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.

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.

Corporate Social Responsibility: What does charity and fundraising mean to you?

What’s your idea of helping charities and fundraising?

 Donating a few pennies to collectors as you’re about to leave the supermarket; a sponsored skydive, walk, fast or silence?

 There are many ways we can help raise funds for charities and organisations, all of which are commendable.  But are we doing them?

There are no right or wrong answers when it comes to helping people less fortunate than ourselves; however sometimes we need a little push in the right direction in order to act now in the aid of others!

It’s all too easy to say…

“I’ll do something next time” or “My donation won’t make much of a difference, so why bother?”

I myself have needed to use a Food Bank when I have hit desperate times.  If it wasn’t for people donating food my children would have starved.  Now I make it my duty to donate a box of food every Christmas to the Food Bank.

I now ask myself why do I only do this at Christmas?

There are eleven other months in the year where people are desperately in need of food, yet I only do this generous act over the festive period!

Giving to charity doesn’t have to cost you anything more than your time.

There was a drive set up in Cromer to make sanitary towels for women and young girls in Uganda.  At present, the females in Uganda are forced to use leaves to try and keep themselves clean during their period.  Females must stay home one week every month, and miss out on education, work and seeing other people, all because they don’t have access to sanitary wear!

This type of charitable help simply needed man (or woman) power to go and help make the sanitary towels but did I go?  The answer is NO, and here are the excuses…

  1. The children needed to go to the library.
  2. The dog needed walking.
  3. Meals needed sorting, and…
  4. Washing and house work had to be done.

…But did they?  Surely, I could have left it all for one day or a few hours to go and help.

The real truth is we all make ourselves too busy with our lives to make the sacrifices needed to help others.

Could you imagine writing your personal experiences down to be shared with the world all in the name of charity?

No?!

Then you will be surprised to hear that some amazing women have done just this!

‘Stories of She’ was released on the 16th March 2017 to do just that.  13 incredible women have bared their tragic stories all in the name of charity, as book sales will raise funds for two charities (Break and Nelson’s Journey).

Their stories include those of baby Loss, sleep issues, eating disorders, and abuse; just to name a few.  Some of the women even posed for the cover of the book with no make- up on!  Could you do that?  Not many women would have the confidence to show themselves in this way, but they have done so to help, encourage the confidence, and inspire other women.

The book was compiled and published by Serena Fordham.  It is hoped that women will read these stories and see that they are not alone when facing dark experiences, and that there is help and support there for them.

Get your ‘Stories of She’ e-book here,  or order a paper copy here.

Written by Kerri Page, CEO at Glow Virtual Assistants

Kerri’s background is in small-medium size business, from administration to managing teams and their workloads. She’s handled high-profile contracts with prisons, hospitals and military bases and has been responsible for emergency call out contracts which required immediate responses.

Kerri now heads up our Property Division, managing holiday rentals, student lets and various properties for our clients.

Contact her through www.glowva.co.uk