Estate Planning

Filter by category

Sweet moments of fatherhood concept, happy african father hold embrace cute little child daughter, smiling black family mixed race daddy and small kid hugging cuddling enjoying time together at home

What is a Lifetime Gift in the UK?

Lifetime gifting is on the rise. That is not surprising, as nowadays children need a financial helping hand to get them on the property ladder. However, when parents give cash to their children they often do not know the UK rules on ‘’what is a lifetime gift’’. As Cheshire Wills and Probate solicitors, it is important to us that parents and other benefactors with estates that will be potentially liable to inheritance tax, as well as the children receiving the benefit of the lifetime UK gift, understand the complex inheritance tax rules so that they can make informed decisions. According to HMRC research, 13% of the UK population have made a lifetime gift of £1,000 or more in the last two years .Just under half of the lifetime gifters said that they did not know the inheritance tax rules on UK lifetime gifts before making the gift. What is a lifetime gift in the UK? The definition of a ‘’lifetime gift UK‘’ is relatively simple. It is a gift, given without ‘’strings‘’ or conditions for its return to a beneficiary during a donor’s lifetime. A gift made in a Will is a legacy that is only effective after the donor’s death. Cheshire Wills and Probate solicitors say that whilst the definition of a lifetime gift UK may be straightforward, inheritance tax rules on lifetime gifting are not. Lifetime gifting UK and the annual exemption and small gifts Current inheritance tax rules say a donor is entitled to give £3,000 in gifts each year exempt from inheritance tax. Lifetime gifting UK and the seven-year rule If a donor wants to give more than £3,000 away in a year, they can do so. However, unless the gift falls within one of the HMRC recognised exceptions, it could become subject to inheritance tax when the donor dies under the “seven-year rule”. For example, if a parent gives a child £40,000 for a house deposit then there may be an ‘‘inheritance tax time bomb’’ if the parent does not survive for seven years after the transfer of the gift. That is subject to size of the parent’s estate, the availability of the parent’s inheritance tax nil rate band for lifetime gifts and the residence nil rate band. Lifetime gifting UK and the small gifts exemption Cheshire Will and Private Client solicitors say that gifters are entitled to use the ‘’small gifts exemption’’ to give up to £250 to as many people as they choose. However, the small gift exemption cannot be used with the annual gift exemption. It also cannot be used to reduce large gifts made to an individual. Lifetime gifting UK, marriage, and civil partnership Under current rules, parents can give up to £5,000, grandparents £2,500, and anyone else £1,000 to a couple who are getting married or entering a civil partnership, without future inheritance tax consequences. Lifetime gifting UK to a spouse or civil partner Gifts to a spouse or civil partner are normally inheritance tax free, subject to the proviso that the couple must have the same domicile. If one partner is UK domiciled and the other is not, then complicated inheritance tax rules and exemptions apply. Lifetime gifting UK and normal expenditure out of income This exemption allows a donor to make regular gifts from surplus income (not from capital or the sale of property). Gifts from surplus income are inheritance tax free on death, even if the donor dies within seven years of transferring the gift. Cheshire Private Client solicitors recommend that professional advice is taken on the definition of “normal expenditure” and “income” to avoid future difficulties with proving that the gifts were made out of income and as part of the donor’s normal expenditure. [related_posts] Lifetime gifting UK and family maintenance The family maintenance exemption allows donors to make gifts for a spouse or civil partner’s maintenance or for the maintenance, training or education of children under eighteen, free of future inheritance tax. Lifetime gifting and exceptions Other major exception to lifetime gifting and potential payment of inheritance tax are lifetime gifting made to organisations, such as: Charities; Gifts to the nation for national purposes ; Political parties (if they qualify). Lifetime gifting UK legal advice Lifetime gifting is undoubtedly a lovely thing to do to help friends and family. However, Cheshire Wills and Private Client solicitors recommend that lifetime gifting should only be undertaken after taking detailed estate planning legal advice and once the potential inheritance tax implications are understood. Just as importantly, solicitors advise that lifetime gifting UK is not an alternative to preparing a Will. For help with lifetime gifting and estate planning or drawing up a new Will please contact our Will solicitors today.
Chris Strogen
Oct 28, 2019   ·   4 minute read
Woman Helping Senior Neighbor With Paperwork

Can You Do Probate Without a Solicitor?

The short answer is yes, you can. Whether you would really want to do it, if you knew what was involved, is a completely different matter. Thinking that you can do probate is a bit like a solicitor thinking that they can do their tax return without any input from an accountant. They may be able to file their tax return by the 31st of January and even answer queries with HMRC, but ask them if they would do it again next year and the majority would give an emphatic no. Online probate application system The good news for people appointed as executors of a Will is that the court service has announced an online probate application system for us if: The deceased died with a Will ; and The deceased was a permanent resident in England or Wales; and The Will appointed up to four executors; and The executors have the original Will. The online probate system allows the executors to start the probate application process online by applying, paying and submitting the probate application. However, after the application is submitted online further enquiries and progressing the administration of the estate is dealt with offline, by traditional post and phone. Can you do probate without a solicitor? I guess, for me, the question is not whether you can do Probate without a solicitor but whether you should do it. I am not saying that because I am a solicitor who specialised in Wills, tax and probate but because I do not believe that if you appoint a loved one as an executor the last thing that they need at a time of bereavement is the stress and worry of sorting out the probate of a friend or relative. What is more, if you are an executor, and you get things wrong, you are personally liable for your mistakes. Many people may think that is unfair as after all the executor was only trying to save the estate money by doing the work themselves, but if it goes wrong it will be the executor, rather than the estate or beneficiaries, who will end up paying for the error. You may think, 'what could possible go wrong with a bit of paperwork?'; it is not until you have sat down and started to fill in a tax return or a probate application that you realise just how complicated it can get. With probate applications, executors can run the risk of: Failing to pay the right amount of estate tax; or Not paying a debt that was due before distributing the money from the estate; or Failing to pay the right amount of estate tax or; Not paying a debt that was due before distributing the money from the estate; or Paying a residuary beneficiary too much for the estate; or Facing complaints by a residuary beneficiary, such as a charity, that the money raised should have been more, as the sale of property or other assets was not handled; or Facing someone challenging the Will because they say it was not drawn up correctly, was signed under duress, was signed when the deceased did not have capacity to sign a Will, or because the Will did not make adequate provision for them. [related_posts] Taking probate legal advice The best advice for anyone thinking about dealing with probate without help from a specialist probate solicitor is to get advice on whether they think it is OK to try. A good probate solicitor will tell you if probate is even needed and, if it is, whether there are warning signs to suggest that you will need expert help such as if: The deceased owned his own business, either as a partner in a firm or company director; or The deceased has left all or part of his estate to charity; or The estate has complicated assets in it, such as buy to let property portfolio; or The deceased has left his estate to minor children and there are trusts involved or; The deceased has a complicated personal life, perhaps with a former spouse or new partner, and there is a risk that the Will may be challenged on the basis that it does not contain adequate financial provision; or The deceased has a complicated financial life with lots of debts that will need to be sorted out before the estate is distributed; or You know that there is a risk that you will find the process of acting as an executor and handling the probate yourself too distressing during a time of bereavement or you think there risk a risk that you will fall out with sibling executors unless a professional handles the probate reports to all family executors. If you need help in deciding whether or not to handle a probate then give us a call to discuss the estate and your options. IF the estate is small, you may not need probate. If you do need probate and you are the major beneficiary of the estate, you may think it worthwhile to try and use the new online service. We are happy to help you make that decision based on what is right for you. If you do decide to ask us to deal with the estate then we can handle it entirely so there is no stress or can work as a team with you.  
Robin Charrot
May 04, 2019   ·   5 minute read
Writing a Will

Writing a Will

Writing a Will protects your loved ones. It is, therefore, one of the most important things that you can do for your family. Why write a Will? Provides for your family and/or other beneficiaries Protects your family Clarifies how you want things to be dealt with after you have passed away Can be a means of reducing the inheritance tax payable on your estate. What is a Will? A Will is a legally binding document. It sets out how you would like your estate to be distributed on your death. Your Will can specify who will inherit and what they inherit. Your Will can offer comfort to your loved ones, knowing that you took the time and trouble to protect them with a Will. What is Intestacy? If you die without making a Will, then you die intestate. Your estate is distributed in accordance with intestacy rules. The intestacy rules are not flexible. They probably will not reflect how you would have left your estate if you had made a Will. The intestacy rules dictate who will inherit from your estate. Your unmarried partner will not inherit. only a partner in a married or in a civil partnership relationship inherits under intestacy rules. The intestacy rules mean that your relatives will inherit according to a strict order, set out in legislation. This may mean that a wealthy relative will inherit your estate rather than your partner or a deserving close friend or charity. You may view your stepchildren as your relations. However, under intestacy rules they would get nothing as they are not biologically related to you. If you have no blood-relatives, your estate will go to the Crown. Wills help the family Not having a Will makes a devastating time for your family just that bit more difficult. Having a Will in place, and ideally discussing the contents with loved ones, gives peace of mind at a stressful time. It is particularly important to make a Will if you are in an unmarried relationship or have stepchildren that you want to leave a legacy to. Wills help the family business With a family business, it is not only your family who rely on you. Your family and your employees will be looking for financial security. A will, and if appropriate, a shareholder agreement or cross-option agreement, will help provide business continuity until the business is sold or transferred to your chosen beneficiary or other business shareholders as part of the cross-option agreement. Wills help children You can appoint a testamentary guardian in your Will for any child under the age of 18. Although other family members can bring a court case to say that they want to look after your child, the appointment of a testamentary guarding is compelling evidence of who you thought would be the best person to bring up your child. As well as leaving a legacy in your Will for your child, you can protect your minor child by: Appointing trustees in your Will who deal with the legacy until your child is of an age to inherit Giving the trustees the power to advance capital or income to your child. This is in the case your child needs income to pay, for example, tuition fees Starting when your child should receive their inheritance, this could be at 18, 21, or at a later age Placing money in a discretionary trust so that your child is protected from potential future claims, for example, by an estranged spouse. [related_posts] Wills can save money on inheritance tax Writing a Will can help to reduce the amount of inheritance tax payable by your estate. If you leave all your estate to your spouse or civil partner, there is normally no tax to pay. There are other ways that you can reduce the amount of inheritance tax that your estate would pay. How much does a Will cost? Evolve is one of the first law firms to publish a price guide and fixed fees for Wills. Evolve can check and review your existing Will for you. It is sensible to get your Will checked because family and personal circumstances change or your Will may no longer be as tax efficient as it could be. If you have complex finances and businesses, and need in-depth advice on trusts, estate planning and tax or on domicile then call us for a bespoke quote. If you need a Will or a Lasting Power of Attorney, or would like a review of your existing arrangements, then please contact us    
Louise Halford
Apr 17, 2019   ·   4 minute read
How Much Is Inheritance Tax?

How Much Is Inheritance Tax?

Inheritance Tax and Leaving Your Estate To Your Spouse The late national icon, Sir Bruce Forsyth, has received some criticism from some quarters about tax planning. I dreaded to think what sort of racy or cutting edge steps Bruce Forsyth had supposedly taken to reduce the tax burden of inheritance tax payable on his death. After all, as an octogenarian with assets of about 17 million pounds and well reported views to the press on the payment of inheritance tax, it would not be surprising to learn that Bruce Forsyth had taken legal advice from an expert wills and estate planning solicitor to protect his estate from the full force of inheritance tax payable on his death. It helps to answer the question ‘How much is inheritance tax? So what was the scheme that Bruce Forsyth was accused of joining? How much inheritance tax did he pay? Was it the same or similar to the tax regimes entered into by high profile footballers and comedians that are now the focus of so much criticism and investigation? Not at all. The supposed ‘tax device’ that Bruce Forsyth had employed was to leave the vast majority of his estate to his wife, Wilnelia. Most people would not think it unusual for a husband to leave his estate to his wife but in Bruce Forsyth’s case the size of his estate and the fact that he had 6 children, with his wife being stepmother to 5 of those children, led to questions in some sectors of the media about why he had not left money to his children. The answer to that question was, of course, to protect his family and to minimise the liability of his estate to pay inheritance tax. What is inheritance tax and how much is inheritance tax? Inheritance tax is paid upon a UK-domiciled person’s death if their estate exceeds their IHT threshold (known as the nil rate band). How much inheritance tax is payable?  If a deceased’s estate amounts to in excess of the nil rate band then inheritance tax is payable    at 40% by the estate. Are there exceptions to payment of inheritance tax? There are a number of very common and popular ways for individuals to reduce the inheritance tax burden payable by the estate on the deceased’s death such as: •           Giving money away during life – known as lifetime gifting; •           Putting money into trust; •           Leaving money to charity; •           Leaving the estate to a spouse or civil partner – no tax is payable on the death of the   first spouse but tax will be payable on the death of the second spouse. There are complicated rules relating to inheritance tax planning such as rules on taper relief. The rules are also different if the deceased was not domiciled in the UK at the time of death. These tricky rules mean that it is always sensible to take professional legal advice on your Will and effective tax planning options. Leaving the estate to your spouse If you leave your estate to your spouse or civil partner then he or she will not pay inheritance tax on the bequest - even if the gift is in excess of the inheritance tax nil band rate. Sir Bruce Forsyth left his estate to his wife, Wilnelia. On the face of things that may seem odd given his wealth of about 17 million. However by leaving his estate to his wife no inheritance tax is payable. It is reported that in addition to the will (which is a public document after probate has been granted) a Letter of Wishes was also prepared to accompany the will. Sometimes Letters of Wishes are left because despite leaving the estate to a spouse the deceased wants his spouse to give money to their children or others. As the Letter of Wishes is private, the media do not know what the Letter of Wishes says. Bruce Forsyth could have asked for specific gifts to be made to his family and friends in this document or the Letter could have simply provided guidance on the sorts of things he wanted his wife to consider if she chose to give some of his wealth away. What is a Letter of Wishes? When planning for the future, it is common to think about what you would like to leave family and friends in your will, it helps people to answer the worry of how much inheritance tax will be. However, there may be things that you would like to say to people after death or gifts that you would like to make but only on a confidential private basis. A Letter of Wishes is a separate document to your will, but is typically stored alongside it so that it can be communicated to the right people after your death. A Letter of Wishes is not legally binding and does not carry the same legal force of a will. Therefore there is no guarantee that if you ask an executor of your will to do something in the Letter of Wishes or ask your spouse to give some of the inheritance left in the will to him or her that they will follow the instructions. That is why it is important that you carefully select your estate planning options and how they might work within your own family as well as carefully choosing the executors of your will. The content of a Letter of Wishes is as individual as the deceased. The Letter of Wishes is signed by the deceased setting out whatever the deceased wants to communicate to their executors or family members. A will becomes a public document if it goes to probate after the deceased’s death. A Letter of Wishes is a separate private document that remains confidential and not available for everyone to pursue. Many probate solicitors recommend the use of a Letter of Wishes to accompany a will so that the Letter of Wishes can be reviewed and changed without necessarily having to change the contents of the will. It is however always sensible to speak to your will and estate planning solicitor to check if any changes should be made to your will, especially if there are any significant life events (such as the arrival of grandchildren ) or a major change in assets. Wills and leaving your estate to your spouse The decision to leave your entire estate to a spouse has to be carefully considered as it is not the right option for every family. If your wealth is not great it may be the case that your spouse will need all the estate. However if you are wealthy and your estate is likely to exceed your spouse’s lifetime needs then family relationships are a key consideration when deciding whether to leave all your estate to a spouse. Bruce Forsyth’s wife has always been reported as having a very close and loving relationship with her step children. That means that Sir Bruce Forsyth presumably had confidence that his wife would act on the Letter of Wishes that accompanied his will. Sadly that is not the case in all families as a spouse may not have a good relationship with his or her own children or stepchildren or the spouse might chose to remarry. That is why it is so important to balance the benefits of inheritance tax planning by leaving your estate to your spouse with the realities of the size of your estate and your individual family circumstances. Contact Us Today For Inheritance Advice
Chris Strogen
Oct 30, 2018   ·   7 minute read
Home for sale. Sign in front of new home

Gift or Loan to Children for a Property Purchase

Is it a gift or a loan? Helping your children on the property ladder. In an age where a lot of young people and divorcees recovering from the financial split from their spouse can’t get on the property ladder without help from the ‘’bank of mum and dad’’ a reported case in the Daily Mail highlights the importance of recording agreement over property. The reasons behind why Mr and Mrs Joy gave their daughter £90,000 are complex but in essence the Joy family dispute was simple: was the £90,000 payment a loan, as claimed by Mr and Mrs Joy, or a gift, as asserted by their daughter, Lucy. https://www.dailymail.co.uk/news/article-5669857/Bitter-rift-bank-mum-dad-Couple-lose-90-000-loaning-daughter.html After a Court battle a judge has recently ruled that the money was a gift and is not repayable by the couple’s daughter, Lucy. This is despite Mr and Mrs Joy reportedly re-mortgaging their family home to raise the £90,000 for their daughter on the basis of an alleged verbal agreement that Lucy would then transfer an inherited property into Mrs Joy’s name. The key factor in the Court decision was that there was no written agreement or contract between parents and child. As a family solicitor I am often told by clients that they don’t need a written agreement or document between their family members. The Joy case is a salutary reminder of the importance of writing things down. That is not just because family can fall out but also to protect family members from: The donor’s estate being liable for extra inheritance tax as the HMRC might not view a payment to a family member as a ‘’gift’’ without formal evidence; The person receiving the money facing a financial claim on divorce and therefore needing to establish that money received from family was a gift to them as an individual or a repayable loan; The person receiving the money facing bankruptcy or a Court judgement – without a written document a third party or a Court may not accept that the money was a loan and not a gift. [related_posts] There are many different ways in which family property agreements can be recorded, such as: Cohabitation agreement between cohabiting couples; Declarations of trust between joint owners; Loan – not secured on the property ; Mortgage – secured against the property ; Prenup agreements between an engaged couple; Postnup agreements – suitable for a married couple who acquire property after marriage, for example, inherited from a parent; Record of gift of property or deposit to purchase a property. Whatever the type of document and however the paperwork is drawn up, the important thing is that there is a written agreement. By spending the time recording the property agreement a lot of time and money can be avoided when it comes time for the loan to be repaid, the property sold or the estate sorted out. The English philosopher, John Locke, said ‘’where there is no property there is no injustice’’. I say ‘’ where there is a written agreement on property there’s normally no injustice’’. For help with family agreements and estate planning please contact us
Robin Charrot
Apr 30, 2018   ·   3 minute read
side view of concentrated couple reading contract during meeting with lawyer in office

Protecting Money From Parents to Buy a House

According to the BBC news a couple of days ago, the number of first-time buyers relying on mum and dad for the deposit to buy their first home or to climb the property ladder has reached a record high https://www.bbc.co.uk/news/business-39381157 This is not surprising, given that house prices are, on average, seven times salary. The problem is a lot worse in London and the home counties. As a specialist family finance solicitor, with many years experience in dealing with divorce and cohabitation breakdown, I have seen plenty of examples of where parents have helped their son or daughter to buy a property, only to find that when their son or daughter’s relationship breaks down, half or even more of that money goes to their ex. Why is mum and dad’s money vulnerable? Many people assume that just because the money has come from their family, or just because the house is bought in their son or daughter’s sole name, the money is protected. This is not true. Partners and spouses can make financial claims over property, even if their name is not on the title deeds and even if they have not paid the mortgage or the bills. Marriage makes the family money even more vulnerable because normally the divorce court will completely ignore the source of funds used to buy the house. Many people assume that just because the money has come from their family, or just because the house is bought in their son or daughter’s sole name, the money is protected. This is not true. Partners and spouses can make financial claims over property, even if their name is not on the title deeds and even if they have not paid the mortgage or the bills. Marriage makes the family money even more vulnerable because normally the divorce court will completely ignore the source of funds used to buy the house. Increasingly, I am being asked by clients how they can protect the parents’ money from relationship breakdown. There are a large number of ways of doing it, and they each have their pros and cons. However, the key message is that whatever way you choose, it needs to be agreed and properly documented at the time the money is provided by mum and dad. The different ways of protecting mum and dad’s money A loan from mum and dad Mum and dad co-owning the house A gift of the deposit Putting the gift of money into a ‘trust’. The trust can then lend, or give money to the beneficiary of the trust fund to buy the house, or even co-own the house with the beneficiary Mum and dad own the house completely, but let their son or daughter occupy the house The best option will depend on the family’s circumstances. That is why it is important to get specialist advice. For example, if parents are wealthy and know that they have a lot of capital that they won’t get through in their lifetimes the option of a gift or trust fund might be the best way to help the family member get on the property ladder and save on inheritance tax. A record of the gift will help evidence it for the tax man and will also help if the son or daughter later starts to live with a partner at the property. If a family is not wealthy then a loan agreement may be the best way forward. The key to a family loan is that it can be prepared to meet the family’s needs over when the money is paid back and if the loan will charge interest or not. You need a cohabitation agreement (or a pre-nup) Whatever option you choose, it is highly advisable to have a cohabitation agreement (or a pre-nup, if son or daughter are definitely going to get married) before the property is bought, which explains what will happen to the house and the money if the relationship does not work. [related_posts] A cohabitation agreement or pre-nup are absolutely essential if mum and dad are going to gift the money to their son or daughter because it is not being protected in any other way (e.g. a loan or co-ownership). If you ask most parents whether they need a written agreement over giving or lending money within the family they say that raising the topic would make them feel uncomfortable. My own view is that it is the parents’ money, it is perfectly reasonable for them to want that money to stay in the family, and it is therefore perfectly reasonable for the condition of that help to be a cohabitation agreement or a pre-nup. Cohabitation agreements and pre-nups are flexible and bespoke to the couple entering into the agreement. The agreement could say that the non-owning partner won’t have any claims at all on the property or it could say how the joint owners will share the equity in the house if they split up. For example, the agreement could say that mum and dad will be paid back their loan first, with interest, or that the partner whose parent’s provided the deposit will get a bigger percentage of the equity. The important point is that if the options on how to give or lend the deposit are explored and the options of how the couple will own a house are carefully considered and recorded there is far less chance of the family falling out with their son or daughter or their in-laws. Contact us If you would like to ask any questions about pre-nup or cohabitation agreements, please contact us. and take a look at our prices online.
Robin Charrot
Mar 30, 2017   ·   5 minute read