Best will for……Part 1: Wealthy singles

I’ve seen a huge variety of wills in my time – some good; some not so good!  How do you know if your will, or your clients’ English wills, are the best they can be, though? 

Unfortunately you can’t tell just by looking at the wording.  A will should be unique to the will-maker – like a bespoke suit, it needs to be tailored to the will-maker’s individual circumstances to really hit the mark.  However, for certain categories of people, common themes do emerge.  So, if you or any of your clients are single, divorced or widowed, here are some ideas for you:

Nil Rate Band will trusts: time to review

This year’s Finance Act introduced some significant constraints on when debts can be deducted for Inheritance Tax (IHT) purposes.  The changes should have set alarm bells ringing for any families who are making use of nil rate band will trusts and associated loans.

The curious incident of the trust (and) the matrimonial property regime

Estate planners may dismiss the recently reported Court of Appeal case of Slutsker* v Haron Investments Ltd & Another ([2013] EWCA Civ 430) as one for divorce lawyers only.  However, for anyone engaged in setting up trusts or other wealth structuring vehicles, the case is an intriguing one.   

What do SKI-ing and Inheritance Tax have in common?

On a week’s escape from the office recently, I had the pleasure of residing at a rather swanky Yorkshire hotel for a few days.  I was enjoying the novelty of a leisurely read of the paper over breakfast when I found my attention drawn to a conversation ensuing offstage left.

A lady was regaling her companions with tales of a forthcoming cruise.  “Of course the kids will be horrified with all this SKI-ing I’m doing.”  There was a pause, presumably while her audience tried to visualise skiing and cruising at the same time.  “Haven’t you heard of SKI-ing?” the lady continued. “Spending the Kids’ Inheritance.”  A lot of merriment ensued.  I busied myself with my eggs and soldiers (they are back on the menu at posh hotels, although my mum’s were better) but Inheritance Tax (IHT) had found me again, in deepest, darkest Yorkshire.

For married couples and civil partners, reducing their combined assets to at or below the IHT transferable nil rate band (currently, at most, £650,000) by the time of the survivor’s death is a great way of mitigating all IHT worries.  However, getting the timing right can prove tricky!  And for some, their main residence, which they can’t easily give away for IHT purposes, prevents them from reducing their wealth below £650,000.  Also, old age can be an expensive business (funding social or nursing care maybe) and this does not sit well with the perception that a lot of IHT planning involves denying yourself access to your assets – which, incidentally, is not necessarily the case.

A ‘how to’ for attorneys and deputies

When a person loses capacity to look after their UK situated assets, usually someone has to assume responsibility for their management.  The well advised have often made an Enduring Power of Attorney, or nowadays, a Lasting Power of Attorney naming someone they trust to act as their attorney.  For everyone else, there’s the Court of Protection, which will name whomever the judge deems most appropriate to deal with the assets (known as the deputy).

Given how common losing capacity is in our long-lived population these days, it’s surprising that it’s taken this long for a few cases to come along to clarify how attorneys and deputies should invest an incapable person’s (the donor’s) assets and the parameters of acceptable gifts that can be made.  However, like the proverbial London buses, indeed they have come together this summer, in the guise of Re Buckley, Re GM and In the matter of Joan Treadwell.

So, if you are an attorney or deputy yourself, or advising those who are, here are some headlines from those cases:

Succession planning for EU residents

A mini revolution is about to take place in the world of Will drafting for EU residents, including British nationals owning assets on the Continent.  Not many lawyers seem to be talking to their clients about it yet so naturally I want you, dear blog reader, to be among the first to know.

It’s all because of the EU Succession Regulation (Brussels IV), due to come into force for the most part in August 2015. 

Married couples and the Koshal case

The recent case of Koshal (Koshal and another v HMRC [2013]) provides a useful reminder that married couples need to take particular care when it comes to declaring income from most of their jointly owned assets.  Whilst husbands and wives are taxed as individual taxpayers, this is a classic example of where a joined up approach is needed – tax advisers to husbands, but not their wives, and vice versa, take note! 

If a living together married couple jointly own a property that generates rental income, they will be taxed on the rental income in equal shares. This is so even if their contributions to the purchase price were unequal.  However, if one spouse is a higher rate taxpayer and the other a basic rate taxpayer, it would be more income tax efficient for the basic rate taxpayer to be taxed on more of the rent.  This can only be achieved by the couple signing a declaration of trust to effect the change to unequal shares and then submitting HMRC’s form 17 by way of notice to HMRC of the change.  This needs to be done within 60 days of form 17 being signed.  As Mr and Mrs Koshal found out, nothing else will do, not even giving sole responsibility for managing the property portfolio to Mrs Koshal and paying all the rental income to her.