Why Inheritance Tax Planning is Crucial for Your Financial Future in the UK

Inheritance tax planning is not merely a consideration but a necessity for anyone looking to manage their estate effectively. The concept of inheritance tax (IHT) centres around the tax your estate owes upon your death, if the value exceeds certain thresholds set by the government. Understanding the basics of inheritance tax and its implications is crucial, as it directly impacts the legacy you leave behind for your loved ones.

The mechanics of inheritance tax involve several key elements, including thresholds, rates, and available reliefs. Currently, the IHT threshold, also known as the nil-rate band, stands at £325,000 for individuals. This means that estates valued below this figure are exempt from inheritance tax. For estates exceeding this value, the standard IHT rate applied is 40%. However, strategic inheritance tax planning can significantly reduce this liability, leveraging various reliefs such as the spousal exemption and business property relief (BPR). As well as strategic gifting to individuals or trusts during lifetime.

Inheritance tax can affect various types of assets within an estate, from real estate and investments to personal chattels. Real estate, often the most valuable asset individuals own, can significantly increase the overall value of an estate, potentially leading to a sizable inheritance tax bill. Similarly, investments and businesses that do not qualify for BPR (such as companies that own residential property) are also assessable for IHT purposes. Understanding the impact of inheritance tax on these assets is pivotal in inheritance tax & estate planning advice, ensuring beneficiaries receive the maximum possible from their inheritance.

Effective inheritance tax planning involves maximizing your available allowances to minimise the IHT liability. The nil-rate band offers an opportunity to pass on assets up to £325,000 tax-free. For married couples and civil partners, this allowance can be transferred, effectively doubling the nil-rate band to £650,000. Moreover, the residence nil-rate band (RNRB) provides an additional allowance of £175,000 for individuals, and £350,000 for married couples, when passing on a family home to direct descendants. However, the RNRB is tapered down by £1 for every £2 the estate value exceeds £2,000,000, underlining the importance of thorough planning and understanding of these allowances in inheritance tax planning.

For property owners, inheritance tax planning encompasses several innovative strategies to mitigate tax liabilities. A Holdover Gift Trust can offer a structured way to manage and pass on equity in property efficiently, potentially reducing the inheritance tax burden and deferring any capital gains tax liability. Rental income is given up using this strategy though, so section 102 (b)(iii) planning may be a more suitable option if rental income is still required. If an individual, or couple, own a significant amount in property, then structuring the property in a clever alphabet share class company would offer the ideal solution to optimise against inheritance tax. There are several options available to property owners, however, it is critical to seek inheritance tax & estate planning advice as there are different tax implications for each solution that needs to be considered carefully.

At the heart of inheritance tax planning is the creation of a Will, a fundamental document that dictates the distribution of your estate according to your wishes. Without a Will, your estate is subject to the rules of intestacy, which may not align with your intentions. Additionally, Immediate Post-Death Interest (IPDI) trusts represent a sophisticated planning tool, allowing for greater control over how and when assets are distributed, providing a tax-efficient way to manage inheritance.

In conclusion, inheritance tax planning is an indispensable element of financial and estate management. It ensures your assets are passed on to your beneficiaries in the most tax-efficient manner possible. By understanding the nuances of inheritance tax, from thresholds and rates to the impact on different assets, individuals can craft a strategy that aligns with their goals. Maximising allowances, utilising reliefs, strategic gifting, and ensuring the proper legal foundations are in place via a Will and IPDI trusts are all critical steps in safeguarding your estate for future generations. With the right inheritance tax & estate planning advice, you can secure your financial legacy and provide for your loved ones long after you’re gone.

The Millennial’s Guide to Wills and Wealth Planning: Building Your Legacy

In today’s rapidly evolving financial landscape, millennials are at a critical juncture where wills and wealth planning are not just advisable but essential. The complexity of modern wealth, including digital assets and cryptocurrency, alongside traditional investments, underscores the need for comprehensive estate planning. This blog explores the vital components of estate planning tailored for young adults, emphasizing the importance of early engagement in wills and wealth planning to secure a prosperous future.

Estate planning often evokes thoughts of old age or vast wealth. However, at its core, it’s about ensuring your assets and wishes are respected, regardless of your size of your wealth or the nature of it.

In the UK, the law permits individuals the freedom of testation, allocating their estate to anyone via a correctly executed will. This fact highlights that wills and wealth planning are crucial for everyone, including millennials who might consider that they are still in the wealth building phase.

Estate planning goes beyond mere asset distribution; but includes appointing key individuals or professionals to important roles be they executors, guardians for minors, or attorneys. It offers a structured approach to managing one’s financial and familial responsibilities during times of great distress.

The notion that estate planning is reserved for later stages of life is a misconception. The reality is that the sooner one starts, the better equipped they are to navigate life’s uncertainties. Early engagement in wills and wealth planning ensures your wishes are documented and can significantly ease the administrative and emotional burden on your loved ones during challenging times.

The digital revolution has introduced a new class of assets, from online accounts to cryptocurrencies, necessitating their inclusion in wills and estate planning. Protecting your digital estate is as crucial as safeguarding physical assets. Failure to include these in your estate plan could result in valuable digital assets being lost or unclaimed. The integration of digital assets into your will ensures that all facets of your estate are comprehensively managed, reflecting the totality of your wealth in the digital age.

Investing is a cornerstone of wealth planning. For millennials, creating a diversified portfolio that balances risk with return within appropriate tax wrappers and structures is essential for achieving long-term financial security.

The key is to start investing early, allowing more time for your investments to grow and compound. This proactive approach to investment is an integral part of wills and wealth planning, ensuring that your assets are not only protected but also have the potential to grow.

Ethical investments stand out as a powerful tool for millennials aiming to align their portfolio with their values. Unlike traditional investment strategies that primarily focus on financial returns, ethical investing emphasizes the impact of investments on society and the environment. Incorporating ethical investments into wills and wealth planning not only allows individuals to contribute positively to the world but also ensures that their financial legacy is in harmony with their ethical beliefs. It represents a thoughtful approach to wealth planning, where the choice of investments reflects personal values without compromising on the potential for growth and stability.

Retirement planning is another critical aspect of wealth planning that millennials should not overlook. Starting early in this area allows for a more aggressive investment strategy, maximizing potential returns over a longer period. This foresight is beneficial, as the power of compound growth plays a significant role in accumulating wealth for retirement. Early retirement planning, coupled with strategic wills and wealth planning, provides a solid foundation for future financial stability.

Understanding the implications of inheritance tax is crucial in wills and wealth planning. In the UK, the standard inheritance tax rate is 40% on estates valued over £325,000. However, strategies such as gifting, trusts, and charitable donations can mitigate this tax burden. Efficient planning can significantly reduce the amount of tax payable, ensuring more of your estate is passed on to your beneficiaries. This aspect of wealth planning underscores the importance of early and informed estate planning to optimize tax efficiency.

The landscape of wills and wealth planning is broad and encompasses more than just the distribution of assets upon death. It’s about making informed decisions that align with your personal and financial goals, protecting not only your assets but also your digital legacy, and ensuring your wishes are executed as intended. For millennials, engaging in wills and wealth planning is a step towards securing a legacy that reflects their values and desires. By addressing these elements early on, millennials can build a comprehensive estate plan that not only safeguards their wealth but also lays the groundwork for a prosperous future.

Essential wealth planning for new law firm partners

Essential wealth planning for new law firm partners

In a recent post we considered what graduates who are beginning a budding career in law need to know about managing their finances. Now it’s time to focus on the higher rungs of the law firm ladder with our wealth management planning advice for new and prospective partners.

You may have dreamt for many years of being a law firm partner, but now you’ve made the grade what’s in store for you financially? In many cases it’s the promise of immediately bigger income. As with the top rung of many professions your future earning potential will also be greater.

But that isn’t the whole story. Your changing circumstances as a ‘partner in waiting’ – where you’ve had the nod but still have targets to achieve – or a newly appointed partner will also give rise to new financial requirements.

ADL helps many legal professionals just like you, who are making the step up to partner, with wealth management planning. In this article, we consider what partners need to know about financial management, and why you should start planning as soon as possible.

What your new pay package will look like

First, let’s look at how law firm partners can expect to be compensated for their dedication and expertise.

While not all partner roles are the same, there are three general classifications of partner remuneration:

Equity partner – Where the partner’s income depends on the law firm’s profits. Profit share agreements can either be based on individual partners’ levels of seniority at their firm; or a mixture of that plus an additional annual performance-based share. As covered later, equity partners are required to invest capital in the business; again, the details of this will vary by firm e.g. cash contribution or loan.

Fixed share partner – This arrangement is a reduced form of equity partner (see above), with the partner’s income usually determined on a profit share basis, but at a lower percentage than full equity partners. Fixed share partners are often contracted to guaranteed minimum payments even in a year of poor profit. Bonuses/commission can also be part of their remuneration.

Salaried or Income partner – Unlike the two partner types above salaried/income partners remain on PAYE. They receive a contractual amount that doesn’t take into account the firm’s profits, which are not part of their income. That said, bonuses and commissions may still be paid.

There’s a lot to get to grips with. At a time when you might also be taking on bigger or more complex cases that would positively impact your and the firm’s reputation, it’s also important to consider how your financial compensation package could affect any wealth management planning.

Understanding financial risk and reward as a partner

Broadly speaking the issues below are the main financial considerations at this point of your legal career. Here’s a closer look at the issues you might encounter and our initial advice on how to approach them:

From safety net to self-employment – If you’re becoming an equity or fixed share partner the law firm will require you to switch to self-employment for tax purposes. If this is the first time you’ve moved away from PAYE you’ll need to get used to setting money aside to pay tax every January and July.

When you come off payroll you’ll also lose access to the firm’s employee benefits package. Removal of death in service and critical illness benefits is especially important, particularly for new partners who have a mortgage and/or a family to maintain.

Solution: Not all law firms automatically stop employee benefits: we work with some that are still entitled to a lump sum payout should the partner die, for example. But more often than not you’ll need to think seriously about replacing insurance policies to make sure you are appropriately covered in case the worst happens. The key word here is “appropriately”; this means more than having an equivalent sum being paid out by the insurer, but rather also being set up under trust, and then paid out of the trust correctly – especially where it’s covering a mortgage.

We helped a newly appointed partner who lost access to payroll benefits, recommending income protection to cover essential outgoings and a decreasing term assurance policy for their mortgage.

Off the payroll, out of the pension scheme – Closely linked to the point above is another common problem to solve: leaving your firm’s pension scheme if you’re a self-employed partner. That means you’ll need to start funding your future retirement yourself – and without the right advice pensions can be a minefield.

Solution: We recommend transferring the pension you’ve accrued at the law firm into a private scheme. From there, you’ll need to restart the regular contributions you were already making and review the level when your income begins to rise, for example through a greater share of profit-related bonuses. This is something we handled for a newly promoted partner; it’s important to review your contributions after 6 or 12 months, when you’d normally receive your first bonus.

It’s all about maximising pension allowances. However, partners are likely to use carry forward quickly. At this point you’ll want to make the most of ISAs and – once those are maxed out – alternative options such as Venture Capital Trusts.

As explained in our recent blog High Earner, High Pressure?, which considers investment options for people on bigger incomes, VCTs are tax-efficient collective investment schemes. They are designed to boost UK start-ups and scale-ups while providing income and capital gains for investors, in exchange for the increased risk you’re taking on.

 An increase in personal financial risk – Depending on the structure of your law firm you may be exposed to a much higher level of financial risk which can even include assets such as your family home.

In a limited company or limited liability partnership exposure levels are lower. Partners are required to invest up front – typically through capital or current accounts, directors’ loan accounts or existing profits. Typically, risk matches the level of initial investment made.

But risk is higher at firms with a traditional partnership that becomes insolvent if, for instance, the partnership performs badly or suffers a negligence claim that exceeds professional indemnity cover. In some cases, the creditor might even choose to pursue a specific partner further putting their personal assets at risk.

Solution: It’s a counterpoint to your success as a legal professional that financial risk increases even as you begin to earn more money as a partner. You might also need to take out a loan to buy into the partnership. This is often the case at smaller law firms where finance is required to ensure cashflow is not disrupted. Financing in this way can be structured as a capital account, paid down over time when you generate fees as a partner.

Partners in time: get wealth planning advice early

Whatever the issues presented as you step up to be a law firm partner getting the right advice and wealth management planning in advance are key. If you engage an adviser prior to becoming a partner you’ll be in a better position to navigate the financial opportunities and risks that will inevitably come your way.

According to Glassdoor the average partner starting salary in a UK firm tops £88,000 and this annual figure can rise dramatically over time. Add almost £20,000 in bonuses – sometimes far more – on top of this and you can clearly see why financial management advice is a must.

ADL is home to extensive expertise and experience under one roof, relating to all of the aspects outlined above and more including:

  • Insurance: critical illness, income protection and more
  • Pensions planning and ongoing management
  • Employee benefits
  • Intergenerational wealth transfer

Our mission is to provide bespoke wealth management planning that suits your specific circumstances, and support you to make sure the devil in the financial detail doesn’t undermine your progress as a law firm partner.

For more information or to book a free introductory consultation, contact our team today.

Navigating Inheritance Tax: Expert Advice On Estate Planning London

A significant aspect to considering inheritance tax advice in the UK for most affected people is always going to be dependent on property values. Considering London’s population and average property values being the highest in the UK, it presents a unique challenge for effective estate planning in London. This is because the value of a London home can use up one’s inheritance tax exemption entirely. This could present an unintended consequence where asset rich, cash poor families would need to sell a home to pay the inheritance tax bill or pay high rates of interest to fund it.

Estate planning in London intertwines the challenge of a greater exposure to inheritance tax with asset illiquidity. Without inheritance tax advice families risk their ability to retain an income generating asset that can improve the financial well-being of beneficiaries. Therefore, inheritance tax needs to assume a pivotal role in the financial narrative of parents and children alike.

Overview of Inheritance Tax

Inheritance Tax is a 40% levy on a deceased person’s estate applied when assets pass down to lineal descendants. The estate compromises of everything you own; property, investments, cash, personal belongings but it excludes money purchase pensions and assets that qualify for business relief.

Every person has an allowance on which they can pass down assets without paying Inheritance Tax. This is called the standard Nil Rate Band (NRB) and it is £325,000. A married couple can utilise the inter-spousal exemption meaning the NRB passes to the surviving spouse on 1st death and the combined NRB value of £650,000 can be used before any tax is paid when the surviving spouse passes away.

An additional Inheritance Tax allowance called the Main Residence Nil Rate Band (RNRB) can be used when a primary residence is passed on to direct descendants, such as children or grandchildren. The RNRB is £175,000 and the inter-spousal exemption can be used meaning a total of £1,000,000 of allowances is available to married couples. One needs to be mindful, however, that the RNRB tapers away for estates valued over £2M.

Estate planning in London is complicated by lofty property valuations combined with the likelihood that mortgages will be (and should be) paid off in old age and by the time Inheritance Tax is due on death. Should mortgages not be paid off or there not be an appropriately structured insurance policy in place, the lender will eventually demand the repayment of their loan, which could require the sale of the property, which may trigger Capital Gains Tax at rates as high as 28%. Should you die a few years later, those unspent sale proceeds could then be subject to inheritance tax at 40%.

 

There are several ways to reduce or manage your exposure to inheritance tax, and it goes without saying the best time to start estate planning in London is yesterday but seriously you should be obtaining tax planning and financial planning advice from the moment you realise you are building wealth. This is because the decisions you make whilst you are building wealth could ensure that you are structuring your wealth in the most tax-effective way from day 1 which could avoid expensive planning solutions later in life that could amount to tens of thousands in advice and implementation fees.

Here’s 6 effective estate planning in London strategies to consider

  • Put in place specialist wills and multiple trusts with expert trustees
  • Put in place correctly structured life policies; this is more than assigning your life policy into trust.
  • Set up a clever alphabet share company structure from day 1 of your property investment portfolio.
  • Gift strategically during lifetime.
  • Don’t just think of a pension as a retirement planning vehicle but also as a succession planning vehicle.
  • Diversify your investment holdings and your tax wrappers.

In conclusion, navigating inheritance tax in the UK is a labyrinth, with estate planning in London presenting additional challenges due to higher property values. Therefore, meticulous planning to ensure optimal wealth preservation for the next generation is crucial.

Degree Of Success: What We Learned from Helping Law Graduates with Financial Literacy

In a recent blog we reflected on the fact that the UK struggles with financial literacy – across all generations, and in all sections of society.

In fact, studies show that almost three-quarters of British people find it hard to get their minds around money matters. In turn, that leaves individuals’ wealth at risk of being badly invested or simply frittered away if people can’t or won’t seek the right financial advice.

It seems like the public is coming round to the need for better financial literacy. According to a recent report about the current school curriculum by the Laidlaw Foundation – flagged up in The Times – 94% of parents believe educators have a key role to play in helping children learn life skills, not least managing their finances.

In addition, 40% of parents named financial literacy as the most important life skill – and almost twice as many said such skills are more important to their child’s future compared to preparing them for further academic study (i.e. further and higher education).

There’s lots of work to do to chip away at the causes of poor financial literacy in the UK – and it’s our mission to do just that. Nor does the job stop when school’s out; adults still need support managing their finances.

To that end, Prajesh Patel – ADL Wealth Director, Private Clients – was invited to run a series of online seminars with an audience of university graduates working at law firm Fieldfisher. The sessions covered a wide range of topics, from creating an ‘emergency fund’ and budgeting, to setting goals, investing and thinking differently about credit.

We asked Prajesh to discuss his experience of helping these young people to improve their financial literacy and wealth management – and discovered he also learned a lot from the three sessions.

Which areas of finance that you covered seemed to be of most interest to the graduates?

I received the most questions around credit cards and credit scores. Credit and debt management is an area I might have learned about earlier. That was the overall theme of the seminars: what I wish I’d known when I left university.

Information around this is relatively scarce, and in some cases, confusing to understand. Credit also comes with a stigma attached. It’s seen in some quarters as simply building up debt, and therefore problems for the future.

But I think it’s one of the critical areas of financial literacy and wealth management. When the graduates come to apply for a mortgage, or in some cases a loan, they will need a credit rating. There’s no difference between using your current account or having a 0% interest credit card to pay daily outgoings – like shopping or bills – and getting used to paying it off automatically each month.

As long as you budget properly, and it doesn’t spiral out of control, you’ll also get a good credit rating, which will help in the future.

Were there any other surprises in the audience’s response to the topics you discussed?

There were only a few questions about investing. That surprised me. Perhaps the audience has a good understanding of it already. There’s a lot of information available in this area so self-teaching is easier than, say, for credit and debt.

But it’s still important to remember that some of the information is bad advice. Look at the number of property investment courses that have sprung up in recent years. Some of those, when scrutinised properly, are not going to make people as wealthy as fast as they claim.

Then there’s the interest in cryptocurrency investment returns among younger age groups in particular. That’s still a relatively unregulated market and you should definitely do due diligence and seek advice before committing money to it.

Was this the first time most or all of the graduates had interacted with a financial adviser?

Yes, that was one of my key insights from the seminars. It seems I was the first person attempting to give them the tools they need to navigate a complex financial world.

I think there are three reasons for this. One, regulated advice is rarely available on social media where this audience goes for a lot of its information. Two, their parents may also not have accessed financial advice, so the knowledge they can pass on is limited.

And three, it’s easy to think when you just have a couple of hundred pounds of spare cash per month that a wealth manager wouldn’t be interested in talking to you. But we’re always happy to help! Especially if it means you don’t fall into the pitfalls of bad investment choices, which I covered earlier.

You mention finding financial content on social media. Do you think technology can help improve financial literacy for the graduates’ generation and those that follow?

Some people will always be better than others at using tech and finding reliable sources, no matter their age. But I do think young people today have a better chance to get the knowledge they need, because they are more proficient with technology, and have instant access to so much information.

There are lots of financial advice apps out there – ADL’s My Finances for one – and they’re usually pretty good. Hopefully technology will have an impact on financial literacy in the future, too.

Did you leave the graduates with some sage advice about what they can do to improve their financial situation from now on?

I think it’s a case of building their knowledge of financial matters gradually. Pick an area, read up on it and seek advice where necessary. Based on their feedback about the seminars, which was overwhelmingly positive, there’s clearly a demand for better financial  education so that’s a drum ADL will continue to beat.

Here’s a summary of what graduates can do – though most of these are also applicable to all of us:

  • Structure your financial goals: find out more here
  • Use (and regularly pay off) a credit card to build your credit score
  • Budget well by using an app to help you
  • Build an emergency fund before you invest
  • When you decide to invest – diversify
  • Make sure you use tax wrappers e.g. ISA/pensions
  • Pay off your student loan as early as possible

To find out more contact ADL using the form below. You can also keep track of Prajesh’s advice on learning how to manage your finances on social media:

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What is the ADL Advice Guarantee?

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We guarantee our advice and implementation fees will be the most competitive in the market based on the following criteria:

 

  • The expertise of your lead adviser i.e. holding at least STEP membership and regulated financial planning qualifications or a private client solicitor holding at least 5+ years post qualification experience in private client advice. The solicitor may not hold formal regulated financial planning qualifications but will be conversant on relevant complementary financial planning needs and thus involve a suitably qualified and experienced colleague.

 

  • The procedure of the advice given which includes, a free initial consultation process; the initial call/zoom session that often lasts an hour, post-session research, a strategy email or report (where needed). All without a charge.

 

  • Post implementation support and guidance without charge. We will not charge you a fee to re-open your case file and review the planning implemented several years prior. We will not charge you a fee to explain the planning we’ve put in place to your children several years down the line when they are now old enough to be able to comprehend it.

 

  • The actual implementation of the solutions.

 

  • If you’ve been given a “cheaper” quote. We’ll review any solution you’ve been given, providing you with a commentary free of charge. If the actual implementation cost is cheaper, we’ll consider matching it if you really prefer to work with us. At the very least, you can rest assured whatever planning you have decided to implement has been one that you’ve decided to implement with eyes wide open.

 

  • Finally, the ADL Advice Guarantee mandates ADL Estate Planning Ltd to be a corporate member of the Best Foundation, which offers it’s own attractive Client Guarantee, inclusive of independent arbitration. You can read more about this here: https://bestfoundation.org.uk/about/client-guarantee/

 

I’m confident our ADL Advice Guarantee is something that will reassure all our prospects and clients. This is also in addition to at least £2M in professional indemnity cover we have in place for all estate planning work we undertake. Do note, any regulated financial planning work is undertaken under our ADL Wealth brand and any tax reporting work is also covered by appropriate levels of professional indemnity cover.

We look forward to supporting and welcoming you and your family into our ecosystem so we can provide you with some of the most important areas of professional advice you’re ever likely to receive.

Should you have any questions about this advice guarantee, you can reach out to me directly.

 

Mohammad Uz-Zaman MA Adv DipFA PETR CeRER CeLTCI

Chartered Alibf (STEP Associate)

Private Clients

Managing Director

Email: muz@adlestateplanning.co.uk

How to witness a Will during lockdown

The rules around the correct witnessing of a Will are strict. If they are not complied with, the Will is not valid and relatives and loved ones may miss out on the inheritance that was intended for them.

The requirements for signing a Will are set out in the Wills Act 1873. The person signing the Will must do so in the presence of two or more witnesses who are also present at the time or must confirm to the witnesses that the signature is theirs.

The person signing must do so themselves or someone else can sign for them, in their presence and at their direction.

The two witnesses must each attest and sign the Will or acknowledge their signature in the presence of the testator.

This generally means that at least three people will be present together, signing the same document at the same time. With restrictions and precautions because of the pandemic, the Ministry of Justice has put new temporary rules in force.

New rules for the witnessing of Wills

With an increase in the number of Wills being made during 2020, the Ministry of Justice introduced legislation in September 2020 allowing the video-witnessing of a Will. It applies to Wills made on or after 31 January 2020 and is currently expected to apply for two years, until 31 January 2022.

Wherever possible, a Will should still be witnessed in the ordinary way. If this is not an option, then video witnessing can be considered.

Video witnessing of a Will Two witnesses must watch the testator sign and they should be able to clearly see him/her signing, but this can be done via live video link. Where possible, the process should be recorded and kept, case of any subsequent dispute.

The Will’s attestation clause will refer to the document being witnessed remotely and can also specify whether a recording has been made.

Before signing, the witnesses should be shown the Will via the camera, although they do not have to see the contents. It should be checked that they can see each other and the testator and that they will be able to see all parties signing. Ideally the two witnesses will be present together, but if this is not possible, then they can also be in separate locations.

Once the testator has signed, the Will should be sent to each witness for them to sign, preferably so that they sign within 24 hours of the testator, so ideally not relying on the postal service. Again, the testator and the other witness should see a witness signing.

Who can witness a Will?

The usual requirements for a witness to a Will apply, meaning that the following people cannot be a witness:

  • The spouse or civil partner of the testator
  • A beneficiary of the Will
  • The spouse or partner of a beneficiary
  • Someone who is under 18
  • Someone who is blind or partially sighted
  • Someone who does not have the mental capacity to understand what they are signing

If you would like to make a Will but you are concerned about how to have it witnessed, we will be happy to advise you.

For press enquiries and further information on your own wealth management plans you can reach out via the contact form or schedule a call via the Calendly widget (30 min initial enquiry option) below:

 

The drawbacks to being a private executor

An executor, appointed in a Will to finalise someone’s affairs after their death, can be either a professional or a private individual.

According to a survey conducted by market research consultancy IRN entitled UK Wills, Probate and Trusts Market 2020, the number of private executors has increased over the past decade. Despite this, the majority of estate administrations are still dealt with by solicitors, with the following split for the two years prior to the report:

2018  Private individuals: 37.2%       Solicitors: 62.8%

2019  Private individuals: 38.3%       Solicitors: 61.7%

The reason for this is likely to be the complexity of the job as well as the number of hours of work it requires.

The job of executor

It is the executor’s job to wind up all of the deceased’s affairs and account to the beneficiaries named in the Will for their share of the estate. The process involves identifying and valuing all of the assets in the estate, calculating and paying Inheritance Tax, applying to the Probate Registry for a Grant of Probate, collecting and selling the assets, to include any property, preparing estate accounts and distributing the estate to the beneficiaries.

Difficulties to look out for

Even a relatively small estate can be quite time-consuming to administer and involve substantial paperwork. Calculating Inheritance Tax is not always easy, as gifts made in the past seven years may attract tax on a sliding scale and these will need to be identified by scrutinising financial records. Research has found that for many of those who take on the job of executor, the role is more complicated than anticipated. In addition, only a small proportion of private executors have been found to be aware that an executor can be held personally liable for any mistakes that cause losses to the estate, even if these were genuine errors.

Losses could arise by not acting promptly in winding up an estate or not reporting the loss in value of an asset to HM Revenue & Customs in time to apply for loss relief.

If a gift is not declared to HM Revenue & Customs and is later discovered, invoking a tax penalty, the executor would be liable for paying this personally.

In the event of a dispute over the contents of the Will, an executor must take care not to mismanage this and spend an excessive amount of the estate’s funds in expenses defending any legal action. At the same time, they are bound to act in the best interests of the estate and protect it as far as possible for the beneficiaries.

Professional representation

When writing a Will, a professional executor can be appointed to deal with the estate administration when the time comes. A professional will usually have more time to devote to the matter and will also be familiar with the process and how to calculate tax and prepare full estate accounts. They will also be backed by insurance, so in the unlikely event that an error was made, the estate would be unaffected.

If you have been appointed to act as someone’s executor, it is also open to you to appoint a solicitor to act on your behalf to wind up the estate.

For press enquiries and further information on your own wealth management plans you can reach out via the contact form or schedule a call via the Calendly widget (30 min initial enquiry option) below:

 

Who will inherit your property when you die? Joint tenancy and tenancy in common explained

If you jointly own a property at the time of your death, your share will not necessarily pass to the other owner. We take a look at the two different types of joint ownership and what happens when one owner dies.

When you buy a property with someone else, you have the choice of owning it as joint tenants or as tenants in common. You should take advice about the right type of ownership for your circumstances to ensure that your interests are protected.

Joint tenants

If you own a property as a joint tenant with someone else, then the whole of the property is owned by you both and if one of you should die, the survivor automatically becomes the sole owner.

This is the case even if you have made a Will leaving all of your estate to someone else.

Tenants in common

Owning a property as tenants in common means that each of you owns a specified share in the property or the proceeds of its sale.

When you first purchase the property, the agreement will state the share that each of you owns. It could be half each, but it is also possible to own different shares. For example, if one person has provided the deposit, ownership may be two-thirds for them and one-third for the other person. If a tenant in common dies, their share will pass in accordance with the terms of their Will and not automatically to the other owner. This could result in the other owner having to leave the property if the person who inherits wishes to sell.

The importance of making a Will

By making a Will, you can ensure that your share as a tenant in common passes to the person you wish to inherit it.

You can also leave someone a life interest in a property. This can be useful in the event of a remarriage, where there are children from a previous relationship.

The new spouse could be left a life interest in a shared home, but when they die or choose to leave the property, it would ultimately pass to the children.

Making a Will not only means that your assets will be left to those you would choose to receive them, but it can also help avoid disagreements between family members after your death.

If you do not make a Will, your estate will pass in accordance with the Rules of Intestacy in specified amounts to close family members. Co-habitees and step-children will not receive anything.

If you have a Will drawn up, you can ensure that you include everyone who you would like to benefit from your estate.

For your own personal estate planning needs, you’re welcome to book a call with an expert via our scheduling window below:

 

The Will of Euromillions £161m jackpot winner

The will of a lottery millionaire has been published following his death at the end of 2019. That’s right, a will becomes a public document on death which is not something most people may want.

Colin Weir and his wife Chris won £161 million in 2011. Colin, who was 71 at the time of his death, was from Largs in North Ayrshire.  The prize was one of the biggest ever in the Euromillions lottery at the time. Colin Weir had formerly worked as an STV television cameraman and left two adult children.

Spending a Euromillions win

Weir invested money for his future as well as that of his family, buying a home for himself and a jointly owned property worth £3.5 million that he later transferred to his wife after they separated.

He set up a charitable foundation, the Weir Charitable Trust, which supports Scottish-based community groups and small charities to provide services and help the Scottish community in the areas of sport, recreational facilities, animal welfare, health and culture. A local artist was sponsored to complete a course at the Florence Academy of Art, the National Sports Training Centre at Inverclyde received funding and Haylie House Residential Care Home were given money.

Other local causes that benefitted from the Weirs’ win included the Largs Thistle Community Club, who were given a new 3G pitch and Largs Thistle Football Club, who made him honorary president.

He bought 55 per cent of Scottish League Division 1 team Partick Thistle, with the intention of donating the share to fans and he helped to set up the Thistle Weir Youth Academy.

The Weirs made a £1 million donation to the Yes campaign for Scottish independence ahead of the 2014 referendum, with both Nicola Sturgeon and Alex Salmond paying tribute to him on his death.

Investments included a £12 million share portfolio, £3.5 million in assets held on the Isle of Man, part-ownership of three racehorses and a £1.1 million seafront home in Ayr.

Possessions included four cars – a vintage Bentley Arnage worth £10,000, a Jaguar SUV work £28,250, a Mercedes estate worth £24,000 and a Mercedes people carrier worth £35,000. He also owned artworks, jewellery and furniture.

In the relatively short time between winning the jackpot and his death, Weir spread his money between family, friends, politics and charity, as well as investing in a diverse portfolio.

Leaving a legacy in a Will

For those of more modest means, leaving a legacy in a Will is a good way of supporting a favourite clause.

By leaving a Will, you can ensure that your estate passes to your chosen beneficiaries. There is also a reduced chance of disputes between family members if a clear will is left. For wealthier families and/or where privacy, and third party threats are a concern, it’s pivotal into incorporate specialists trusts as part of any planning.

For a discussion about your personal circumstances, you can book a call with an experty via our scheduling window below: