Tag: Wills

Older couple overlooking beach

How Can I Reduce My Inheritance Tax Bill?

Posted on by Mark Reynolds

The children born to the ‘baby boomer’ population will inherit the highest amount of wealth any generation has ever seen, and perhaps for several generations into the future. They’re the wealthiest generation in history, collecting around £250,000, consisting mostly of property. This means the children of this generation are likely to inherit approximately £100,000 each. Even then, although it might raise their standard of living, it still won’t be enough to mitigate the impact of the housing crisis on younger generations.

What is inheritance tax?

Inheritance tax is a tax imposed on the property, money, and possessions of a person who has died. How much tax you should pay when you inherit these things depends on a variety of factors.

You don’t have to pay inheritance tax if:

  • The value of your estate is below £325,000
  • The deceased leaves anything above £325,000 to a spouse, civil partner, charity, or a community/amateur sports club

This threshold of £325,000 usually stands. However, if the deceased gives away their home to their child or grandchild, the threshold can increase to £475,000. If you pass it to a spouse or civil partner, there is no inheritance tax to pay on the home. Also, if you’re married or in a civil partnership and your estate is worth less than the threshold, you can add any unused threshold to your partner’s. This means your partners threshold before inheritance tax could be as high as £950,000.

Even if you inherit below the £325,000 threshold, you must still report your inheritance to HMRC. If you are due to pay inheritance tax, the standard rate is 40% of the value above £325,000. So, how can you keep this value to a minimum?

Keeping your inheritance tax bill low

We already mentioned in passing how you can lower your bill. Here’s how you can do it in more detail:

Gifting homes

You can pass on a home to your spouse or civil partner when you die and there will be no inheritance tax to pay for this. However, leaving it to another person in the will ensures it counts towards the value of the estate.

There is usually no tax to pay if the deceased gifted a home to someone, moved out, and lived for at least another seven years. If they wanted to continue living in the home, they would have to show a history of rent payments to the new owner.

Main residence allowance

The main residence tax allowance came into place in 2017. The rules state if you’re passing your home to a direct descendant you can benefit from an extra £150,000 of tax-free inheritance. Direct descendants include:

  • Children
  • Grandchildren
  • Great Grandchildren
  • Step-children
  • Adopted children
  • Foster children
  • Children under the guardianship of those passing on their estate

The tax-free amount is likely to increase to £175,000 by the 2020/21 tax year. This takes the threshold up to £500,000 tax-free income. This is only available if the home is worth under £2 million.

There are plenty of rules around paying inheritance tax. It’s hard to give blanket advice because the amount you’ll have to pay largely depends on the size of the estate, the assets involved, and individual family circumstances. So it’s always useful to get in touch with experienced solicitors who know the details of the inheritance tax process in enough depth to help you get the best outcome for your family.

 Mark Reynolds Solicitors specialise in helping our clients create and manage wills, manage lasting powers of attorney, get a seamless probate service, and manage joint tenancies to give your family peace of mind. Get in touch with us today by calling 0800 002 9577 to get started.

Man and young daughter holding hands

The Problem With DIY Wills

Posted on by Mark Reynolds

DIY wills are cheaper than going to a professional, but ‘you get what you pay for’ has never rung truer. DIY wills offer a cheap alternative, costing around £20, with some less than £10. In fact, for £19.99 you can purchase a ‘last will & testament DIY kit’ from WHSmith. You’re likely to find more of the same on Amazon and other online sites. But what might seem like a great deal on the surface could come with an unprecedented risk to your family and loved ones after you pass.

The risks

Just one mistake can render your will invalid. Your estate could end up in the hands of someone you never intended. It could leave your loved ones in an emotional mess with huge legal fees shrouding them. According to the Co-operative Legal Service (CLS), ineffective and poorly written DIY wills cause of around 38,000 probate ordeals per year.

The lack of professional guidance when choosing to use a DIY will allows ambiguities to arise leading to many becoming invalid in the UK. Where DIY wills have an unclear meaning, the Court is often the deciding voice determining the outcome for the beneficiaries. This doesn’t always go to plan.

Little mistakes, big consequences

In 2015, the case of Tinuola Aregbesola made the news. She was seeking hundreds of thousands of pounds in compensation from Barclays Bank. She claimed their £90 will-writing service resulted in her losing a stake in a valuable London home. The court documents detail how her father instructed half of the home go to Ms Aregbesola on his death.

However, her father’s wife, Ms Aregbesola’s step-mother, also partly owned the home. Because of this joint ownership, the home passed fully to his wife and Ms Aregbesola received nothing, contrary to the wishes written in the will. This all happened because Barclays didn’t sever the joint tenancy agreement to allow half of the property to pass to his daughter.

If you want your will to be unquestionable, there must be no mistakes and no oversights. As a legal document, while it isn’t impossible to create a DIY will, it’s hard for those who haven’t trained in law to do this successfully. There is more to writing a will than stating where you would like your estate to go, as highlighted by the Aregbesola case. Existing agreements such as joint tenancy agreements and partnerships might need dissolution if you want everything to run smoothly.

Staying up-to-date

It’s common for someone to write a DIY will and forget about it. It might seem like your work is done, but as you age, and your estate changes, so should your will and any other accompanying documents.

For example, in 1993, Princess Diana created a ‘letter of wishes’. In this letter, she requested her estate be divided differently to what she laid out in her will. She wanted her 17 godchildren to receive a proportion of her estate and, after her divorce, the value of her estate grew immensely. However, Princess Diana never updated the will to match her letter of wishes so there was no legal responsibility to carry out the requests in the letter.

Your will is a legal document. If it is correct, containing no mistakes, and overlooking no facts, it will stand in a court of law. If you set out the terms of your will in another document or verbally without updating your will, it’s unlikely these will hold up when disputes occur. Using a reliable, professional solicitor who specialises in will-writing will help you ensure your will sets out the correct terms. There will be no arguments after you’re gone.

The complexities of families

The structure of families is constantly evolving. The nuclear family isn’t the norm anymore. Families today comprise second, third, and fourth spouses, step-children, single parents, separated families, and hundreds of variations of all these things. The complexities of families are often what causes disputes when the will is invalid or unclear.

For example, if you get married, any will you’ve written beforehand will be invalid. It can only stay legally valid if you overtly express that you wrote the will in contemplation of the marriage. If you don’t update your will, you could leave your family confused, receiving nothing laid out in your previous will. If you’re separated from your spouse but aren’t legally divorced, they still count as your spouse. If you pass, they might be the one who receives your estate whether you planned for that to be the case or not.

For those who aren’t married, having an explicit, valid, and accurate will is essential to ensuring your partner can receive what you decide in your will. If you don’t, you could see it pass straight to your children or parents, leaving your partner to cope with emotional disputes.

What are the other options?

It’s understandable that many people choose DIY wills because they believe they can’t afford to pay for a professional service. It’s worth pointing out the money you spend on a professional will-writing service will be a fraction of the cost to your family if your will doesn’t hold up in court.

However, if a professional will is a little out of your price range, there are steps you can take to minimise the chances of inaccuracies and it becoming invalid. Check, check, and check your will again. There should be no spelling mistakes and you and two witnesses should sign it correctly.

Other things to take care of include:

  • Ensuring you set up trusts properly – If you want to gift money in a trust you must be explicit in this desire and say so. If you want the beneficiary to receive the money after a certain age, you must say so, otherwise, they may get a lump sum when you die.
  • Make provisions for when a gift fails – You might leave money to someone who died before you. Unless you updated your will, you must include a gift over clause. This details where the gift should go if the first choice is no longer available or cannot accept the gift.
  • Choose the right trustee – Choosing the wrong person to administer your estate can cause chaos. Your trustee needs to be competent and able to deal with the position.
  • Check what is legal – If you’re choosing to gift something like a house, ensure you check you can legally pass the house on to your chosen beneficiary. For example, make sure joint ownership doesn’t stand in the way.

The best thing you can do to make sure your will does what you intend is to seek help from professional solicitors. The cost of a will can vary depending on the complexity of your affairs. A simple will might cost between £144 and £240 pounds, while a specialist will can reach up to £600. In the grand scheme of things, it’s a small price to pay for security and peace of mind for all your loved ones who could end up losing hundreds of thousands if things don’t go to your plan.

The experts at Mark Reynolds Solicitors specialise in will writing, dealing with lasting powers of attorney, probate, and severance of joint tenancy. We have extensive experience in making sure our clients experience no ambiguity with their will, giving your family peace of mind. For more information about our services, get in touch on 0800 002 9577 today.