Wills and estate planning

Making a Will that's right for you

Give your holiday home to the children and save IHT?

Many parents pass their holiday home on to the children as they get older, either directly or via a Trust. This can be a good long term Inheritance Tax (IHT) planning ploy, but has serious “gift with reservation” risks to be managed if the parents want to carry on using it. There can be Capital Gains Tax (CGT) problems as well.

The overall tax position can be even more complex where the property is also offered as a Furnished Holiday Let, although on the whole this will make the IHT planning safer. This requires keeping accurate accounts and care with your tax returns.

Keeping your affairs in order. Have you left adequate instructions for your Executors?

Even if you do review your Will regularly, have you worked out a way of leaving adequate instructions for your Executors, particularly if they are not immediate family but friends or professionals? If not we suggest you should, as the cost of sorting things out could be significantly increased. Why not contact us for guidance?

While your heirs may not have the same taste in music as you, inability to access records kept on computer can be a problem.

Inheritance tax relief on gifts to charity

With effect from April 2012 there will be a new Inheritance Tax (IHT) relief to encourage gifts to charity. The proposal, introduced by the 2011 budget, is intended to reduce the rate of IHT payable on estates from 40% to 36% if 10% of the taxable estate passes to charity. The relief will only apply on death – not on lifetime gifts.

Charities who are seeking to attract legacies should be alerting donors to the new rules now, in the hope of boosting philanthropy, as is the intention, without greatly reducing the family’s inheritance.

Protecting Personal Data

The DPA provides that certain conditions must be met before personal can be held, used or disclosed, or dealt with in any way.  The easiest and safest way to meet these conditions is to obtain consent.  But consent must be “freely given, specific and informed”, and it cannot be inferred from a failure to respond to a general communication.  In some cases the consent must be expressly given, eg in relation to sensitive personal data or transfer to a non-EEA country.  In any event the consequences of not consenting have always to be clear.

Next of Kin & Human Rights

The phrase ‘next of kin’ crops up in daily life in two contexts. One is medical – hospitals want to know (I suppose in case they kill you) - and the other legal, when identifying your heirs and successors if you do die under the knife, or from neglect in a busy hospital ward. So what does the phrase mean and what is the difference (if any) in these medical and legal contexts?

Less obviously, what might your human rights as a European have to do with it?

CGT on Chattels & Wasting Assets

People often worry about paying CGT on gains above the annual allowance (£10,600) on the sale or gift of investments, and second homes or buy to let property. Bigger gains can be “held over” when assets are transferred into a discretionary Trust, but that has become less attractive with gifts into Trust bearing Inheritance Tax at 20% over the £325,000 nil rate band threshold.

What are not so well known are the CGT exemptions for “alternative investments” such as  “chattels” and “wasting assets” as long as you are not trading in them.

Cheap life cover - the cost of delay?

Thanks to EU edicts to eliminate “discrimination” by “gender neutralising”, the cost of life insurance is likely to increase significantly from 31 December 2012. Insurers will not be able to set differential premiums for men and women, based on life expectancy and health, as they have done for hundreds of years. This may increase the cost of protection cover for women in particular, while for men the cost of income protection may also increase.

Contributing to Grandchildren’s Education

Older clients often want to talk about helping with the cost of grandchildren’s education, and the question may be raised – what about setting up a Trust?

An “Accumulation and Maintenance” (A&M) Trust was a conventional answer up to about 5 years ago, for those who had the funds, but changes to the taxation of trusts over the past few years have reduced their attractions. However, there are alternatives such as a “Bare Trust”.


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