If you die without making a Will your estate will not necessarily pass on to whom you want.
If you die without making a Will your estate will not necessarily pass on to whom you want.
Wills are not just for passing on your estate. They can be used for Inheritance Tax planning, appointing Guardians for children, passing on businesses, protecting assets from care costs etc.
Steps can be taken to protect assets from being sold to pay for long term care fees.
If you have mental incapacity no one (including spouses and close family) has automatic rights to take over your affairs.
If you are a owner of a business will it continue after your death?
How do you reduce the impact of inheritance tax?
Do you and your family know where your Wills are kept?
Do you need help in administering an estate?
Usha Chudasama is launching her book, "Your Happy Child, 10 Proven Steps To Raising A Happy Child" and I am priviledred to sponsor the event. I would love for you to come and support the message of helping parents to raise confident and happy children and prevent mental health issues from occurring in the future. You can get your ticket here: tinyurl.com/YHCBookLaunch.:
The Ministry of Justice has announced a new (vastly more expensive) scale of fees, effective some time in May 2017, to be paid on application for probate as follows:
Value of Estate for Probate (£s)
Current cost (£)
(application by a non- solicitor)
|New Cost (£)|
5,001 - 50,000
50,000 - £300,000
300,001 - 500,000
500,001 - 1,000,000
1,000,001 - 1,600,000
1,600,001 - 2,000,000
As with Inheritance Tax, these fees have to be paid with or before the application for probate. The new fee structure may cause financial hardship for those applying for probate. It will become more important to make some form of estate planning in the future to mittigate the new fees. This may involve giving away assets during your lifetime or, instead of leaving some or all of your estate direct to family, leaving it in trust for their benefit (so what you leave in trust does not form part of their probate estate).
The Supreme Court has found in favour of the charities and has reinstated the original (2007) trial judge's award of £50,000 to the daughter.
This is an important decision as it clarifies that adult, independent children do not have an implicit right to inherit their parents' estates and that people with assets in England and Wales still have freedom to leave them to whoever they want to (but still subject to the provisions of the Inheritance (Provison for Family and Dependants) Act 1975).
I am pleased to announce that I have been elected a Fellow of the Institute of Paralegals.
In this case, heard in the Court of Appeal in July, a daughter who had been left out of her mother's Will was awarded about a third of her mother's estate by the Court.
The background is that the daughter, Mrs Ilott, when quite young, went off with a man deemed to be unsuitable by her mother, Mrs Jackson. Mrs Jackson wanted nothing more to do with her daughter after this and there was very little, if any, contact between them. When Mrs Jackson died about 26 years later she left the whole of her estate (worth about £486,000) to charities, having taken all the right precautions in advising her solicitor about her feelings towards her daugfhter, with her Will being drafted correctly.
Mrs Ilott then claimed a share of her mother's estate under the Inheritance (Provison for Family and Dependants) Act 1975. Under this Act it is a requirement to make reasonabe financial provison for certain categories of people, bearing in mind their own financial circumstances. In Mrs Ilott's case, she had 5 children, was on State benefits and living in a Council house. As a daughter, she was entitled to claim under the Act.
A lower Court had awarded Mrs Ilott £50,000 but the Court of Appeal increased this to £163,000 (£143,000 to enable her to buy her house plus £20,000 (low enough not to affect her State benefits)).
There was a lot of coverage in the media about this case with headlnes like "Courts can rewrite your Will". In fact the Courts have been able to do this since 1975 (if not earlier) . Every case has it own merits. In this case Mrs Ilott had no financial resourses of her own and 5 children. It was also argued that Mrs Jackson had not supported her chosen charities in her lifetime. The merits of the size of the award and the reasons for it can be debated.
It is unlikely that the Courts would award significant sums (if anything) to children who were financially independent and had been left out of a parent's Will, if that Will had been drafted correctly with the proper advice and notes made at the time of drafting.
The moral of the story is that one shoud take proper advice when drafting a Will and if someone is to be excluded, make sure the reasons are clear. This will, however, not prevent someone who thinks that they have a claim under the Act from doing so.
The Chancellor has announced that the changes to care fee caps and capital limits expected to come into effect in April 2016 (see items below) will now not be introduced until April 2020.
In his July Budget the Chancellor announced a new allowance for Inheritance Tax ("IHT") on main residences. The headlines have been that, for couples, houses worth up to £1m will no longer be subject to IHT. The truth is, of course, more complicated.
The new Residence Nil Rate Band ("RNRB") will come into effect in April 2017. It will start at £100,000 per person and increase by £25,000 each year until it reaches £175,000 in April 2020. After that it will increase in line with inflation. The allowance is transferable between spouses or civil partners.
The usual allowance (Nil Rate Band, "NRB") has been frozen at £325,000 until Aptil 2020 (it was expected to rise in 2018). So this gives the headline figure of (an eventual) £1m IHT allowance per couple.
If a person has moved after 8 July 2015, their Executors will be able to choose which property they have owned since then on which to base the FHA (so that downsizing afer this date will not necessarily affect their allowance).
The RNRB is only available on main residences (not buy to let properties) and only if the house (or proceeds of the sale of the house) are passed on to children ( step children, chldren who have been adopoted out, foster children) or remoter issue or their spouses.
If a person's whole estate is worth more than £2m (including business ir agricultuarlk assets, which in themslves may attract IHT relief) then the RNRB is reduced by £1 for every £2 the estate is worth above £2m.
If the value of the main residence is below the RNRB, then the excess RNRBcannot be transferred to other assets.
If the first of a couple dies before 6 April 2017 and the survivor dies after this date then the whole transferable RNRB is avaliable on the second death.
Finally, if the value of the house is worth more than a person's combined NRB and RNRB then there is no further allowance to set against other assets, which will then be subject to IHT.
Nice talking to you. Your blog on IHT is fantastic and really enjoyed reading it as it has a lot of insights to start thinking about IHT tax planning. Avinash (Oman)
The only item in the Budget concerning Inheritance Tax was an announcement of a review of variation of Wills. Variation of Wills is currently allowed within 2 years of a person's death, and is usualIy done to distribute the estate in a more tax efficient manner. If you are considering a variation of someone's Will I would advise that you do not delay. UPDATE There will not be a change for the foreseeable future.
I am pleased to announce that I have passed my specialist paralegal exam in Wills, Probate and Estate Administration from the University of the West of England. I will shortly become a Fellow of the Institute of Paralegals.
The BBC have a very good care fee cap calculator at www.bbc.co.uk/news/health where you can calculate how much you will have to pay in care fees before you reach the new cap of £72,000 coming into effect in April 2016. It's only an estimate but it shows that it may still be necessary to sell a house to pay for care fees after April 2016.
The calculator also has useful information on the new capital limit of £118,000 and how much income you can retain before it is used for care fees.
A new intestacy law (Inheritance & Trustees' Powers Act 2014) comes into force on 1 October 2014.
Under this new law the spouse or civil partner of someone who hasn't made Will and who dies on or after this date will get a greater share of the deceased's estate.
If there are children the spouse/civil partner gets the first £250k plus chattels and jointly owned assets plus half the remaining estate and the children get the other half of the remaining estate.
If there are no children the spouse gets everything.
This doesn't mean couples don't need to make Wills. What about guardians for orphaned children, second families and the situation where spouses die together or soon after each other?
The new law does not affect unmarried couples. They still have no automatic entitlement to each other's estate. So Wills are essential in these cases.
Very much appreciated your time wisdom and empathy this morning.
M and I have now registered as Organ Donors.
Thank you again for the attention to details and for clear explanations re the PPT Will and implications.
To have this most important activity signed and sealed will be a good relief!
GM, Highams Park, July 2014
I was a guest on Jo Good's show on BBC London 94.9 on 19 August (sorry I wasn't able to give you prior notice). We discussed legacies in Wills and other Will related matters.
The 2017 changes have been brought forward to 2016 with the cap reduced to £72,000 and the upper asset limit reduced to £118,000. and the upper aset lomit reduced to £118,000aandand and
The Department of Health anounced its proposals for how care fees will be funded after April 2017 on 11 February 2012. The headline announcement was that indiviuals would only have to fund the first £75,000 of social care and the limit of capital above which an individual would have to fund all care fees would be increased from the current £23,250 to £123,000.
On the face of it this is all good news but digging deeper nothing will change very much - although the final small print has not been isssued. The things to note are that the £75,000 cap only applies to social care - it does not include "hotel" costs such as accomodation and food, which can make up a large proportion of overall fees. Raising the capital limit may not have much impact (apart from local authorites having to pay social care costs over £75,000).
I have done some "sums" for a person with an income of £250pm and capital of £250,000 (a house/flat in the South East, say) who goes into a care home and pays £650pw but the local authority will only fund up to a maximum of £540pw. Without going into the detailed calculations, the £75,000 cap will be reached after 5 years and it would take 25 years for the capital to be reduced to a level where the local authority will contribute towards other costs. The average stay in a care home is under 5 years. So the indiviual would pay the same in care fees as he would do under the current arrangements, i.e. all of his care fees, and the hosue would need to be sold to pay for it (unless it is rented out or other measures taken to protect it).
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