Who’s got the POWER!

17th Jul 2013
Is it who YOU would choose? ...
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Who’s got the POWER!

17th Jul 2013

Is it who YOU would choose?

All of us are constantly making financial decisions whether we realise it or not:

  • What bills to pay
  • Is it worth switching Utility providers
  • Shall I top up my pension fund or invest elsewhere
  • Shall I save for a big holiday this year

But what happens if you suddenly can’t do this; due to physical or mental incapacity.

We often think about getting insurance to cover the loss of income but who will actually manage your money?

If you suddenly lose capacity to deal with your affairs all your bank accounts are frozen – including, in many cases, joint accounts. Nobody will be able to access your money, even those who are financially dependent on you.

So what happens?

Your loved ones will have to apply to the court of protection to become what’s known as your ‘Deputy’. This is a costly, cumbersome process which may take up to 6 months.

Why does this matter?

  • No one can access your money until the deputy has been appointed
  • The person the Court select to be your Deputy might not be who you would choose
  • The Court may apply restrictions on what the Deputy can or can’t do
  • Often the Deputy is supervised by the Court incurring even more cost and stress.

But all this is simple to avoid if you make a Lasting Power of Attorney (LPA).

After a Will an LPA is arguably the most important document you can have. It gives somebody YOU choose (your Attorney) the legal power to look after your affairs if you can’t.

We all hope that we will not have to use an LPA but the consequences of not having one are too big to ignore.

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Regulation of will-writing is rejected

16th May 2013
The Lord Chancellor yesterday rejected the recommendation made be the Legal Services Board to regulate will-writing activity. ...
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Regulation of will-writing is rejected

16th May 2013

The Lord Chancellor yesterday rejected the recommendation made be the Legal Services Board (LSB) to regulate will-writing activity.

In their statement announcing the decision it recognises that the report produced by the LSB indicates a consumer detriment in the will-writing market. However it felt that the report doesn’t adequately demonstrate that regulation is the best solution or that all other options have been sufficiently exhausted.

The statement went on to say that as separate work is being done to look at simplifying the current legal services regulatory landscape and as part of this the Lord Chancellor will consider whether it would be appropriate to bring will-writing within the scope of legal services regulation, it wouldn’t be beneficial to add complexity to the regulatory landscape in advance of this work.

Whilst the will-writing industry will not be regulated at this stage it is clear that it will continue to be under scrutiny. Pavilion Row’s advice remains; when making your Will choose somebody, whether will-writer or solicitor, who is a member of the Society of Trust and Estate Practitioners (STEP).

A key concern arising from the original LSB report into will-writing was the poor technical quality of the Wills. One in four of wills examined by the panel were found to be inadequate. However simple or complex you believe your affairs to be it is imperative that you get the right advice and your Will is drafted correctly. Too often problems with Wills are not found until the person has died and it is too late to rectify.

STEP members are the most highly trained in this specialist area of law.

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When is a pound worth 60p?

1st May 2013
In George Osborne’s most recent Budget further provisions were made to prevent Inheritance Tax avoidance schemes. ...
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When is a pound worth 60p?

1st May 2013

When you needlessly pay Inheritance Tax (IHT)

In George Osborne’s most recent Budget further provisions were made to prevent Inheritance Tax (IHT) avoidance schemes.

In many ways this helps to reinforce false perceptions; that to reduce your IHT liability you need complicated schemes that will be scrutinised by HMRC.

But for many this can’t be further from the truth. There are plenty of options for standard IHT planning before you need to think about complex and aggressive solutions.

We often come across clients in later life with assets over the IHT band and good incomes that they are saving. But for every extra pound they save they only save 60p i.e. their eventual beneficiaries will be giving 40p to HMRC in IHT!

For these clients gifts out of income are an excellent way to minimise IHT – and one that is often over looked.

But what is classed as ‘income’? And what criteria will HMRC apply when accepting gifts out of income?

  • Normal income includes salaries and pensions – plus interest, dividends and investment income (including rental income and annuities).
  • The gift must be out of normal income and MUST leave the person fully able to maintain their usual standard of living, including luxuries such as holidays
  • The gifts must form part of a regular pattern or provide proof of a commitment (for example, the first payment of a life assurance policy).
  • HMRC will generally accept the expenditure as ‘normal’ if it happens three or more times.
  • Often mis-understood – the gift doesn’t need to be the same amount to the same person – it just has to be of a similar nature. For example, ‘every year I give 50% of my surplus income to family members.’

Gifts out of income are extremely valuable as there is no maximum amount (as long as they fit within the above criteria). They can provide substantial IHT savings and are simple – but they MUST be done correctly and well documented to ensure they don’t form part of HMRC ‘s IHT calculations.

Pavilion Row are specialists in Wills, probate and trusts. If you have any queries regarding the above or would like to understand more about how decisions made now affect what happens in probate please feel free to contact us.

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Budget 2013: Changes to the inheritance tax (IHT) nil-rate band are confirmed

21st Mar 2013
It was announced yesterday that the nil-rate band for IHT will be frozen until 2017/18. ...
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Budget 2013: Changes to the inheritance tax (IHT) nil-rate band are confirmed

21st Mar 2013

The Government announced in the budget yesterday that the tax-free nil-rate band for IHT, which currently stands at £325,000 (£650,000 for married couples & civil partners), will be frozen until 2017/18. This supersedes their announcement in the Autumn Statement last year that increased the level to £329,000 in 2015/16.

In addition the Chancellor announced plans to further stamp down on IHT avoidance schemes. HMRC will change the existing treatment of liabilities, setting new rules on when deductions would be allowable or restricting the deduction altogether so as to avoid any possible tax advantage. This measure is in support of the government’s anti-avoidance strategy.

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If you love me you’d make a Will!

14th Feb 2013
How many of us have said ‘I must make a Will’ but never got round to it. Better things to spend your time and money on, maybe? ...
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If you love me you’d make a Will!

14th Feb 2013

I’m sure not many of us have dreamt of our love one coming home tonight presenting us with their Last Will and Testament as a Valentines gift. However you could argue that this is one of the kindest, most thoughtful, considerate and selfless things that somebody could do.

How many of us have said ‘I must make a Will’ but never got round to it. Better things to spend your time and money on, maybe?

But a Will is not about you. You are not making it for yourself. It is about looking after the people you love when you are not around to do so.

You won’t be here to see the consequences of not making a Will but it can be painful.

When you die assets including bank accounts may be frozen
Not having a Will creates delays in sorting out your affairs during which time your money/assets may be frozen and nobody can access them. This can result with those left behind having to borrow money to pay for day to day bills and expenses.

Your partner may not inherit everything and in some cases may get nothing
If you do not leave a Will the law determines who inherits your estate – see our flow chart. If you are not married or in a civil partnership your partner will get nothing. If you have not got children it could be your parents, siblings or even aunts and uncles that inherit!

A claim may need to be made against your children
If your partner has received a reduced or no inheritance they will need to go to court to make a claim on your estate. The claim will be against the other people who benefit, including your children. Imagine that. A court case pitching mother or father against their children’s inheritance!

Failing to make a Will not only causes extra cost and delays it creates a huge burden and stress for those who are left behind at a time when they least need it!

Series: 6 Ways to Avoid a Probate Nightmare, Article: 2 (click here to read Article: 1)

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IHT nil rate band may now be frozen until 2019

12th Feb 2013
It is now being reported that the government will freeze the IHT threshold. ...
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IHT nil rate band may now be frozen until 2019

12th Feb 2013

Despite Chancellor George Osborne’s Autumn Statement pledge to raise the inheritance tax (IHT) threshold by 1% – to £329,000 for individuals and £658,000 for couples – in 2015/2016. It is now being reported that the government will freeze the IHT threshold – at £325,000 for individuals and £650,000 for couples – until 2019.

The extended freeze is expected to part-fund the government’s plans for a cap on elderly care fees.

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Inheritance Tax – Holiday lets are entitled to business property relief, ruling reversed

5th Feb 2013
HMRC has successfully appealed the decision. ...
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Inheritance Tax – Holiday lets are entitled to business property relief, ruling reversed

5th Feb 2013

Further to our news story in February 2012, HMRC has successfully appealed the tribunal’s decision in which a holiday lettings business was granted business property relief from inheritance tax.

The original tribunal ruled that a holiday let was too active an operation to be an investment and must be regarded as a business asset.

The Upper Tribunal has now reversed this, accepting HMRC’s argument that the business was ‘mainly’ one of holding the property as an investment. The business is therefore not entitled to any relief from inheritance tax.

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6 Ways to Avoid a Probate Nightmare

20th Jan 2013
We see all too often the mess left behind when somebody has not got their affairs in order, so to help avoid this we’ve created a checklist. ...
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6 Ways to Avoid a Probate Nightmare

20th Jan 2013

It is now 3 weeks into 2013 and many of those New Year’s resolutions are falling by the wayside.

One of the most popular resolutions is ‘sorting out my finances’ whether this is to get out of debt, save money or simply getting affairs in order.

But how do you actually achieve that New Year’s resolution?

We see all too often, through probate, the mess left behind when somebody has not got their affairs in order. This leads to needless complications, delays, stress and ultimately extra cost.

So to help avoid this we’ve created a checklist. Follow this and hopefully by 2014 ‘getting your affairs in order’ won’t need to be one of your resolutions!

  • Checklist for getting your affairs in order
  • Get all your paperwork in order and easy to find – making it simpler and quicker for your executors to administer your estate
  • Check all relevant polices are in Trust and going to the right people – avoiding assets going into your estate and delays in releasing the money
  • Make the most of tax exemptions now! – Lifetime gifts, annual exemption and regular gifts out of income are simple ways in which you can reduce your exposure to inheritance tax.
  • Make a Will – many people simply don’t get around to it, don’t be one of them!
  • Review your Will – well done for having one but it needs to be kept up to date;
  • Let people know where your Will is – there is no point having one if nobody can find it!

Look out over the coming weeks for our series on ‘Avoiding a Probate Nightmare’.

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IHT nil rate band set to rise

6th Dec 2012
George Osborne revealed in his Autumn statement that the tax free nil-rate band for inheritance tax (IHT) will increase in year 2015/16. ...
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IHT nil rate band set to rise

6th Dec 2012

George Osborne revealed in his Autumn statement yesterday that the tax free nil-rate band for inheritance tax (IHT) will increase to £329,000 in year 2015/16.

The current nil-rate of £325,000 has been in place since 2009.

The increase in the nil-rate band means that as of 2015/16 a married couple/civil partnership will be able to leave £658,000 before IHT is payable.

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Give to charity and the tax man pays!

17th Sep 2012
Today sees the start of ‘Remember a Charity Week’ which seeks to bring awareness about the importance of charitable gifts in Wills. ...
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Give to charity and the tax man pays!

17th Sep 2012

Give to charity and the tax man pays!

Pavilion Row is a supporter of ‘Remember a Charity’. Today sees the start of ‘Remember a Charity Week’ which seeks to bring awareness about the importance of charitable gifts in Wills.

Did you know that whilst 75% of people give to charity in their lifetime only 7% leave anything in their Will?

Following recent changes to inheritance tax (IHT) it is worth remembering when giving to charity there are tax advantages now available. If you plan to give 4% of your net estate to charity you can increase the gift to 10% without reducing the amount of inheritance the other beneficiaries receive. The tax man pays the difference!

From April 2012 IHT is reduced from 40% to 36% for people who leave at least 10% of their net estate to charity. This lower rate can only apply if part of the estate is chargeable to IHT at 40%. For example:


Example 1 Example 2
Net Estate £100,000 Net Estate £100,000
Charity Receives 4% £4,000 Charity Receives 10% £10,000
Remainder to be taxed £96,000 Remainder to be taxed £90,000
Tax at 40% £38,400 Tax at 36% £32,400
Inheritance for other beneficiaries £57,600 Inheritance for other beneficiaries £57,600

 

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SRA state “we haven’t failed to act”

27th Jun 2012
The SRA has asked us to point out that Elisabeth Davies, Chairman of the Legal Services Consumer Panel, did not state that the SRA had "failed to act." ...
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SRA state “we haven’t failed to act”

27th Jun 2012

Following our story “The Solicitors Regulation Authority (SRA) fails to act against those writing bad wills”, published yesterday, the SRA has asked us to point out that Elisabeth Davies, Chairman of the Legal Services Consumer Panel, did not state that the SRA had “failed to act” but simply they were “unaware of any action”.

In a letter to the Legal Services Board she states “Our jointly commissioned research found that solicitors and unregulated will-writers were equally culpable for producing sub-standard wills. However, while we are heartened by trade association initiatives to correct problems, we are unaware of any action to date by the SRA.”

Full details of Elisabeth Davies’ letter can be found here

In response, Antony Townsend, SRA Chief Executive, said: “The SRA strongly supports the LSB’s proposal that the list of reserved legal activities be extended to include will writing and estate administration. This step is necessary to secure the public interest. Consumers of these services are often particularly vulnerable and prone to exploitation; they need the protections which only proportionate regulation can provide.

In addition to undertaking supervision and enforcement activity where particular problems arise with will writing, we are now discussing with all our stakeholders how to improve standards of will writing both within the existing regulated sector and in the proposed new regulated community of will writers.”

Pavilion Row is happy to clarify the situation and apologise for any confusion.

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Solicitors Regulatory Authority (SRA) fails to act against those writing bad wills

26th Jun 2012
The SRA is failing to take action against solicitors who produced sub-standard wills. ...
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Solicitors Regulatory Authority (SRA) fails to act against those writing bad wills

26th Jun 2012

The SRA is failing to take action against solicitors who produced sub-standard wills for their clients according to Elisabeth Davies, Chairman of the Legal Services Consumer Panel.

In a letter to the Legal Services Board she states “Our jointly commissioned research found that solicitors and unregulated will-writers were equally culpable for producing sub-standard wills. However, while we are heartened by trade association initiatives to correct problems, we are unaware of any action to date by the SRA.”

The pressure for regulation continues. Ms Davies also states in the letter “We are acutely conscious that consumers will continue to lack adequate protections until regulation is introduced so it is important that this happens speedily. I know that the LSB is aware of this and will work with colleagues at the Ministry of Justice to make progress as quickly as possible.”

References

Legal Services Consumer Panel

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