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Monday, 23 April 2012

Twelve Tips towards making Inheritance Tax Savings

1. Ensure you make a Will - By making a Will you ensure that your assets are distributed in the way you want. If you leave everything to your spouse by way of a Will, the transfer will be tax exempt. However, if you die without making a Will (intestate) then it is possible that not all your assets will transfer to your spouse, meaning that Inheritance Tax might be payable. We provide a cost effective and time efficient service to enable you to achieve this and the service can be found here 

2. Emigrate - Changing the country which you are deemed to be resident for tax purposes is far more difficult than just changing the country you regard as home. If you are domiciled overseas, then only assets based in Britain will be subject to IHT, whereas IHT would cover your worldwide assets if you were domiciled here. You should always ensure that you have a Will in each country that you own assets BUT be sure that one Will does not revoke the other. Always seek professional advice with regard to your assets if you are considering moving abroad.

3. Give it away! - Gifts made prior to your death are potentially tax exempt. If you die within seven years of making the gift then, if your estate is taxable, tax will be payable on the gift, however this is on a reducing scale. You must ensure that you give the whole of the gift and do not “reserve benefit” in anyway, e.g. transferring ownership of your house but continuing to live there – under circumstances such as these the property may still be a taxable asset. 

4. Charitable Gifts  - Gifts to registered charities are tax exempt and therefore, if you have a favourite charity, be it an animal charity, children’s charity etc, why not consider leaving them a legacy, whether an asset or monetary gift? This can therefore reduce the value of your taxable estate. 

5. Monetary gifts - Each person has a £3,000 annual allowance for gifts to anybody, this can also be carried forward for one year, so if a married couple have not used their personal allowance in one tax year they could potentially give away £12,000 tax free in the following tax year – even if one or both of them were to die within seven years of the gift. There is also the ability to for parents to give up to £5,000 as a wedding gift to their children – that could be £5,000 from each parent to each adult child.

6. Make it a family affair - Discretionary trusts can be set up and this enables assets up to the nil rate band of IHT (currently £325,000 per person or £650,000 married couple or civil partnership) to be free from IHT, so long as the donor survives seven years. The donor will retain control of all of the assets, unlike giving outright gifts. 

7. Farm the land! - Numerous rules govern business, property and agricultural tax reliefs, and it is imperative to obtain professional advice before taking such a step. There are many pitfalls, not least the risk of losing your capital while trying to avoid tax! However, generally speaking agricultural land which is let out can become IHT-free after seven years and if you like the idea of becoming a farmer yourself then by personally farming the land it is possible that the land would become IHT free after just two years. 

8. Gifts from Income  - People with a high level income could make substantial tax savings: to show that the payments are made from income, three tests need to be satisfied: 
• they must be made out of income, not e.g. from sale of an asset; 
• there must be a realistic intention to make regular payments; 
• the payments must not reduce the donor’s standard of living.

9. War wounds  - Where it can be proved after their death that the donor died as a result, even indirectly, of their injuries suffered during military service then that person’s estate may become tax exempt. This point enabled a Duke of Westminster to avoid IHT when he died many years after injuries sustained during the Second World War. This may now be relevant to more people, following the situations in Iraq and Afghanistan. 

10. Equity Release  - Now that it is impossible to shelter the family home from IHT and remain living in it, another solution is to spend some of the wealth in that asset before it can be taken into account for tax. Equity release schemes are widely available. Independent professional advice should always be sort before entering into such an agreement. 

11. Individual Savings Accounts - Individual Savings Accounts (Isas), assist in the avoidance of income and gains tax – but they do not offer protection against IHT. 

12. Spend it - Well, this one does not really need any explanation does it? However, if you are stuck for ideas why not take a long cruise or exotic holiday. Be careful not to buy assets which will increase in value, such as an antique, thereby defeating the object of diminishing the value of your estate. 

And above all....

perhaps this is the most important tip of all: PLAN AHEAD.

For further information regarding estate planning please contact Hardeep Nijher on 01992 642333 or email

Beware unregulated will writing companies

The Legal Services Board (LSB), which oversees the will-writing industry in England and Wales has called for all will-writing companies to be regulated claiming that 20% of wills contained mistakes. 

This could include spot-checks by the Solicitors Regulation Authority, in order to cut out the "sloppiness, simple errors and poor communication". 

Examples of these mistakes have included wills that have been cut and pasted without changes being made, or names having been omitted. The LSB claimed that there were "systematic problems" with will-writing, including unfair sales practices, and fraud and deception. 

The Legal Ombudsman who receives many complaints a year relating to poorly drafted wills has called for action to be taken to ensure consumers were not left vulnerable by unregulated services. 

Breezeplus would always recommend using a reputable business to draft your will. For those customers who want to take control of their own will writing we would direct you to our on-line will drafting service that allows you to prepare and download your will from the comfort of your own home. If you want to take advantage of a 50% discount on this service please feel free to use discount code aprwkx any time during April.

Tuesday, 17 April 2012

Joint ownership implications in family breakdown

It is not often that Family Law has to cross paths with conveyancing solicitors but in wake of the somewhat famous case of Kernott v Jones, attention has once again been directed at conveyancing solicitors acting for purchasers buying property together. It has long been the duty of the solicitor who is acting for clients buying land jointly to explain to them that they can chose to hold it as beneficial joint tenants or as tenants in common. The solicitor should explain what those two options mean, and should make clear to the clients the advantages of setting out their choice in a Declaration of Trust so that there can be no dispute about their decision. They will then be saved costly litigation should a dispute arise in the future. This is vital advice, and it goes beyond the simple point that beneficial joint tenancy means that there is a right of survivorship (the survivor of the two when one dies, will take the whole property); joint purchasers also need to know that when a beneficial joint tenancy is severed, it is at that point unavoidably held in equal shares even if the purchase was funded unequally. Because of the lack of any jurisdiction to redistribute property on the breakdown of cohabitation, this advice and the taking of an informed decision may be even more crucial for unmarried clients than for married clients.

There have been many incidents in the UK when this advice has not been given, no Declaration of Trust has been executed and much of the value of the property has later been wasted in litigation under the law of implied trusts. Over the years, Judges have had to point out on many occasions the disastrous consequences that can occur when people fail to deal explicitly with the beneficial interest in the property.

In an earlier case Stack v Dowden (2007), it was observed by the Court that although the Land Registry form TR1 required registration of a purchase and makes provision for the parties to declare whether they are to hold the property for themselves as beneficial joint tenants or as tenants in common or on some other trust, the parties are free to make that declaration. They may not have been advised to do so despite the solicitor’s duty or they may choose to ignore that advice. The problem with the Form TR1 is that the tick box exercise is not compulsory and failure to tick one of the boxes means that the Land Registry will simply enter a restriction in Form A upon the title by default. That restriction has often been misinterpreted and taken as an indication of tenants in common.

It is imperative to avoid unnecessary litigation to make sure that joint purchasers particularly unmarried parties, purchasing property together are correctly advised regarding the implications of how they hold the property.

Many family solicitors will be directing their separated cohabitant clients to make claims for negligence against the conveyancers who dealt with the purchase where parties’ intentions as to ownership have not been properly recorded.
(Blog written by Olive McCarthy, Head of Private Client)

Tuesday, 10 April 2012

Mortgage Rates Increasing despite low Base Rate

Figures released by Moneysupermarket today reveal increasing costs of mortgages to borrowers notwithstanding the historic low Bank of England base rate and the predictions of many that the 0.5 base rate is here to stay for some time to come.

The average two-year fixed rate has risen by 0.33% to 4.15% since October 2011 (equivalent to 8.3 times Bank Base Rate). Average five year rates have increased 0.15% since January to this year to 4.72% (or over nine times the Bank of England base rate).

Average 2 year trackers are up to 3.63% from 3.37% last August.

These increases have also been accompanied by a number of lenders increasing their Standard Variable Rates by an avaergage of 0.6% (see earlier blog)

Lenders have argued funding costs as the primary driver for these increases but as discussed in my blog re SVR rate hikes I am not convinced that this is the case.

Whatever the reason, the cost of mortgages to borrowers already stretched financially is going to increase over coming months. Whilst this may not be welcome in the short term there is an argument that gradually increasing mortgage costs is better than a sudden leap in cost in the event of a Bank of England Base rate hike. If the increases are the Lenders' way of smoothing in a gradual return to normality of the cost of borrowing mortgages and avoiding sudden payment shock a year or so down the line then I very much welcome the move. If in the alternative, lenders suddenly hike rates in answer to a base rate hike in addition to these creeping rate increases then I would consider the current increases to be something much more cynical.

As with everything in the current economic climate the future is far from certain and I guess only time will tell.