Inheritance Tax – Jan Oliff Financial Planning

Government Announces Significant Overhaul Probate Fees

Government announces significant overhaul of probate fees from 1 May 2017

Last February, the Government began a consultation into probate fees and how much families should be charged for extracting the Grant of Probate.

Their proposals outlined a move away from the current application fee of £215 for an individual and £155 for professional, to a new tiered fee system based on the value of the estate in question:

Estates valued at less than £50.000 – No probate fee
Estates valued at £50,000-£300,000 – £300 probate fee
Estates valued at £300,000-£500,000 – £1,000 probate fee
Estates valued at £500,000-£1m – £4,000 probate fee
Estates valued at £1m-£1.6m – £8,000 probate fee
Estates valued at £1.6m-£2m – £12,000 probate fee
Estates valued at more than £2m – £20,000 probate fee

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Kings Court Trust was one of 853 firms or individuals to formally respond to the consultation.

They voiced strong opposition to the plans, citing the fact that the proposed fees would potentially cause significant financial difficulties for families already having to deal with the loss of a loved one. Despite overwhelming opposition, the Government has approved the changes to the fee structure and these will come into action from 1 May 2017.

What does this mean for clients that use King’s Court
through Jan Oliff Financial Planning?

Our clients will have the fee changes clearly explained to them.
KC is committed to supporting any families who need advice and support on what the fee structure change will mean for them and are currently investigating a number of options that will allow us to help families manage the additional cost of the Grant of Probate as a result of the new structure.

How will this impact on Kings Court Trust’s fixed fee service?

KC’s comprehensive estate administration service will still be offered with a guaranteed fixed price.

They have removed the cost of the Grant of Probate as a fixed charge and will not be reintroducing this until there is a clear understanding of the new processes that the Probate Registry will be putting in place.

Instead, KC will explain clearly how the new fee structure will impact on the estate in question so that clients have as much information as possible.

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Increase in Will Disputes Attributed to Rising Property Prices

It has been reported that the increase in the number of children involved in inheritance disputes has been fuelled by rising property prices.

As the value of property has soared during the last decade, the estates of ‘ordinary’ families have become more likely to prompt inheritance disputes as families go to war over the division of assets. The High Court saw 116 cases of children challenging their parents’ estates in 2015, compared with 104 in 2014 – an 11% rise.

One reason for this surge is due to the rise in more complicated family structures which has led to more relatives, such as stepchildren, expecting to benefit from the estate.

There has also been an increase in cases where children challenge charity donations. This may be due to increased life expectancy which means it is becoming more common for parents to die when their children are middle-aged and assumed to be comfortable financially. If their children are perceived not to need as much financial help, parents may be more likely to make alternative arrangements for the distribution of their assets – to friends or charities, for example.

The children of the deceased can make a claim under the Inheritance Act if they feel reasonable provisions have not been made for them. There is also an option for those who were treated as the deceased’s child to claim against the estate, even if no formal or legal arrangement exists – such as when children have been adopted or fostered.

Tom Curran, Chief Executive at Kings Court Trust said: “Unfortunately, we do see family disputes over inheritance and it highlights how important it is to ensure your Will explicitly states how you want your estate to be distributed.

By ensuring that your Will is clearly and professionally written, your estate can be dealt with as smoothly as possible and reduces the likelihood of loved ones being unintentionally excluded when it comes to their inheritance. It is important that people understand the benefits of planning ahead, regardless of our age or health.”

Your Estate

Having a LPA in Place Should be Common and Natural

The Alzheimer’s Society reports that more than one million people in the UK will have dementia by 2025. Accidents, strokes, brain injuries and Parkinson’s Disease can also affect your ability to make your own decisions. Handling financial affairs can become virtually impossible and could cost a great deal of money and load the burden on relatives.

A report from ‘This is Money’ on analysis by Key Retirement Solutions found that more than 11,500 families every year are having to go to court to appoint ‘deputies’ so relatives and friends can make decision on behalf of ill or incapacitated people.

Without a lasting power of attorney** (LPA) in place, it can be difficult to access bank accounts.

For example, a 2013 British Bank Association Booklet, “Guidance for People Wanting to Manage a Bank Account for Someone Else”, said: “If one joint account holder loses mental capacity, banks and building societies can decide whether or not to temporarily restrict the use of the account to essential transactions only.”

We have all warned how the restricting of a joint account has severe implications as the joint owner cannot freely withdraw what is their own money without an order from the Court of Protection which could be devastating, especially if this is their only form of income, such as their pension, paid into this joint account.

Having a LPA in place should be as common and natural as making a will.

The UK authorities introduced LPAs in October 2007, replacing the previous system of enduring powers of attorney (EPA) – although an enduring power of attorney created before October 2007 remains valid.

The Treasury advises consumers: “If you want to give one or more people the power to completely manage your money and property if you lose mental capacity – that is, if you can’t make decisions for yourself – you have to set up a permanent power of attorney.

The people who will manage your finances are called your without the other (good for spreading the load).

You should also choose at least one replacement attorney who would take over if their attorney died or could no longer act for them. If they are older and the people they choose are all the same age as they are, they may not end up being the best people to act if and when their help is needed.”

Setting up a power of attorney is a big step and you need to understand all the implications and may want to get good legal advice.

The person setting up a power of attorney must have the capacity to make their own decisions.

It is a good idea to get it set up well before you need it. It is much harder and more expensive for someone to help you with you money and property if you have already lost mental capacity. And if you get it set up now, it is there if something happens to you suddenly, like an accident or a stroke.

Setting it up does not mean you have to give up control.

It takes several weeks to register a lasting power of attorney – yet another reason to get it set up early. If you lost mental capacity during those weeks, your attorney would not be able to act for you in the meantime.

The attorney you choose should be someone you really trust and preferably younger than you. Many people choose their husband, wife, partner, another family member or a close friend. You might choose more than one attorney.

If you do, they can decide whether they need to make decisions jointly (a good idea if they want two opinions on their finances) or whether each can decide things.

SEE this BBC item
Can Power of Attorney help protect your family against scams?
If an elderly relative starts to spend money irrationally, or in a way that is out of character, what powers do you have to intervene and stop them? Louise Minchin has heard from one woman who was worried about her father’s spending and when she eventually gained Power of Attorney over his affairs, discovered that more than £10,000 had disappeared from his bank account. We investigate what people can do if they feel their relative is becoming vulnerable to scams. bbc.co.uk/programmes/p04c0yl6

** Lasting power of attorney in England; known by other names in other UK domains

A Fixed Price Estate Administration Service Could Save Bereaved Families up to 15%

A report on the cost of dying has highlighted that a bereaved family will spend £3,000 on average when hiring a legal professional to administer the estate of a loved one. Administering an estate typically involves dealing with all of the assets associated with the person who has died, paying any debts and managing all of the legal and tax implications.

Last year, estate administration specialists Kings Court Trust [KCT] administered over 1,000 estates on behalf of families across the UK. Their average net fee for carrying out all of the legal and tax work associated with these cases was £2,549 – a saving of almost 15% compared to the industry average quoted in the research report.

Unlike the service offered by many traditional solicitors, KCT ’s comprehensive estate administration service comes with a guaranteed fixed price that is agreed up front with the customer.

This means that the family have complete peace of mind in knowing that the cost of the service will not change, regardless of the complexity of the case.

In contrast, many solicitors still use an hourly rate model which means that the final fee is dependent on the length of time that the estate takes to administer, which is often unknown until well into the estate administration process.

The report highlights the significant costs involved in someone passing away.

Professional fees often need to be met by the immediate family, so it goes without saying that they should shop around to find the service that best suits their needs.

Unfortunately, it is all too common for us to hear of families appointing the first solicitor or estate administration provider that they come across. This often means that they end up paying over the odds for a service that they don’t fully understand.

We don’t believe this is fair for the family, which is why KCT takes the time to explain how the estate administration process works and provide a guaranteed, fixed price quote before any work is undertaken.

KCT offers a comprehensive estate administration service for a guaranteed fixed price. For more information on their services or if you have any questions relating to the estate administration process give me a call and I will give you a personal introduction.

Jan Oliff Financial Planning is pleased to work with KCT in a business relationship that enables our firm to be alongside our clients as they make crucial financial decisions. Sometimes other financial planning can also be used to further reduce the final costs of estate settlement.

Is Minimising the Tax we Pay Legitimate and Ethical?

Is minimising the tax our businesses, ourselves and our families pay legitimate and

Your Residence And Inheritance Tax

The main residence nil rate band (RNRB) will be introduced on 6th April 2017 to apply to deaths on or after that date.

For those eligible to use it, it will be in addition to the standard nil rate band (NRB), currently £325,000 (and frozen at that level until April 2021).

In summary, the RNRB is intended to protect some or all of the value of the family home (or previous family home) from inheritance tax where the home (or, if the home has been disposed of, assets of equivalent value) is being passed on to children or grandchildren (or their spouses).

The RNRB will be phased in gradually from 2017/18 to 2020/2021 as follows:

£100,000 per person in 2017/18
£125,000 per person in 2018/19
£150,000 per person in 2019/20
£175,000 per person in 2020/21
and then increasing in line with CPI in subsequent years

The RNRB can be offset against the value of a property which has, at some time, been occupied as the family home as long as that home passes on death to the direct descendants of the deceased.

A direct descendant is defined as a child (including step-child, adopted child or foster child) or grandchild of the deceased. This includes the situation where the property is left to a direct descendant and their spouse or civil partner jointly, to a direct descendant’s spouse or civil partner solely, or to a direct descendant’s widow, widower or surviving civil partner who has not remarried or entered into another civil partnership at the time of death of the deceased.

The RNRB will be available when the individual dies on or after 6th April 2017. The transfer must be on death and can be made by will, under intestacy or as a result of the rule of survivorship.

An estate will be eligible for the proportion of the RNRB that is foregone as a result of downsizing or disposal of the property as an addition to the RNRB that can be used on death. In the Government Technical Note this is referred to as the ‘additional RNRB’. The qualifying conditions for the additional RNRB would be broadly the same as those for the RNRB.

Clearly there is a lot more to it than this so do take professional advice and not rely upon a limited knowledge of the rules. And ensure that you will including your living will, are up to date ~
oliff.info/your-financial-journey

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