully utilised and the Inheritance Tax payable is reduced from £110,000 down to £50,000 (£60,000 being 40% of £150,000 RNRB)  Deeds of Variation are technical and have options taking into account Inheritance Tax with or without Capital Gains Tax implications . We have specialised in such documents since the 1980s and are well-positioned to save inheritance tax for the familyIt is worth noting that wills should be revisited periodically ( every 5-10 years and certainly after a major Inheritance Tax change like the introduction of RNRB).   In addition wrinkles and qwerks from new legislation appear gradually and we are on top of all such developments for you. 

 

 

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Foster Harrington honoured by Cancer Research UK

Avril-Turner---Cancer-Research

We are proud to announce that we have received a Gold Award from Cancer Research UK after facilitating over £1 million from clients pledging a gift in their Will for the charity.

"Gifts in Wills fund over a third of Cancer Research UK's life-saving research" explains Clare Moore, Director of Legacies at Cancer Research.  "We're so grateful to Foster Harrington Solicitors for supporting Cancer Research UK.  Whenever their clients express a desire to support Cancer Research UK Foster Harrington staff act with great sensitivity to explain the different options so individuals and families can make the right choice for their circumstances"

"Cancer Research UK has played a role in developing 8 out of 10 of the world's top cancer drugs, with gifts in wills making a significant contribution to what we can achieve.   Its quite astonishing to think that by simply combining enthusiasm with the highest professional standards Foster Harrington has helped secure over £1 million worth of legacy gifts which will go a long way towards helping our scientists, doctors and nurses to beat cancer sooner"

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Choose your Executors wisely

competent

Wills and Probate Administration

Choose your Executors wisely; are they competent to deal with all the law and any taxation?    When appointing lawyers are you confident they will deal efficiently and promptly with all matters; the Personal Representatives of the deceased have a legal duty to collect in all the deceased's assets with due diligence and if this takes longer than a year, the burden is on the Personal Representative to show good reason.    

(remember also the duty to pay all debts and all tax due; on occasion the Personal Representatives if they fail to adequately do this, they can be found personally liable for these payments!)

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Court Fees

Court Fees

The controversial hefty increase in the court fees has been delayed as Brexit squeezes the life out of everything and there has been no time for it to be approved by Parliament;   the proposed increase is controversial (and very possibly illegal) as it clearly would be a massive revenue-earner (and therefore constitutes a tax);  fees are supposed to relate merely to the cost of providing the service.

Potential higher fees can be avoided by applying for Probate now at the current (very reasonable) fee level.

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Wills & Probate - Digital Assets

bitcoin-activity-computer Digital Assets

We all don't like the idea of dying and certainly not the idea of dying now.

The Boss of a crypto-currency exchange died suddenly in 2018 giving no digital keys to his crypto-assets and over £100 million has therefore been lost .

That is exceptional but each of us  should keep a safe record of how our online assets are accessed We can help you think practically about the management of your estate digital and otherwise.

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Keep your Will safe and choose Executor wisely

The perils of depositing your Will with a lay executor were highlighted in case of Tessa Amstell deceased reported November 2018; in 2009 the deceased made her Will gifting her bungalow to her nephew, making gifts to charities and appointing her niece as executor; When the deceased died in 2011 the niece couldn't find the Will.

The bungalow was left vacant until the local council asked heir hunters to get involved; they tracked down lots of relatives, took out a Grant and started dealing with the administration including selling assets and taking money until finally stopped by the Court; imagine the stress and the costs - reputedly £250,000.

Morals of the tale -

  1. For a modest fee have your Will done properly by your solicitor who should keep it safe and to your order (in the firm's safe!) for no extra charge.
  1. Appoint your Executors wisely - generally either the main residuary beneficiary if the estate is simple or your solicitors, if the administration requires legal expertise (which it frequently does and always does when Inheritance Tax is involved).
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Inheritance Tax

Nil_Rate_Band

The IHT nil rate band is £325,000.   For those of us who are married or in a civil partnership, any unused nil rate band can be passed to our surviving spouse or civil partner, producing a total tax-exempt band of £650,000.

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Important changes to intestacy rules

intestac_20180926-072005_1

The Inheritance and Trustees Powers Act 2014 came into force on 1 October 2014.

One of the main principles of the Act was to abolish the life-interest trust of the Spouse established by the Administration of Estates Act 1925. In future therefore, the surviving spouse of an intestate with children will get the £250,000 statutory legacy, the deceased’s personal chattels and half the balance of the remaining estate outright. Children or other descendants share the other half of the balance. Furthermore, the Act provides that the Spouse when intestate without children will in future inherit the whole estate.

These new rules apply even to estranged Spouses or Civil Partners and thus it is even more important for individuals to prepare Wills.

Please note that marriage revokes a Will and therefore if it is a second or third marriage, and a new Will is not prepared, if there are no children, the surviving Spouse on intestacy will take the entire estate.

Please contact Avril Turner for advice on this matter or any other concerning Wills, Probate, Lasting Powers or issues concerning the elderly.

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The risks of DIY probate applications

probate

Some people believe that by making an application for a Grant of Probate themselves rather than instructing solicitors will save them fees and ensure that the process does not become a lengthy, protracted one.  Very much the opposite.  Servicing your own car would be considered dangerous and the same applies with Probate Law and Tax.  Mistakes by a Personal Representative could be very expensive.  Executors/Personal Representatives are personally responsible to the Estate and the beneficiaries if anything goes wrong. 

Cases abound as Executors being sued by beneficiaries or being personally liable for outstanding tax.  Remember, you do not know what you don’t know.

Dealing with the estate of a loved one is very time-consuming at an emotional time.  The Executors/Personal Representatives have to be willing to invest time to ascertain the extent of the assets and liabilities of the estate to prepare the probate papers and possibly to attend at an interview at the Probate Registry to obtain the Grant of Probate.  Once the Grant of Probate has been obtained they will then need to collect in all the assets and distribute them in accordance with the Will  or Letters of Administration on intestacy.  Clearly there is a risk that certain things will be overlooked, in particular such things as the income tax position of the deceased with HM Revenue & Customs, protecting the Estate from any claims by advertising and minimising any tax payable.

Instructing a solicitor to act on your behalf could actually save the Estate money.  An experienced probate solicitor ensures that the minimum amount of tax on the Estate is paid and the savings can be substantial.  It is possible to prepare a Deed of Variation varying the terms of a Will to ensure that the Will is tax-efficient at the time of death and instructing an experienced probate solicitor ensures not only that the correct tax is paid on the Estate and kept to a minimum but the Estate is protected from any future claims.  We can ensure the most tax-efficient outcome for the Estate meaning that the beneficiaries may actually receive more than if the application was made personally.  Any mistake made by a Personal Representative or an Executor could be a very expensive one and the beneficiaries are entitled to pursue the Executors and Personal Representatives for any loss to the Estate caused by any unnecessary tax payment or failure to carry out a relevant step in the process.

Instructing a probate solicitor is especially important if the Estate is taxable, if the beneficiaries are under the age of 18 or if there is anyone likely to dispute a Will.  Instructing a solicitor will ensure you are advised of any tax saving measures available which will provide a more tax-efficient outcome for the Estate meaning this would be passed on to the beneficiaries.

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