Don’t Make Inheritance Tax Taxing

Whenever Brits are polled on their most hated tax, without fail, one tax in particular always finishes top – inheritance tax. As a nation, we want to leave as much as we can after death to our loved ones and the thought of the taxman taking a slice evidently annoys us.

However, for there are plenty of simple and efficient ways to reduce your inheritance tax liability and ensure that you leave as much as possible to your loved ones.

  • Making a Will

It’s a simple fact that failing to write a Will generally means you will end up paying more inheritance tax. Without a Will in place, your estate will be doled out according to the rules of intestacy, and chances are the taxman will help himself to a healthy chunk of it.

One simple way to reduce your inheritance tax via your Will is to leave some to charity, as these gifts are free of tax.

  • Understand the thresholds

Inheritance tax is charged on estates once they pass £325,000 in value, at a rate of 40% on everything above that value. However, couples are able to pass their allowance over in full to their partner – in other words, couples have a £650,000 allowance overall. If their combined estate ends up being worth less than that, there will be no tax to pay.

There is also a new additional element to bear in mind here. The ‘main residence’ allowance allows you to pass on your family home to a direct descendent, with an additional tax-free allowance included. For this year it stands at £100,000 and will increase each year until 2020/21 when it hits £175,000. As this allowance applies per person, it will mean a total tax-free allowance of £1 million for couples.

  • Gifts

Even if you give something away, the taxman will still class it as being part of your estate if you die within seven years of making the gift. It’s a way of preventing people from handing over their home on their deathbed and avoiding the duty. Live longer than seven years and there’s no tax to pay.

However, there are certain gift allowances anyway which are free of tax. Everyone has a £3,000 limit each year, and what’s more this limit carries over to the following year if you don’t use it, to a maximum of £6,000.

On top of that you can give away £250 to each of any number of people every year, while further allowances are in place for wedding gifts to family members, friends and even political parties.

  •  Write your life insurance policy in Trust

Lastly, it’s a good idea to write your life insurance policy in Trust, as this essentially separates it from the rest of your estate.

Usually your life insurance payout will be added to the value of your estate before it is paid out to your loved ones, meaning they have to wait a while in order to receive anything and then may have to pay tax on that payout too.

But writing it in Trust means it is viewed as being outside of your estate, ensuring that your loved ones get every penny and likely get the money quicker to boot.

For expert advice on inheritance tax, contact us today on 0161 771 2056 or email help@FinanceNorthEPS.co.uk.


To find out more please contact us below

Finance North Estate Planning Services
Cheshire Office – 0161 771 2056
Staffordshire Office 01782 963 303

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What Is Business Property Relief?

Inheritance tax is often named as one of the UK’s most hated taxes. While there are a number of ways to reduce your eventual tax bill, many people are unaware of business property relief.

Business property relief allows relief from inheritance tax at a rate of 50% or 100% on certain business assets.

You can get 100% business relief on a business or interest in a business, while 50% relief is available on:

  • shares controlling more than 50% of the voting rights in a listed company;
  • land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled;
  • land, buildings or machinery used in the business and held in a Trust that it has the right to benefit from.

It’s important to remember that you can only get this relief if the person who has died owned the business or asset for at least two years before they passed away. You also can’t claim business relief if the asset is not needed for future use in the business.

What’s more, business assets can actually be given away while the owner is still alive and qualify for business relief. However, certain criteria needs to be met – for example, the recipient must keep them as a going concern until the death of the donor.

Clearly, timing is extremely important when it comes to business property relief, so plans should ensure it’s available at the relevant time.

Business property relief can make a huge difference to the eventual inheritance tax bill of your loved ones and can also help with succession planning. But it requires careful planning in order to ensure it is available when you need it. Dictating exactly what happens to your assets after you die is incredibly important, whether you own a business or not, and a Will is the best way to do that. It is a terrific way to reduce the uncertainty and upset your loved ones face after you pass away.”

If you own a business or are interested in becoming a business owner, and would like advice on how to include this within your Will, talk to Finance North Estate Planning Services today on 0161 771 2056 or email help@FinanceNorthEPS.co.uk.

Finance North Estate Planning Services
Cheshire Office – 0161 771 2056
Staffordshire Office 01782 963 303

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The burden of being an Executor

An Executor is the person you choose to carry out your wishes as stated in your Will. Executors can be beneficiaries under your Will and often people choose their spouse, partner and or children as Executors. Please check with your proposed Executors that they are willing to take on this role before naming them. as it can involve considerable responsibility.

  • Being an Executor is a difficult and time consuming job.
  • The role carries personal legal liability.
  • Relatives may be too distressed to perform the role.
  • Decisions could make them unpopular with beneficiaries.

Consider naming more than one Executor in case one dies before you. Also, it will be an easier task if there is more than one person so they may share the task and responsibility.

If the Estate is large or complicated there may be advantages in appointing a Professional Executor such as Solicitors, Accountants etc, but be warned they can charge between 3% and 5% of the value of the estate, and sometimes an hourly rate in addition to this.

For our clients when making a Will if they choose to appoint ourselves as Executors we only charge 1.5% of the estate and VAT, and disbursements.

You should take into account the following:

  • Availability & suitability
  • Willingness to act
  • Any possibility of conflict or dispute
  • The possibility of them predeceasing you
  • The size, nature and location of the estate, the assets and the beneficiaries
  • The costs involved

Where professionals are chosen as Executors they may be appointed as individually named persons or as a firm. Executors like Trustees, are in a fiduciary relationship so they cannot make a profit out of their office. They may only claim out of pocket expenses. Therefore, a charging clause must be included authorising them to charge for all work done by the Executors of their firm in administering the estate.

There is no legal objection to a beneficiary being appointed as an Executor where he or she is the sole beneficiary.

Understanding the role of an Executor:

An Executor has to carry out certain tasks and duties in order to legally fulfil the obligations of the task. As an Executor, you should therefore:

  • Obtain a copy of the medical certificate indicating cause of death.
  • Register the death at the Local Registry of Births Deaths and Marriages. The death must be registered in order to obtain the Death Certificate. NB. it is advisable to get more than one copy as it will be needed when dealing with Insurance Companies, Pension Providers, Banks etc.
  • Ensure any last wishes such as organ donations are carried out. The job might also include planning for the Funeral or Cremation and arranging for payments for the services provided.
  • Make sure you have the last original will of the deceased, hopefully the Testator should have notified you as to the location of the Will.
  • Locate all the heirs, this might seem like an easy task and if there are just a couple of children and they are the only ones named in the Will, it maybe be easy. If there are numerous heirs and they are named in the Will either collectively or individually, the Executor must locate each everyone.
  • Make an exhaustive list of all the assets of the estate, from personal possessions, property, bank accounts, investments, Premium Bonds etc. all debts including credit cards, utility bills, loans etc, they must all be accounted for.
  • Open a separate estate bank account into which all money collected can be paid into. This will prevent estate monies being confused with personal finances.
  • Notify all businesses of the death e.g. Utility companies, Credit Card companies, Banks, Council Tax Offices, Social Security etc.
  • Make sure all the deceased’s debts are settled before the estate is distributed to the beneficiaries.
  • If there are minor or dependent children, the Executor could be responsible for arranging for their care and placement. The deceased might have their wishes stated in the Will. but if not, the Courts may need to be involved in the placement. If there are pets, the Executor will need to care for them and make arrangements for their continued care.
  • Pay any Inheritance Tax necessary.
  • Calculate and declare the value of the estate to HMRC on an Inheritance Tax return, within 12 months of the death.
  • Pay the deceased’s Tax. PLEASE NOTE, this is your personal responsibility. Failure to submit an accurate account to HMRC may leave you open to personal liability or penalties.
  • Complete the relevant forms and submit them to the Local Probate Registry to obtain the Grant of Probate.
  • Distribute the contents of the Will, making sure that if anything is to be left to minors a Trustee has been named.
  • After you have completed all of your tasks, you the administrator need to produce a full set of accounts for the beneficiaries showing the estate assets and liabilities, administration income and expenses and how the estate has been distributed.

A key consideration for you will be the extent to which you wish to involve professionals to help and support you in this role.

If you are considering asking someone to serve as the Executor of your estate, be sure you understand the duties and responsibilities of being an Executor.

Remember being an Executor of an estate is not really an honour, it’s difficult, and time consuming and carries personal legal liability.

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How wealthy families keep their wealth.

David Cameron’s father’s will makes interesting reading.

He left a fortune of £2,740,000 from which the ex-Prime Minister received the sum of £300,000, but what is interesting is that:-

  • He appointed his children as Executors and Trustees.
  • He and his wife owned their home as Tenants in Common rather than joint owners.
  • His half of the home went into Trust rather than directly to his widow.

 

Cameron Will

 

Trusts have been instrumental in mitigating tax since the Medieval times. Trusts were initially created for the Nobility and wealthy landowners to avoid paying taxes to the Crown. Nowadays, you don’t have to be a Nobleman, or a wealthy landowner to want to take advantage of the many tax strategies Trusts can provide.

The use of Trusts ensures that assets are protected from attack from the following.

  • Care Fees
  • Divorce / Separation
  • Creditors / Bankruptcy
  • Inheritance Tax
  • Generational Inheritance Tax

We have advised many clients from all walks of life in protecting their homes and other assets, so that their children and grandchildren can maximise their inheritance, and we have now launched a fixed price package to specifically tackle the above problems at an affordable price for all home owners and from all walks of life.

Firstly you will receive a free no obligation home visit from one of our trained consultants which usually takes about 1hr where you can ask any questions and discuss the matter in more detail.

Once you have decided to proceed we will take all the necessary instructions and then commence constructing a Will each, a Flexible Family Trust each with Memorandum of Wishes and also a Deed of Severance. Within approximately 2 weeks your consultant will return with all the documents for signing.

 

PPT

On first death, the deceased’s share of the property is passed into their Flexible Family Trust via the Will. The surviving Spouse or Partner continues to live in the property and is still able to move home if they choose to do so. In the event that the survivor enters care, the survivor only owns half a share of the family home.

The beneficiaries have access to the Trust Funds but we ensure that these assets do not enter their estates and so are protected from attack by the following:

  • Marriage after Death – Placing half of the family home and other assets into a Trust on first death ensures that, should the surviving spouse or partner marry in the future, those assets cannot be taken into the marriage and removes the threat of your children being disinherited.
  • Divorce – Placing your assets into a trust ensures if your children or chosen beneficiaries are subject to a divorce then what you intended them to receive is protected from any divorce settlements.
  • Creditors – Similarly if any of your beneficiaries are subject to Creditor claims or bankruptcy then their inheritance would not be exposed to these claims.
  • Care Costs – The trust ensures that they do not add onto the beneficiaries own estates and so cannot be assessed for their care costs.
  • Further or Generational IHT – Holding the assets in the trust ensures that they do not add to the beneficiaries estates and impact on their own Inheritance Tax.

For more information, please call 0161 771 2056 or simply complete the form below
and one of our consultants will gladly answer any questions you may have.

Finance North
Estate Planning Services
Offices in Cheshire and Staffordshire

www.FinanceNorthEPS.co.uk

 

 

 

How Can Trusts Help With Inheritance Tax Burdens?

There are few taxes more unpopular than inheritance tax. A poll by the financial website, loveMONEY last year found that an incredible 90% of Brits believe it is unfair.

However, there are a number of perfectly legitimate ways to reduce the amount of tax your estate will have to pay. One of those is making use of a Trust.

What is a Trust?

A Trust is a legal arrangement where your assets – such as property, cash or investments – are given to trustees, who will oversee them for the benefit of a third person. For example, you might want to put some savings into a Trust which your children can then benefit from at a later date.

When you place items into a Trust, they technically no longer belong to you. As a result, when it comes to working out the inheritance tax due on your estate, they aren’t included.

Instead, the assets belong to the Trust. The trustees are charged with managing those assets in the interest of the beneficiaries you have named, until some time when those beneficiaries can take control.

The many different types of Trust

Trusts come in a variety of different forms, which will suit different circumstances.

The simplest form is a Bare Trust – this basically hands over ownership of the assets to the beneficiary immediately, so long as they are over the age of 18.

Alternatively, there is an Interest in Possession Trust. This gives the beneficiary income from the assets held within the Trust, but they don’t have a right to the assets generating that income. An example of this is that you might put shares in this form of Trust which would pay an income to your partner, but your children would get ownership of the shares themselves once your partner died.

Then there is the Discretionary Trust, which is where the trustees have responsibility for deciding how the assets within the Trust are distributed. You could therefore leave assets in the Trust for your grandchildren, with your children named as the trustees. They could then determine who gets what at a later date.

Dividing your assets

Trusts are a useful way to take control of passing on your assets to your loved ones and can serve as a complement to a comprehensive Will. Without a Will in place, you have no say on who will get your assets and could put your loved ones through further heartache after your passing.

To discuss your Will and estate planning needs today, speak to Finance North Estate Planning Services 0161 771 2056.

Finance North Estate Planning Services
Offices in Cheshire & Staffordshire

The Cost Of Dying Is Increasing

The Government is introducing a new fee structure that will affect the cost of accessing an estate when someone dies.

Fees for Applications for Grant of Probate or Letters of Administration (for when someone dies intestate) will be changing and could eventually impact you and your family when you’re no longer around.

The new fees will take effect from May 2017. At the moment, the fees are set at either £155 if probate is applied for by a Solicitor or £215 if it is applied for by friends or family. There are no fees if the value of the estate is less than £5,000.

The first change is that estates below £50,000 will no longer have to pay any probate fee. This significantly increases the number of estates exempt from the fees. Unfortunately, everyone one else will see an increase, with those with the largest estates seeing fees of up to £20,000.

The fees are tiered depending on the value of the estate:

  • £50k – £300k = £300 fee
  • £300k – £500k = £1,000 fee
  • £500k – £1M = £4,000 fee
  • £1M – £1.6M = £8,000 fee
  • £1.6M – £2M = £12,000 fee
  • Above £2M = £20,000 fee

These fees are in addition to inheritance tax (IHT).

When somebody dies, the executors must apply for a Grant of Probate from the probate registry. This needs to be done to allow them to administer the estate according to the terms of the Will. These fees need to be paid up front. It may be difficult if the executor is not able to release cash from the deceased’s bank account and/or the executor is on a low wage or benefits.

Previously they may have been able to apply to get help with the fees. However, the Government is also removing probate applications from the general fees remissions scheme and financial help will no longer be available.

There are things to consider which may reduce the amount of probate needing to be paid. In particular, married couples or those in a civil partnership should consider the nature of any property ownership agreements they hold.

Another way to reduce the cost of probate is to consider setting up a Trust. This may lower the value of the estate (from a probate point of view) and drop it from a higher tier rate to a lower one.

Trust law is complex. You will need advice from a specialist to ensure you are setting one up in the most tax efficient way, so that it doesn’t end up costing you more than you hope to save.

For advice on this or any aspect of Estate Planning or Will Writing, please call Finance North Estate Planning Services on 0161 771 2056, or complete the enquiry form below for more information.

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.”