Docklands Solicitor

- A question we are asked on a daily basis, as the Government (through HMRC) has been very active over the last few years in finding ways of clamping down on any way people can avoid paying tax. In practical terms ‘tax-avoidance’ is legal, whereas ‘tax-evasion’ is not!


General ‘lifetime gifts’ which are free from Inheritance Tax (IHT) liability are:

- Gifts to spouses / Civil Partners

- Wedding gifts of up to £5000 to each of your children/step children/adopted children or their fiancé

- Wedding gifts of up to 2,500 to each grandchild or their fiancé and £1000 wedding gifts to anyone else.

- Maintenance payments by court order

- Other gifts of up to a maximum of £3000 each tax year, and any unused balance from the previous tax

year

- As many small gifts of up to £250 to other people per tax year

- Gifts to: Charities, Housing Associations, Political parties, Museums, Universities, and The National Trust.

Reduced rates of IHT are payable for gifts made within seven years of death that are above the Nil Rate Band of £325k, as follows:

- 0-3 years - no reduction

- 3-4 years - 20 per cent reduction

- 4-5 years - 40 per cent reduction

- 5-6 years - 60 per cent reduction

- 6-7 years - 80 per cent reduction

- over 7 years - no tax paid

Rachael Rodgers (Will writing and Estate Planning) Tel: 07841 868 828

Labels: charities, civil partners, lifetime gifts, spouses, tax avoidance, tax evasion

- As a rule of thumb, on death every individual has a ‘Nil Rate Band’ (NRB) of £325k they can leave free of Inheritance Tax (IHT) to a ‘taxable’ beneficiary - which in general terms is anybody other than a spouse/civil partner, charity or political party(!).


- Anything gifted to taxable beneficiaries over this NRB is liable to IHT at 40%

- Since October 2007 any transfers to spouses or civil partners are free of IHT on 1st death, and the surviving spouse can add the proportion of unused NRB of the 1st to die to their own NRB on 2nd death, so that a maximum of £650k can be left on the survivors death to taxable beneficiaries.

- However, it is not quite so simple as that - well it wouldn’t be with the government involved would it? To enable HMRC to rake back rather more in tax, they look back at any ‘lifetime gifts’ the deceased had made in the 7 years prior to their death and under certain circumstances these gifts, made up to 7 years previously, will be deducted from the deceased’s available £325k NRB at the time of death.

- eg - If Mr Smith had given his son £100k (~30% of his NRB) six years before he died, he would only have £225k of his NRB left to gift after his death. If he then left his entire estate to Mrs Smith, on her death she would have her own NRB + the unused 70% or her husband’s NRB to leave free of IHT.

- These lifetime gifts are known as ‘PET’s’ or ‘Potentially Exempt Transfers’, and the ‘7 year rule’ should be an important consideration for people with substantial assets looking at long term tax planning. If you have sufficient free assets you can basically gift up to £325k at 7 yearly intervals and after that time has elapsed, the gifts will no longer be considered in your estate for IHT purposes.

- If you are considering making such provisions you should always take professional advice from a taxation specialist such as an accountant or a specialist financial advisor dealing with tax planning, to ensure you are maximising the tax planning opportunities without potentially getting yourself into trouble with the tax man!

- For people without the need for such lifetime tax planning, there are ways of protecting your estate from IHT within your Will, particularly important for unmarried couples where there is no tax-exempt spousal transfer, and unless it is protected on 1st death, there will only be one NRB available to pass on 2nd death.

Rahcael Rodgers (Will Writing and Estate Planning) Tel: 07841 868 828

Labels: civil partner, inheritance tax, lifetime gifts, spouse

- Anybody who is ‘dependent’ on you at the time of your death, has a right to be provided ‘reasonable financial provision’ from your estate under the ‘Inheritance (Provision for Family & Dependents) Act 1975’ - IPFDA - if there is no Will, or the Will fails to adequately provide for them, with the Court using similar principles to those used by a divorce court.

- Dependents can include the deceased’s spouse, ex-spouse, co-habitants living together in a relationship other than a marriage or civil partnership, children, persons treated as children of the family and those financially dependent on the deceased - but excludes friends and close family who share a property.

- The ‘dependence’ has to either be literal dependence or dependence in the circumstances of that relationship for a particular standard of living.

- There are currently around 2 million co-habiting couples in the UK, and the widely held belief of a ‘common law marriage’ does not actually exist in law, but often results in people incorrectly believing their property will go to their partner on death. Such cohabitants are often forced into making a claim on their deceased partner’s estate, as, if there was no Will they would otherwise not inherit at all under Rules of Intestacy.

- The current qualifying cohabitation period after which a surviving partner can make a claim under the IPFDA is 2 years, and unlike a spousal claim, a cohabitee has to demonstrate that provision is necessary for his or her maintenance.

- It is important to remember that although you are entitled to leave your estate to whoever you wish, you must take into account potential claims that could be made by family members who are excluded or only left ‘token’ gifts when more was expected or even promised to them. Resolving such disputes can be a lengthy process – and incur significant costs!

Labels: children, cohabitee, dependant, Estate, ex-spouse, spouse

- If the answer is ‘NO!’ then you need to consider how you own your assets, and the available estate planning options to help you preserve them for your children, or your side of the family.

- If you own your property with your spouse as ‘Beneficial Joint Tenants’, effectively you both own 100% of the property, which means that on 1st death the surviving joint tenant will inherit by ‘survivorship’ and the property cannot be passed to anybody else, no matter what your Will says.

- So if the survivor then remarries, and again owns the property as joint tenant with their new spouse, if the survivor predeceases them, the new spouse will take the whole property, and your own children would receive no part of it after the death of both their parents.

- How can you avoid this situation? The first step is to sever the ‘Joint Tenancy’ to ‘Tenants in Common’ so that you both own 50% of the property, and can then each leave your 50% via your Will. The next step is to include a Trust in each Will, to appoint your children as ultimate beneficiaries, but providing a ‘life tenancy’ or ‘right to reside’ (eg until they remarry) for the surviving spouse, so they can continue to live in the property, but cannot pass your share onto your replacement!

- There are many areas of flexibility that can be built into such Trusts, and professional advice should always be sought from a Solicitor or Will writer specialising in Estate Planning.

Labels: beneficiaries, estate, joint tenancy, Survivor, tenants in common

In almost all commercial leases there is a clause known as Jervis v Harris clause which gives the landlord the right to enter and inspect the property and where the tenant is in breach to carry out repairs. This clause enables the landlord to recover its costs from the tenants as a debt, rather than damages. This is important because section 18 Landlord and Tenant Act 1927 (LTA 1927) restricts the amount a landlord can recover in damages for disrepair but this does not apply to costs incurred under a Jervis v Harris clause.

Labels: entry, Harris, inspect, Jervis, landlord, repair, right

- Many Will writers would have you believe the slightest change in your circumstances should result in a re-write - this is not strictly necessary, but certainly after any major change you should review whether your existing Will is going to do what you need it to, and it is best practice to review its provisions every 3-5 years in any case, as it may be changes in the law that governs inheritance which impacts on what your Will is or is not going to do.

- Major changes include: marriage or remarriage, as if you become a ‘different legal entity’ to when you wrote your existing Will, it will be invalid.

- Should you separate from your spouse/civil partner, the first thing you should do after moving out or changing the locks is to update your Will, as if you die before your divorce is finalised your soon-to-be-ex will still be entitled to inherit a large part of your estate, which is probably not what you would want!

- If you have children since last writing your Will, you will need to update it to appoint guardians and make changes to the distribution of your estate, and once your children reach over 18 you may wish to include them as Executors – make them earn their inheritance!

- If you divorce, or if anybody appointed within your Will predeceases you, you should update it to replace those appointees and ensure those parts of your Will do not fail, and become invalid. - Professionally drafted Wills should include ‘substitution’ clauses to allow for eg the children of beneficiaries to inherit in their place to make the Will more flexible.

- For peace of mind take advantage of our Free Will Audit service to ensure yours is actually going to do what you think will and need it to.

Labels: children, divorce, review, separation, update, Will

- Many charities could not survive without the legacies and gifts left to them through Wills of people who have decided to leave them something after they have died – afterall, many people have no family they wish to leave assets to, or their potential beneficiaries may not need their money; as if they are wealthy in their own right it would only add to their own inheritance tax liability.

- Just like any other beneficiary, Charities can be fiercely determined to ensure they get every penny available to them, and they have very well developed legal departments to ensure this happens! As a result we often hear of family members who have been appointed as Executors being ‘harassed’ by these charity representatives who ‘want their money and want it now’. The charities afterall are not the ones who have just lost a loved one, and this unwanted extra pressure comes at an already very stressful time. If you find yourself in this situation it is best to employ the services of a Professional Executor, such as a Solicitor, to keep the circling sharks at bay.

- In addition it is always advisable to take professional estate planning advice when making your Will if your estate comes to over the ‘Nil Rate Band’ (NRB) which is the amount of money (currently £325k per person) which you can leave free of Inheritance Tax (IHT) to a ‘taxable beneficiary’ - being anybody other than your spouse/civil partner, the government(!) or a registered charity.

- This means that, if your estate is worth over £325k, anything over this NRB will be taxed for IHT at 40%, if you are leaving it to taxable beneficiaries.

- Charity gifts are free of tax, so if you are leaving your estate to eg your 2 children and a charity in equal shares, the charity’s share is tax free, and any tax payable will be borne by your children’s shares!

- But it’s not all bad - you can use gifts to charity in your Will to bring your estate down below the NRB so that anything you then leave to your children would be totally free of IHT!

Labels: beneficiaries, charities, gifts, IHT, tax, Wills

Where a negligent act has damaged or destroyed an item, the damages claim should be for the replacement cost of the item, even though the claimant will end up with a brand-new item rather than one that may be several years old and had several years use



The defendant will not be allowed to raise the argument that the claimant is getting something "new for old" and that therefore there should be some percentage discount



This does not apply where there is a ready market for second-hand goods e.g. cars where it is very easy to go out and buy an older model vehicle with similar mileage

Labels: betterment damages negligence

- A question we are asked on a regular basis. There are several very important considerations to take into account when leaving assets to a disabled beneficiary.

- First of all, one of the most important things you need to know if you have any beneficiary who is in receipt of means tested state benefits, is that if they receive an inheritance outright that brings their own savings to over £23,500, they will lose their state benefits and the support structure that goes with them. The simple way of ensuring this does not happen, is to leave their inheritance to them through the use of a Trust in your Will, for which you need to speak to an estate planning specialist.

- Any beneficiary who may be unable to manage their own money - maybe through disability, or as a result of drug or alcohol or gambling addiction - can also be provided for by the use of a Trust in your Will, to protect your assets for their benefit.

- Likewise, if any of your beneficiaries is in an ‘unsteady’ marriage (or you simply do not want their spouse to get their hands on their money!) or is, has been or is liable to become bankrupt, again the use of a Will Trust will protect their inheritance from their creditors.

Labels: assets, beneficiary, disabled, Will Trust

Internet sellers should consider very carefully which country's law should apply to their transactions and make sure that a choice of law clause appears in binding terms and conditions of sale. Otherwise, if there is a dispute with one of their purchases, much time money and effort can be spent in arguing about which laws apply

Labels: cross-border Internet sales choice law country

- Many people with children under the age of 18 years think they are ‘too young’ to need to make a Will, but what they do not realise is that the God-parents they appointed when Christening their children actually have no legal rights to act, and worse still, if you do not officially appoint ‘Guardians’ for your minor children - one of the main reasons for making a Will - your children will become ‘Wards of the State’ on your death, and the Courts (or Social Services in the first instance!) will decide where they live!

- Guardianship issues cause many a family break up after the parents’ death, as if you do not make your intentions clear, there are likely to be 2 sets of grandparents fighting over them, or siblings from both sides of the family, and the ‘winner’ may well cut off access to the ‘losers’ which would be further tragedy for your children, having just lost their parents.

- It is always best to appoint ‘Primary’ and ‘Secondary’ guardians rather than joint guardians - the idea is that the children will go and live with the guardians and they can’t live in 2 different places.

- The appointment of Secondary guardians ensures that, should the situation arise that the primary guardians when needed are unable or unwilling to act, there is a replacement to take over.

- Appointing Guardians is a very hard decision for any parent. We never like to think of predeceasing our children when they are still very young, but surely you would rather make the decision as to who they should live, rather with than leaving it to the Government to decide!

Labels: children, god-parents, guardians, Will