The New Tax Band: What If My Property Is In Trust?

The way properties are judged for Inheritance Tax is about to change.

This month (April 2017), the new Residence Nil Rate Band (RNRB) will be introduced. This new band will allow parents to hand more of their estate over to their children without having to pay Inheritance Tax.

Currently, an individual does not pay Inheritance Tax on an estate worth less than £325,000. This increases to £650,000 for couples.

However, the RNRB, something which former Chancellor George Osborne announced, means an end to Inheritance Tax on the family home for most of us. It is essentially an extension to the current tax-free allowance, but applying solely to property. It initially stands at £100,000, but will increase over the next four years until hitting £175,000 in 2020/21.

In order to qualify for the RNRB, the estate must include a qualifying property – basically a property that the deceased lived in at some point during ownership. That property must also pass to a direct descendant, such as a child or grandchild. Finally, the value of the estate cannot exceed £2 million. For every £2 over this limit that your estate is valued, the relief is reduced by £1.

It could save families a huge amount in tax. Things can, however, become complicated if the property is held in Trust.

Why hold a property in Trust?

Trusts can be very useful for people who want to cut their Inheritance Tax bill. By putting certain assets – like a property – into a Trust, they are not viewed as being part of your estate when the time comes to work out what Inheritance Tax your loved ones will have to pay.

While some forms of Trust will benefit from the RNRB, others will not.

The RNRB will only be available with the following Trusts:

  • A Bare Trust for a lineal descendant
  • An Immediate Post Death Interest Trust for a lineal descendant
  • A disabled person’s Trust for a lineal descendant
  • An 18-25 Trust
  • A bereaved minor’s Trust.

Other Trusts will not benefit, for example if the property is left to a basic Discretionary Trust, RNRB will not be available, even if the beneficiaries of the Trust are a lineal descendant.

So how do we maintain the flexibility and protection that a Discretionary Trust offers whilst ensuring that our clients do not miss out on the RNRA?

One less reported aspect of the RNRA and its impact, is how the Trustees can benefit from a strategy in a little known section of the Inheritance Tax Act 1984 (Section 144) which gives the Trustees the power to make their choice later, and decide who is best to inherit within two years of a death. Two years to pick and choose the best person to receive this new RNRA allowance, that person most likely being the youngest member of the family.

But what if the Trustees forget?

Some clients choose their Spouses to be their Trustees, others choose their children and some may pick “John” from down the pub. Are these Trustees likely to know that they have two years to jump into action, probably not?

So we shouldn’t risk using Discretionary Trusts, hoping that the Trustees will miraculously remember to do their job? There is much merit in that argument.

The New Flexible Family Trust

What if we were to offer a Discretionary Trust that means our clients do not have to “speculate” who would be the best person to receive the RNRA at the time they make their Will? A Trust that gives the Trustees a chance to choose the best person at the date of death, BUT also ensures that if the Trustees neglect to do so, the allowance will be received REGARDLESS by default in the terms of the Trust.

We therefore present the
NEW FLEXIBLE FAMILY TRUST!

Our new Trust ticks all of the boxes. The flexibility within two years of death to “pick the right person” but also with the security in knowing that if the Trustees are “sitting on their hands”, the trust defaults for them, ensuring that the relief is never lost.

Jon O’Brien from Finance North Estate Planning Services says: “Working out exactly who should get what after you pass away takes a lot of thought and planning. Getting a comprehensive Will in place is crucial. Please come and speak to us today on 0161 771 2056 to receive expert advice.”

Before You Forget…

At breakfast this morning, a woman said to her husband: “My memory is getting really poor, I went upstairs yesterday to get something and by the time I got to the top of the stairs I had forgotten what I was going for.” 

The husband said: “How bad is your memory?”

 She responded: “Sorry, what were we talking about?”

Old jokes are always the best, but early signs of a loss of memory are an uncomfortable reminder of the aging process and certainly no joke.  Some of us will inevitably get dementia or other debilitating conditions that could result in the loss of mental capacity.

Do you know what happens if you or your partner becomes unable to make decisions for themselves due to old-age memory issues or dementia? Potentially you can find yourself in a position where you cannot pay for services or make decisions, without lawyers and something called the Office of the Public Guardian (OPG) being involved. It’s an expensive and long-winded process. That is, unless you have written a legal document called a Lasting Power of Attorney (LPA) in advance of your loss of mental capacity.

The Citizens Advice Bureau website says:

You should make an LPA if you have been diagnosed with, or think you might develop, an illness which might prevent you from making decisions for yourself at some time in the future.

“The kinds of illness which might prevent you from making decisions for yourself include:

  • dementia
  • mental health problems
  • brain injury
  • alcohol or drug misuse
  • the side-effects of medical treatment
  • any other illness or disability.

“You must make an LPA whilst you are still capable of making decisions for yourself. This is called having mental capacity”

At Finance North Estate Planning, we are experts in writing Lasting Powers of Attorney and talking you through the pitfalls. Whilst no one wants to think about the potential of problems in later life, writing an LPA could save you and your family considerable cost and grief in the not too distant future.

Call us today on 0161 771 2056 for a no obligation discussion about these issues. Or complete your details below and one of our consultants will call you.

Finance North Estate Planning
Offices in Cheshire & Staffordshire

“Simply Good Business Sense”

If you are a business owner, director, partner or a sole trader, protecting the future of your business with a Lasting Power of Attorney is simply a must!

What is a Business Lasting Power of Attorney

 A BLPA is a powerful legal document which allows a Business Owner (Donor) to appoint persons of their own choice (Attorneys), to look after their business affairs. It can be used if they no longer wish to make these decisions, or lack the capacity to manage their business affairs themselves.

 Why do I need a BLPA?

The main objective of any Sole Trader, Partner or Company Director is to ensure the efficient running of their business. With daily decisions to be made, staff to pay and suppliers to meet, it is imperative that somebody is able to fulfil their duties if they should be taken ill or become mentally incapable.

If you can’t continue to run your business, either through being physically or mentally incapable, (or by simply being out of the country for long periods of time) it is important that somebody has the authority to act on your behalf in relation to your business interests.

  • Salaries
    Bank accounts may not be accessible. Salaries and bonuses could therefore go unpaid; this may cause undue hardship for the employees and their families.
  • Suppliers
    With a signatory unable to sign on the business bank accounts, suppliers may not be paid and cash withdrawn therefore suppliers are left without payment and refuse to send further products.
  • Contracts
    Without your signature, the business could be prevented from entering new contracts, paying invoices, buying stock and authorising sales.
  • Banks
    Most banks place limitations on accounts when they become aware that an    account holder has lost capacity.
  • HMRC
    Without your signature, the business may not be able to pay its creditors as above, this could include HMRC.

Won’t my business partner/family member(s) be able to just run things for me?

You may think that your family, friends, or business partners can help run the company if anything should happen to you. Unfortunately this may not be the case. Without a BLPA it would be for the Court of Protection to decide who is best placed to make decisions on your behalf. This process can take months and be very costly, in the meantime your business may struggle to survive.

It will be the Court of Protection who decides who the best person to deal with your affairs is. What happens if that person is not business minded, or doesn’t work well with the remaining business partners? Would you, or your business partner, want the business being run by a stranger?

A Business Lasting Power of Attorney is a simple, cost effective legal document that allows you to choose the best person to run your business.

A Business Lasting Power of Attorney only comes into force when it is needed. It should be safely stored away and registered in the event of a critical illness or accident. It can even be used in the event of a lesser injury which temporarily prevents someone from dealing with their business affairs.

How we can help?

Having to face the prospect of being unable to deal with your own business affairs can be daunting for us all, but failing to act NOW and plan for this eventuality can lead to your business suffering unduly.

We understand that the process of dealing with the business affairs of someone who has lost capacity can be very difficult. Our dedicated team of professionals have vast experience in dealing with both the Office of the Public Guardian and the Court of Protection and provide both a professional yet personal service throughout, while still offering our clients extremely competitive rates.

Speak to our team today at Finance North Estate Planning Services, call 0161 771 2056 or complete the form below and one of our consultants will contact you to discuss your requirments.

Finance North Estate Planning Services
Offices in Cheshire & Stoke on Trent

 

“Til Death Do You Part?

Around a third of parents are unwilling to leave an inheritance to their children or provide them with financial aid, as they are concerned that divorce may mean that money leaves the family.

This is according to research from Investec Investment & Wealth, which found that 14% of parents had little or no confidence that their children’s marriages would last a lifetime.

It is perhaps an understandable concern, with around 42% of marriages failing, according to the Office for National Statistics.

There are, however, steps you can take to ensure that your money ends up in the right hands – irrespective of how successful your child might be at finding a long-lasting partner.

Make use of your gift allowance

The research found that one in six parents are opting to give their loved ones small financial gifts to help with the cost of living, rather than large lump sums.

It’s important to remember that everyone has a £3,000 annual gift allowance, covering financial gifts you can hand over each year, free of inheritance tax. On top of that you can give away up to £250 to any number of people each year.

Skip a generation

According to the research, around 14% of parents are skipping a generation and instead looking to leave assets to their grandchildren.

Put it in trust

The study found that one in seven parents are considering putting the money into a discretionary trust, which could be a useful way to protect the money from a divorce.

With a discretionary trust, it is up to the trustees to determine how and when any potential beneficiaries may be able to access the cash. You can appoint yourself as the trustee, so that you have final say over where the money goes, or you can go for an independent trustee. What’s more, the money within the trust is classed as separate from your estate, so it’s free of Inheritance Tax.

It’s important to consider exactly how you want your assets to be divided up among your loved ones, and get those wishes down in the form of a comprehensive will. Speak to our team today at Finance North Estate Planning Services, call 0161 771 2056 or complete the form below and one of our consultants will contact you to help you get your will in place.


Finance North Estate Planning Services
Offices in Cheshire & Stoke on Trent


VIP R.I.P.

It’s been a grim year for everybody but the Grim Reaper. As we bid farewell to 2016, we ask why it’s been such a bumper year for celebrity deaths…

 “Why are so many celebrities dying in 2016?” asked the Daily Mirror, whilst people on Twitter expressed that their tolerance was subsiding, “Enough, 2016!”

 Other users of the site posted pictures under the tag line “Me at the beginning of 2016 versus me at the end of 2016” – the first an upbeat image of a character such as Kermit the Frog and the second showing the same figure beaten down by life; a bedraggled mess.

So why has 2016 been such a good year for the Grim Reaper when it comes to celebrities?

Experts have come up with a few reasons. Thanks to the proliferation of media over the past few decades, there are more stars around these days, for one. In the early part of the 20th Century, before television, the only celebrities were film stars. Social media also plays a role. As well as creating new stars, it also means that we hear about celebrity deaths far faster than in the past in addition to providing everyone with a platform to publicly share their grief. Then, there’s the fact that many of those who died in 2016 were baby boomers – people aged between 52 and 70. With so many born into that generation, it makes sense that lots of them went on to become famous.

One numerological theory is that 2016’s bad luck is due to its digits adding up to nine, the number commonly associated with completion and endings.

What is incontrovertible, however, is that 2016 was the year that reminded us that death is inevitable, regardless of how rich and famous they are. It also reminded us of the importance of writing a will. Whilst Alan Rickman left £100,000 to charity, David Bowie similarly planned sensibly, setting out 20 pages of instructions on how his estate should be divided. This included his wish to have his ashes scattered on Bali after a Buddhist ceremony. On the other hand, Prince died intestate, with drama ensuing over his £300m estate as various people claimed to be his blood relatives.

Although more famous faces will stay the course this year, January 2017 is still a good month to reflect on our own mortality and get our estates in order – even if they aren’t of A-list proportions.

Here at Finance North Estate Planning Services we are here to help you write your Will and we offer all our clients a red carpet service, so give us a call now on 0161 771 2056 or complete the enquiry form below.

Finance North Estate Planning Services
0161 771 2056

The Pitfall of Gifting Assets

It’s no secret that there is a care crisis in the UK.

In order to deliver social care, the Government is being forced to consider increasing council tax to help cover the costs. However, the cost facing the individual, should they require care, could be very high too.

If you have savings and assets worth more than £23,250 in England and Northern Ireland (rising to £24,000 in Wales or £26,250 in Scotland), or a weekly income high enough to cover care fees, then you will not be eligible for local authority funding. In other words, you’ll have to pay for your own care.

In order to reduce their care liabilities, older people may therefore look to giving away their assets to loved ones. However, where gifting is concerned, there are strict rules which must be followed.

  • Deliberate deprivation

It’s not easy to hide the fact that you may have tried to give your property away to your children or grandchildren. Local authorities will carry out a financial assessment, looking not only at your current assets, but also those that you have previously owned.

If they believe you have given away assets intentionally, in order to qualify for funding from the local authority, they may find that you have indulged in ‘deliberate deprivation’. This may include selling assets for less than their true value, as well as giving them away.

  • What makes it deliberate?

To determine whether the disposal of assets was deliberate, the local authority will look at a number of things. These include:
– What your apparent motive was,
– The timing of the gift (i.e. the time between you realising you need care and when       you disposed of the asset),
– The amount of assets involved.

For example, they are less likely to investigate you if you give away £500 than if you are handing over £50,000.

If it is found that you have deliberately deprived yourself of those assets, even if you no longer own them, their value may be considered in the financial assessment. If the local authority does fund someone’s care costs, and later discover that the individual deliberately deprived themselves of assets, they can pursue that asset transferee in order to recover some of those care costs.

It’s not just during your life that you need to carefully plan how to hand your assets over to your loved ones. It is also vital to put together a plan for what happens after you die. This means ensuring you have a professional will in place. With important issues such as these, it pays to work with those who really know what they are doing. We can help.

For more information with protecting your assets during your lifetime and after your death call Finance North Estate Planning Services on 0161 771 2056, or enter your details in the enquiry form below.

Finance North Estate Planning Services
0161 771 2056

Excess Winter Deaths

Unsurprisingly, during the cold, winter months there is a noticeable increase in deaths compared to during the summer months. The Office for National Statistics refers to these as ‘excess winter deaths’.

In 2015/16, the number of excess winter deaths halved compared to the year before, at 24,300. That’s primarily because last year’s figure sharply increased on usual winter deaths as a result of a particularly ineffective flu vaccine. Because that vaccine didn’t combat flu properly, a larger number of elderly people passed away during the winter months.

As a result, it’s easy to think excess winter deaths is only an issue for the very old. But according to the ONS, in 2015/16 there were similar mortality rates across all age groups. The mortality rate among those over the age of 85 actually fell, as that is the age group most at risk from flu. Deaths go up for all age groups during winter, and it isn’t simply down to the very old dying because of a strong flu.

It’s not a pleasant thing to think about, but these figures should remind us all that death is sadly inevitable. As a result, it’s absolutely crucial that you begin thinking about what will happen after you die. What plans do you have in place to continue to support your family? What do you want to happen to your assets? Are there particular charities or organisations that you would like to support after death?

If you don’t have a will in place, the process of dealing with your estate becomes much more stressful for your loved ones, and there is no guarantee that your assets will be divided as you’d like. Speak to Finance North Estate Planning Services today to find out more information.

Give us a call on 0161 771 2056 or complete to enquiry form below.