Inheritance Tax for unmarried couples…don’t get caught out!

(Blog courtesy of Trusted Law: www.trustedlaw.co.uk)

Do you know that the legal position for cohabiting couples is NOT the same as married couples?  Cohabiting couples simply do not receive the same benefits and succession rights.

Inheritance tax (IHT) planning that is simple and normal practice for married couples may not therefore be the best option when it comes to unmarried couples.

Inheritance tax (IHT) is payable at 40% on death on assets in excess of the nil-rate band (currently £325,000).

There are certain practical steps cohabitees who want the same tax advantages as married couples can take, although the most certain one does involve wedding bells!

A married couple can easily leave everything to each other in their Will and on the death of the first person their estate will be free of IHT (known as ‘spousal exemption’),and then on the death of the second person their estate will benefit from two persons Inheritance Tax relief rates (known as ‘transferrable Nil Rate Bands’)Unmarried couples however do not benefit from either the spousal exemption  or the transferable Nil Rate Band.

The estates of an unmarried couple leaving everything to each other would therefore be subject to consideration for IHT on both first death and second death and without the benefit of two NRBs on second death. This could lead to an unnecessarily high IHT charge on second death.

 Let’s look at an example…

Simon and Sue are a married couple owning £300,000 each. They have no joint children, but Simon has children from a previous relationship.

Simon dies first, leaving a life interest in their home for Sue and residue to her outright. On his death no IHT is due thanks to the spousal exemption and his unused NRB and Residential NRB are available to transfer to Sue.

On Sue’s death, she passes her estate of now £600,000 to Simon’s children. As her estate benefits from her own NRB, and Simon’s unused NRB, no IHT would be payable on her death. Whilst her estate does not need RNRB, stepchildren are classed as direct descendants for the purpose of RNRB.

Imagine this same scenario, but Simon and Sue were not married.

On Simon’s death, no IHT would be payable as his estate is below the NRB. On Sue’s death however, her estate will only benefit from her own NRB. This would mean that once you deduct Sue’s NRB of £325,000 from £600,000, this would leave £275,000 subject to IHT at a rate of 40%, making her IHT bill approximately £110,000. Her estate would also not qualify for RNRB, as her late partner’s children would not come under the definition of direct descendants for RNRB purposes (because they are not stepchildren)

 So, what’s the solution…

The simplest step is for them to make a Will that makes provision for a surviving cohabitee.

There are ways in which assets can be left under a Will to an unmarried cohabitee in a tax efficient manner. Rather than leaving assets to the partner outright, or to a Life Interest Trust where the partner will be seen as inheriting the assets for IHT purposes, they could consider using Nil Rate Band Discretionary Trusts within their Will

The Wills would leave assets up to the value of the NRB to a Discretionary Trust, of which the partner and others (possibly children) are discretionary beneficiaries. The Trust is its own legal entity and the Trust therefore owns the assets rather than the partner.

If Simon and Sue had used NRB Discretionary Trusts, on Simon’s death no IHT would be payable as his estate is below the NRB. All assets would pass to the Trust, with Sue taking the benefit during her lifetime. On Sue’s death, she will only own £300,000 worth of assets. As this is below the NRB, it will pass IHT free to Simon’s children.

For the purpose of this article, all references to married couples also include civil partners.

Would you like some professional advice?

If you are putting off writing your Will because you are unsure of how to go about it or can’t decide on the fine detail, then there is no need to worry.  To provide you with peace of mind, you can discuss your situation and concerns with Trusted Law.

We will work with you to agree what is best for you both and your family.  Everything we discuss will always be private and confidential, and you will never feel rushed or pressured.

Trusted Law offers convenient appointments in the comfort of your own home – including evenings and weekends!  So it couldn’t be easier…..

To make your appointment, or for an informal chat, please feel free to contact us on

Tel:                      01953 711950 / 01603 339055

SMS text msg:   07972 212355 or

Email:   enquiries@trustedlaw.co.uk

 

Please note that this information is provided as a guide only and in accordance with the current laws as at the date of publishing. 

 About Trusted Law Ltd

 Trusted Law (previously Trusted Wills & Probate Ltd) provides a wide range of services to protect your loved ones and your assets, providing you with much needed peace of mind. 

Our team take the time to get to know you, your family and your wishes to ensure that we are providing you with the right service. No matter how complicated your situation may be, we will work with you to find the right solution.

 To read ’Our Story’ (explaining how Trusted Law was established) please click here.

 If you would like to discover what our clients say about us, please feel free to read our client Testimonials.

How to live a happy life – In memory of Jan Fowler

(Blog courtesy of Debi Haden: www.debihaden.co.uk)

Yesterday I attended the celebration of the life of my wonderful client and friend Jan, who passed away last week. Although expected, I’m not sure we truly ever prepare for someone leaving us.  Jan asked me on her passing to promise to share our journey together and her thoughts on how to live a happy life, in the hope that it inspires you, the reader, to go out and live the life you really want. Her daughter Abby has given permission for her mother’s wishes to be carried out. So here goes…

18 months ago Jan approached me after attending one my mindfulness discovery days about working with her on a one to one basis. A question I always ask my groups is, ‘Are you living a happy life, doing the things that make your heart sing?, never had it felt so relevant than it did for Jan that day, she was to tell me at our first session.  Jan was undergoing treatment for cancer and had within the last year been given a terminal diagnosis.  As a life coach my work is very much about looking forward and helping people achieve their life goals, so this was a very different ask of me.  I had supported my father with his end of life care, but this was something quite different. It was really important that Jan was properly supported in what was to be the last part of her life journey.  After much deliberation we agreed to start working together to see how it went. Making that decision to say yes was the best decision I have taken as I got to spend time with the most amazing woman who taught me so much about life, the human spirit, courage, and myself.  I will be forever grateful and honoured that she chose me to support her.

We can never truly comprehend what it must feel like to be told you have a life limiting illness, why would we, our ultimate aim in life is to live a long and healthy life, and if we are lucky, get to live a happy and fulfilled life.  Jan was no different, she had so many things she wanted to achieve, things on her ‘bucket list’ that she would do at some point in the future, but like many of us, finding other things stealing her time and energy.  Understandably she carried a huge rucksack of emotions.  she certainly wasn’t ready to leave this life behind.  Sometimes angry for a life not lived, sometimes sad for the loss of not seeing her children and grandchildren flourish, and often regretful for the opportunities not yet experienced.

Those 18 months moved quickly from month to month, season to season, with good and bad days but always with a focus, to find peace within herself and to work on her alternative ‘bucket list’, those things that were stretching but achievable in the time she had left.  She got to see the Northern lights, cruise with her family, and feel the warmth of the sun on her skin in Cyprus with her daughter.  For me most importantly she got to leave her demons behind, those regrets from the past that filled her with guilt, and I believe, she lived these last 18 months for herself, doing what she wanted to do, when she wanted to do it, and most importantly she found her peace.

Of course, she had regrets, who wouldn’t at this time, however her biggest regret was that she had spent so much time and energy doing things because she thought she should, feeling guilty about what had gone before, and worrying about what others thought of her, instead of putting her energy into living the life she really wanted to live.

lessons on living a happy life…

So, as we come to the end of our journey together, the message we both have for you is this…

Don’t waste your energy on things you can’t change, it’s been and gone, find the learning and move on.

Stop worrying about what others think or feel about you, the most important opinion is your own, do right be yourself.

Find those things that make your heart sing, don’t settle, keep looking until you find your happiness

And most importantly,

Don’t wait for tomorrow because it might just never come…do things now, live your life as you want to, in the moment. You deserve to live a happy life!

To Jan, my wonderful, client and friend, the world will be a much duller place without you in it.  You brought a wonderful light and brightness wherever you went.  I will remember your wonderful rainbow of colours, your tenacity for life and your wonderful warm spirit.

With love

Debi

x

Jan was a member of my Rise & Shine group for women and took great comfort from the love and support she got from this.  If you would like to be a member please click through.

If you are finding life difficult right now, grieving the loss of someone, or facing your own health challenges and would like to find out how I can help you please contact me to arrange your free call.

Book your FREE 30 minute Clarity Call today and see how Debi can help you! Just click here to Discover more.

Challenging a Will: Everything you need to know!

(Blog courtesy of Trusted Law: www.trustedlaw.co.uk)

Why would you need to Challenge?

What is the process, the time limits, who can contest and what are the fees involved?

Let’s answer these questions.

There is often confusion around contesting a Will. In the majority of cases when a person dies the administration of their estate will be dealt with in line with the wishes left in their Will (or if there is no Will, under the rules of intestacy).

This may result in what appears to be an odd distribution of the estate, but if it is in accordance with the deceased’s wishes, a disappointed beneficiary may have difficulties in contesting the Will.

However, if a Will does not include the true wishes of the person making the Will, or if the Will has not been executed correctly, it may be invalid and can therefore be contested.

On what grounds can you contest a Will?

There are a number of grounds on which you can contest a Will (or make a claim against an estate). But let’s say upfront that we strongly advise that if you believe you may have a claim, you seek legal advice from an expert in this area early on.

  • Technical reasons include:
    • The Deceased did not have the necessary mental capacity to make a Will.
    • The Will was not executed in accordance with the legal requirements for a valid Will.
    • The Deceased did not have full knowledge and approval of the contents of the Will.
    • Some fraud/forgery has occurred in relation to the Will.
    • The Deceased was unduly influenced when they made the Will.
    • The Will does not reflect the instructions given to the Deceased’s lawyer/solicitor.
  • The Deceased did not provide financial support for you and you want to claim for reasonable financial provision from the estate.
  • The Deceased made a promise to you which you relied on, to your detriment.
  • A claim that the Deceased gifted something to you on their deathbed.
  • A claim that the Deceased owed you money.

Who can contest a Will?

Not everyone has the right to contest a Will. Only those with a genuine interest in the estate can make a claim against it. Generally, the law is clear about who can challenge the terms of a Will, but some matters can be at the discretion of the courts – so it pays to get specialist legal advice.

What are the time limits?

As a general guide, if you are submitting a claim under the Inheritance (provision for Family and Dependants) Act 1975, the time limit is 6 months from the date of probate being granted.

There is no time limit for contesting a will on the grounds of fraud. The court can overrule these but only in exceptional circumstances.

How much might it cost?

It is difficult to say how much challenging a Will might cost. This is primarily due to the cost being dependant upon the grounds for the challenge and the level of legal advice / support you require, and legal fees can be expensive.

When thinking about the cost, it’s important to consider the ‘principle of proportionality’. You will need to weigh up how much it is likely to cost to pursue your claim against how much you are likely to recover. If you proceed where your claim is disproportionate to the likely legal costs, you should be aware that even if successful, you may not recoup all the legal expenses you have incurred in pursuing your claim.

The effect of challenging a Will

Challenging a Will can take a considerable amount of time and money to resolve and will likely cause a lot of stress and upset at a very emotional time.

Obviously, there are occasions when it is reasonable to challenge a Will and make a claim against an estate.  An example of this would be where the Will is outdated and adequate financial provision hasn’t been made for a dependent spouse or minor child.  However, it is worth considering whether a resolution can be found between the beneficiaries and those challenging the Will to avoid length and expensive legal proceedings.

If you would like to discuss any issues about challenging a Will, or would like to ensure that you have your own Will in place, please feel free to contact us on

Tel: 01953 711950 / 01603 339055

SMS text msg:   07972 212355 or

Email:   enquiries@trustedlaw.co.uk

Please note that this information is provided as a guide only and in accordance with the current laws as at the date of publishing. 

About Trusted Law Ltd

Trusted Law (previously Trusted Wills & Probate Ltd) provides a wide range of services to protect your loved ones and your assets, providing you with much needed peace of mind. 

Our team take the time to get to know you, your family and your wishes to ensure that we are providing you with the right service. No matter how complicated your situation may be, we will work with you to find the right solution.

To read ’Our Story’ (explaining how Trusted Law was established) please click here.

If you would like to discover what our clients say about us, please feel free to read our client Testimonials.