Case Study Three - Inheritance Tax

Inheritance Tax

A client of ours, Terry, met and moved in with his partner Margaret, who had been married and had a daughter Helen, with whom he had a good fatherly, family relationship. Margaret owned the flat from the proceeds of the sale of the family home – had downsized and purchased a two-bedroom flat.

Margaret was diagnosed with cancer and died after six months. The family were devastated. Unfortunately Margaret had not made a will and died intestate.

The flat ownership was shared with the ex-husband and the daughter and Ted moved out into a flat he used to rent out.

We were invited to draft a will for Terry, as a result of what had happened with his partner Margaret, who had wanted her estate to pass 100% to her daughter Helen, rather than her ex-husband. Terry wanted to ensure his assets were distributed as per his wishes and his requirements which included Helen.

The will was drafted, signed and witnessed. We asked if he wished to keep a secure copy in safe storage at a cost of £37 per annum. Terry declined this on the basis he had a safe place for his will. Unfortunately, Terry died a year later. We were asked for a copy of the will, but whilst we held the draft copy, it had not been signed nor witnessed.
This meant that Terry died intestate and his estate was distributed under the Laws of Intestacy i.e. the state decided how his estate should be distributed after payment of the Inheritance Tax Liability was paid.

The security of a will, to be held in secure storage cannot be over emphasised. A catastrophe, such as damage through Fire or theft, burglary or any damage, or loss or put in a private place ( perhaps not telling anyone, where your will may be found ). If your will cannot be found or is damaged can make your will invalid – and the courts will decide on the distribution of your estate under Law. We recommend you hold your Will in secure storage, which can then be changed or amended as required with ease, and produced after death, when it comes into effect. Your will can be made available to your executors, to complete the service, and to provide you with peace of mind.

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Case Study Two - Will Writing

Will Writing

Eddie is 72 and has been a client since 1994. We have advised Eddie and his wife Jane about how to arrange their wills in a tax efficient manner where we arranged to include a discretionary Trust to use their Nil Rate Band ( NRB ) when they die. Each one of them is a potential beneficiary of the others NRB discretionary trust.

We were aware of Jane’s circumstances. Her first husband had died in February 1995, leaving all his assets to Jane. We were not her adviser at the time – and she was not alerted to advice with regard using a Deed of Variation within two years of David’s death, so his NRB was not used on his death. Jane remarried five years ago.

We contacted them some time ago due to the introduction of the transferable NRB in the 2008 Finance Act. We wanted to alert them of the fact that it might now be possible to resurrect David’s NRB, which went unused when he died. This could show a considerable inheritance tax saving when they eventually die.

This means whoever dies first, Eddie or Jane leave their wills as they are, the second of them to die (or to be accurate their personal representatives ) may effectively claim 100% extra NRB current at the date of the second death on account of David not using any of his NRB when he died. It is important to ensure the right documentation is available and the documents that existed at the date of David’s death are fully examined – and the options fully explained. It is not an easy concept to explain…

Jane could revoke her will and revise a new will to include a discretionary trust at twice the NRB current at  date of her death. Eddie’s would be left as it is so his NRB will be used on his death whether this occurs before or after Jane’s.

Eddie and Jane decided not to take up our suggestion but to rely on their personal representatives to claim David’s NRB if Jane’s personal representatives have not already made use of it on prior to Jane’s death.

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Case Study One - Estate Planning

Estate Planning

Estate planning is about reducing your potential inheritance tax liability ( IHT ), but more importantly it is about planning to ensure you do not give away more than you can reasonably afford. Estate Planning ensures you retain control of your assets in case you need to rely on them at some stage in the future.

Joyce had retired from teaching three years ago, her husband died last year. Joyce went to see an adviser who recommended she take up an equity release scheme after her husband died to provide funds to meet her desired lifestyle.
Joyce wanted to help her daughter out with education costs for her two grandchildren, Katy (9) and Jonathon (4), estimated to be some £10,000 per annum. Joyce wanted to visit her sister in America and to spend more time once a year, with her. She wanted to preserve the estate, whilst remaining in the family home, because of the size, location, close proximity of friends and the memories it held.

Joyce had provided some financial assistance to her daughter and wanted to ensure her son was not left out.

The advice provided was (i) downsize to a smaller house in another location or (ii) take equity out of the family home by way of an equity release mortgage. Otherwise it would mean completely restricting her lifestyle.

We were able to show Joyce how she could achieve her objectives simply and without purchasing a substantial equity release mortgage – whilst making provision for financial assistance toward her grandchildren’s education – and provide some financial assistance for her daughter through the use of trusts and rearranging her affairs – without the unnecessary expense and high cost of Equity Release. Furthermore by cashflow modeling we were able to demonstrate how her income and expenditure would be affected using various “what if”, scenarios.

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