Wills and estate planning

Making a Will that's right for you

Basic Inheritance Tax Planning

What is Inheritance Tax (IHT)?

IHT is basically a “wealth tax” and has been around in one form or another since 1894 when Estate Duty was introduced. From 1975 to 1986 it was known as Capital Transfer Tax. IHT is charged during your lifetime or upon death at either the death rate (40%) or the lifetime rate (20%). Each individual has an allowance to IHT known as the “nil rate band” or NRB, which has been frozen at £325,000. This means that the first £325,000 of net assets within your estate is assessed to IHT at 0%.

Wills challenged due to ‘want of knowledge and approval’; a growing trend?

Two recent cases indicate a trend towards the Courts finding it difficult to declare a Will invalid due to the deceased lacking testamentary capacity but declaring them invalid under another ground of ‘want of knowledge and approval.’

The three limb test for testamentary capacity is set down in Banks-v- Goodfellow; the testator must

The conflict between lifetime gifts and gifts in Wills, the latest

There is a presumed intention where parents, for example, leave a child a share or sum by Will and then make a significant lifetime gift of a sum to that child. The Court presumes that a parent would not intend to benefit one child twice to the detriment of the other(s). The lifetime gift is regarded as a payment on account of the sum or share in the Will with the result that the legacy reduces to the extent of the lifetime gift.

In order for the presumption to be relied upon, the lifetime gift must be such as ‘to establish the child in life’ or make ‘provision’ for them.

A new Bill for estates without Wills, but the sure-fire solution is an effective Will

The Government has issued a draft Inheritance and Trustees' Powers Bill which will abolish the spouse's life interest trust that is automatically established on a death in intestacy (where there’s no Will or the Will falls short and does not deal with all the assets in the estate) under the existing laws of England and Wales.

Maximising income on let property

If you own a let property jointly with your spouse or registered civil partner, you should assess whether the proportion of income declared in your tax returns could be altered to maximise your respective marginal rates for income tax.

If this is the case then you should, with advice, agree the terms of a declaration of property trust which records the revised interests in the equity in the property and complete and send form 17 to HMRC which will acknowledge that the proportion of the net income arising follows the proportion of the equity declared.

Keeping HMRC Out of Your Wine Cellar

Many people dabble in buying fine wines, usually for personal use in years to come, or perhaps “laying down” for their children or god children. But sometimes they may over - estimate the ability of themselves, family and friends to glug their way through all the bottles in the cellar. If so, they may then sell a few cases, hoping to make a profit and fund the purchase of a few more cases for drinking even further into the future.


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