Arford Henderson Law

Author name: Nadeem Afzal

your Will

Why your children may not inherit what it says in your Will!

Wills /

What goes hand in hand with your financial advice that your client will be indebted to you for arranging for them?

Estate Planning! – Your clients will forever be grateful that not only have you sorted out their long term financial plan but you also helped them ensure that their assets are protected when the they pass from this world.

There are so many different facets to Estate Planning that clients just have not thought about.

Why would your clients want to invest and save all their lives (with your help) and then have 40% of it to go into inheritance tax and the rest of it divided amongst people they didn’t intend to.

Let me tell you of a horror story. Mr. Thrifty married to Mrs. Thrifty hopes that one day his only child, Lucy will inherit his £1m home. You have advised them to get a mirror Will that they obtained from the Internet.

However, Mr. Thrifty dies a year later in an accident. The home transfers to Mrs. Thrifty who marries her tennis coach, Mr. Opportunity a year later. They have two children. She makes a new will, leaving everything to her children.

Unfortunately they divorce ten years later, and Mr. Opportunity receives half the value of the house (£500,000) in the divorce settlement. Mrs. Thrifty dies in shock and the rest of the estate is divided amongst the three children. Lucy receives £166,000.

This is not what Mr. Thrifty had intended when he was setting out his long-term financial plan with you.

And the moral of this story is…

If there is a lesson to be learned from the above tale, it is this:

  • It is a good investment to obtain sound Estate Planning advice.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

Why your children may not inherit what it says in your Will! Read More »

jointly-owned property

What happens to jointly-owned property when someone dies without a Will?

Estate Planning advice /

This depends how the ownership of the property is structured at the Land registry.

Married couples normally own property as “beneficial joint tenants“, meaning the property goes entirely to the deceased’s spouse or civil partner.

The same principle applies where this form of ownership is used but the joint owners are not married.

Here, though, inheritance tax may have to be paid if the deceased’s share is worth more than the nil rate band.

The “tenants in common” form of ownership is more common where co-owners aren’t married. This is because it allows different proportions of ownership and also allows individual owners to bequeath their share separately.

But where there isn’t a Will, this poses a risk to the survivor. The part of the property belonging to the deceased will be distributed according to the intestacy rules.

“Chattels” are personal items used by an individual, for example furniture, vehicles, art and other household items. Post 1 October 2014 this excludes items that are held as an investment with no personal use at the date of death (so for example art held as an investment).

They go entirely to the deceased’s spouse or civil partner where there is no will and are not considered part of the estate to be split under the rules of intestacy.

However, where someone is unmarried, these are treated like any other assets and distributed according to the intestacy rules.

To illustrate this point, Jack is in a 20 year relationship with Jill but are unmarried. Jack has two children from his first marriage. Jill has no children but her father is alive.

Jack and Jill buy a house for £1m and register the property as equal tenants in common.

Neither of them have made a Will.

If Jack was to die, his share of the house will go to his two children, including his wine collection.

If Jill was to die, her share of the house would go to her father, including her record collection.

And the moral of this story is…

If there is a lesson to be learned from the above tale, it is this:

  • It is a good investment to obtain sound Estate Planning advice.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

What happens to jointly-owned property when someone dies without a Will? Read More »

DIY Will

8 reasons why a DIY Will is the cheapest option!

Wills /

A quick Google search will provide you with many options for this and a ‘DIY’ or “home-made or Online Wills” Will can seem like a simple and inexpensive solution. After all, you can purchase a DIY Will kit for as little as a £20 from WHSmith!

The pitfalls for a DIY Will are:-

1.  Wills not witnessed correctly – this renders a Will completely invalid and your wishes won’t be carried out. You will be deemed to have died without a Will.  I have seen, where the ‘wrong’ people witness a Will, making the intentions of the Will void.

2.  The Will not actually covering all the assets in the estate – this creates a problem because the parts of the estate not covered pass as though you didn’t have a Will and could pass to someone you didn’t intend it to.

3.  Assets being incorrectly described, such as “my Prudential Insurance Policy”, when in fact the policy was an “assurance” policy or “my Midland bank account” when The Midland Bank had long since become part of HSBC. Such gifts could fail and your intended beneficiary may not receive them. What if the bank you have your money in now, changes it’s name in twenty years time.

4.  No consideration of what happens if a beneficiary dies before you – Wording used such as “I give £2,000 to Jane William” could leave confusion. Was the intention Jane should receive £2,000 if she was alive at your death only or did you want the gift to pass to her family if she died before you?

5.  Later amendments written on top of the original Will – such amendments may not be valid.

6.  The consequences of nursing home care fees or inheritance tax not being considered – meaning your estate could be eroded to pay for care or a larger inheritance tax bill might be payable by your family.

7.  Considering who is to look after your young children if you were to die – this is a complicated area, who are you going to appoint as a guardian, what will there legal duties or what consideration will you give if they can no longer care for your children. What are the legal consequences for when your children can inherit your estate.

8.  Ring fencing your estate so your children are guaranteed to inherit instead of it being diluted by your spouse’s new partner or your spouse’s future children – did you know most people leave their estate to their spouse with the intention of it being inherited by their children. What if your spouse was to get married again and leaves everything to his/her new spouse. What if your spouse has more children? Your estate will be diluted and your children receive a fraction of what your estate.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

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Why tax and social services are among the 7 reasons you should make a will today!

Taxes, Wills /

It is relatively easy to make a Will – and it will ensure your family is saved from unnecessary anxiety at an already distressful time.

Below are 7 reasons why your family will thank you for making a Will.

1. How Much Inheritance Tax Can You Save?

You can easily ensure that no IHT is paid on your death and that it is deferred to the death of your spouse, allowing your family to plan their wealth planning with this in mind.

2. Do You Have Young Children?

If you have young children and both you and your partner were to pass away, you can not determine who will look after your children and how they will be brought up and at what age they inherit your estate. The Social Services will get involved and this will inevitably cause unnecessary trauma to your children.

3. Do You Want To Avoid A Dispute? 

A Will makes it much easier for your family or friends to sort everything out when you die – without a Will the process can be more time consuming and stressful. This will also mean that solicitors and the courts will have to get involved.

4. What Happens If You Don’t Write a Will?

If you don’t write a Will, everything you own will be shared out in a standard way defined by the law – which most likely isn’t the way you might wish. You may not have thought of this, but your siblings could end up with part of your Estate.

5. Is Your Family Financially Secure? 

A Will is especially important if you have children or other family who depend on you financially, or if you want to leave something to people outside your immediate family.

6. Are You Married or Single?

If you are unmarried, your partner will receive none of your estate, this could mean them becoming homeless and without any financial support.

7. Ways To Eliminate The Tax!

There are many ways in which you can eliminate IHT tax, which you can do in your lifetime and still maintain control of your assets.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

Why tax and social services are among the 7 reasons you should make a will today! Read More »

Five reasons why you must write your Will

Five reasons why you must write your Will

Wills /

 It is relatively easy to make a Will – and it will ensure your family is saved from unnecessary anxiety at an already distressful time.

Here are the 5 reasons to Write your Will

  • A Will makes it much easier for your family or friends to sort everything out when you die – without a Will the process can be more time consuming and stressful.
  • If you don’t write a Will, everything you own will be shared out in a standard way defined by the law – which most likely isn’t the way you might wish.
  • A Will can help reduce the amount of Inheritance Tax that may be payable on the value of the property and money you leave behind.
  • A Will is especially important if you have children or other family who depend on you financially, or if you want to leave something to people outside your immediate family.
  • If you have young children, and a large estate, then your children will end up potentially paying Inheritance Tax or your spouse will have to pay legal fees to make an application to the courts to have this sorted out.

It is a good investment to obtain sound Estate Planning advice.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

Five reasons why you must write your Will Read More »

How you can increase your ISA allowance

financial security, Wills /

Did you know that you can inherit your partner’s ISA tax free allowance savings?

The new rules mean ISA assets can now be passed on to spouses or civil partners and retain their tax-friendly status.

THE REASON FOR THE CHANGE?

Under the previous system, when someone died, any savings held in an ISA automatically lost their tax-free status. This meant that the surviving partner would have to start paying tax on any returns or income earned from it, which could add up to a significant sum if the ISA holder had been saving for many years.

The tax system was inherently unfair, particularly given the fact that couples tend to save from joint incomes – they’d have to pay tax on money they thought was protected, and thousands of people were caught by these unexpected tax charges every year.

PASS ON THE BENEFITS

The rules mean that if an ISA holder dies, the surviving spouse or civil partner will be able to inherit the ISA and retain its tax benefits. This is in the form of an additional allowance – the surviving partner is given an ‘additional permitted subscription’ (APS), a one-off ISA allowance that’s equal to the value of the ISA at the date of the holder’s death, which won’t be counted against the normal ISA subscription limit but will instead be added on to the survivor’s own ISA limit.

In other words, you’ll be entitled to an additional allowance that would cover the value of your partner’s savings as well as your own. For example, if your partner had £50,000 in ISA savings, your ISA allowance for the year would be £65,240 (the value of your partner’s savings and your own ISA allowance for the 2016/17 tax year, which stands at £15,240).

Essentially, the rules mean that the tax-efficiency of the ISA won’t be lost, and that you’ll be able to benefit from the money that could well have been saved together. The changes have been specifically designed to ensure that bereaved individuals will be able to enjoy the tax advantages they had previously shared with their partner, offering more flexibility and a much fairer outcome.

There are approximately 150,000 married ISA holders die each year, so these changes will benefit spouses or civil partners by increasing the amount that they can save by offering the tax advantages in an ISA wrapper. Surviving partners could have lost out significantly under the previous rules whereby investments held by deceased ISA savers lost their tax-free status. Allowing ISA savings to be transferable will enhance flexibility and will act as a further incentive to save within these vehicles.

BRIEF LOOK AT THE RULES

•   Eligibility: Anyone whose spouse/civil partner died on or after 3 December 2014 is eligible, and the APS could have been claimed since the start of the 2015/16 tax year.

•   Pot size: The rules apply irrespective of the size of the deceased’s ISA pots. No matter how much they had saved in an ISA, you’ll have that amount as an additional allowance. In the event that more than one ISA was held by your partner, the pots will be combined to give an overall additional subscription amount that you can claim.

•   Subscriptions: APS allowance subscriptions (referred to as payments) can be made to a cash ISA and/or a stocks & shares ISA, either with the deceased’s ISA provider or with an alternative that will accept APS subscriptions (not all will). Some ISA providers will allow payments to be made in instalments whereas others only allow a lump sum, so make sure to check.

•   Time limit: Chances are, arranging your new allowance won’t be at the forefront of your mind on the death of your partner. In most cases, at least for subscriptions made in cash, the allowance is available for three years after the date of death.

•   Process: ISA providers will require key information and personal details from the spouse/civil partner to open a qualifying ISA, and they’ll also require an application form to use the APS allowance.

•   Transfers: The APS allowance can be transferred to another ISA provider, subject to the new provider’s acceptance. It can only be transferred once and only where no subscriptions have been made under the allowance. But, after an APS allowance payment has been made, the cash and/or investments related to that subscription can be transferred to another ISA.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

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Why choosing your executors is so important

Why choosing your executors is so important

Wills /

What does an executor do?

Your executor takes on the job of carrying out the instructions you leave in your Will when you die. It can be a difficult job even if your instructions and your property are quite simple – it’s not unusual for the process to take several months.

The job of an executor is sometimes complicated. For example they might have to decide when to sell your property so that the people who inherit the proceeds get the most money and make sure the right amount of Inheritance Tax, Capital Gains Tax or Income Tax gets paid.

 Who can be an executor of a Will?

Anyone aged 18 or above can be an executor of your will. There’s no rule against people named in your Will as beneficiaries being your executors. In fact this is very common.

Many people choose their spouse or civil partner or their children to be an executor. But that doesn’t mean they have to write them out of the Will.

Up to four executors can act at a time, but they all have to act jointly so it might not be practical to appoint that many people.

It’s a good idea, though, to choose two executors in case one of them dies before you do. For example, you might choose one family member and one professional, like a solicitor or accountant.

Professional executors tend to charge, but it can be helpful to have someone involved with specialist knowledge. You can appoint substitute executors to cover the situation if your first choice dies before you.

What makes a good executor?

If you leave something to a person in your Will, they can still be your executor – but they can’t be one of your Will’s official witnesses.

Above all you must choose somebody you trust. It’s going to be up to them to follow the instructions in your Will and to find fair solutions to any disagreements.

If your executor is good at paperwork and managing legal issues it will be helpful. And if you choose more than one executor, they may decide to divide up the work.

For example, if you appoint one of your children and a solicitor as your executors, they may decide that your child might be the best person to deal sensitively with other family members, while the solicitor handles the tax and legal work.

Family members as executors

If there’s someone in your family who you think will handle the job well, it can be a good idea to have them as an executor. For example, it’s very common to name one of your children, a niece or nephew or an adult grandchild.

Make sure you ask if they’re happy to do the job before you write your Will, though – if they say no, you’ll have to get your Will changed.

Think carefully before choosing your husband, wife or partner as your only executor. They’ll be dealing with your death, and by naming somebody else to be an executor with your husband, wife or partner, you can at least take the burden of the paperwork off their shoulders.

Solicitors, banks and accountants as executors

Choosing a solicitor as one of your executors makes a lot of sense, especially if sorting out your things is likely to be complicated – they’re experienced at the job and know their way around legal, tax and property issues.

If the financial side of your Will is especially complicated, it could be a good idea to choose a bank or accountant as one of your executors.

Of course, these professional specialists will charge you for their work.

This happens in one of two ways:

  • by sending a bill for their time when your things have all been sorted out
  • by taking a share of the total value of your estate – this will be written into your will.

Make sure you understand how your solicitor, bank or accountant will charge for being an executor and how much each option will cost before you commit yourself.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

Why choosing your executors is so important Read More »

potentially exempt transfer

How to get the most from a ‘potentially exempt transfer’?

Estate Planning advice, Taxes /

This is a common way of gradually reducing your IHT liability. You don’t immediately incur Inheritance Tax when you make certain gifts while you’re alive. And if you continue to live more than 7 years after you’ve made the gift, it becomes fully exempt from Inheritance Tax.

However, you must be sure that you can ‘afford’ to give the asset away to your beneficiaries. You should not have to rely on the income that the asset produces.

You must also be aware that the asset now belongs to the beneficiaries. So if the beneficiaries were to divorce or become bankrupt then the asset is at risk.

During that 7 year period, your gift is known as a ‘potentially exempt transfer’ or PET.

If you do not survive the gift by 7 years, the exemption fails. The PET is counted as part of your estate, and is subject to Inheritance Tax. How much tax is due depends on when it was given – the rate of tax is lower for older gifts.

You must ensure that you do not have an interest in the gift that you have ‘given’ away. Gifts where you still have an interest in it – no matter when you’ve given it – don’t qualify as a PET. For example, if you continue to live for free in the house you gave your child more than 10 years ago. The house would still be considered part of your estate and therefore subject to Inheritance Tax. This is known as “reserving a benefit” in the property which you gave away.

There is a smart way of giving away a gift but ensuring that the gift is safe from divorce proceedings and bankruptcies. Creating a discretionary trust ensures that the gift is ring-fenced. You still keep a control of the asset, insofar as the Trustees can ensure that the asset is not sold off or squandered by the beneficiaries.

It is a good investment to obtain sound Estate Planning advice.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

How to get the most from a ‘potentially exempt transfer’? Read More »

IHT-FREE allowance

The £1m IHT-FREE allowance explained!

financial security /

The impression the law was set out to give was that couples could leave behind £1m inheritance tax free.

What actually happened was that there was an introduction of a £175,000 nil rate band which will apply to the value of your main residence and will be in addition to your £325,000 personal nil rate band allowance.  The effect is to give the impression that an individual could leave up to £500,000 and a couple £1,000,000 before IHT becomes chargeable.  However, the allowance will not be available until 2017 when it will be introduced at a lower £100,000 level and then slowly increased by £25,000 per year until the full £175,000 is claimable in 2020/21.

This new allowance will also only be available when the deceased has bequeathed their property to ‘direct descendants’.  Direct descendants are described as children, grandchildren, step-children, adopted and foster children and, and following an amendment, now also includes a spouse or civil partner of a direct descendant or a surviving spouse or civil partner if they have not remarried or formed another civil partnership.

However, a Will which provides for your estate (including your interest in the property) to pass into a Discretionary Trust (even if the only beneficiaries are you children and grandchildren) may not qualify for the relief.

The amount of main residence nil rate band will also be reduced if the value of your combined estate exceeds £2.m.  The allowance will taper by £1 for every £2 that your estate exceeds this sum, thus meaning that when the allowance is fully in force then it would not be available once the joint estate exceeds £2.7m.

The relief can also only be claimed against a freehold or leasehold residence, and therefore unless your estate includes a property which you used, or intended to occupy as your home, the main residence nil rate band cannot be claimed.

If the property value does not equal or exceed the amount of main residence nil rate band allowance then any ‘unused’ allowance’ cannot be applied against the value of other assets comprised within the estate.

An illustration would be a couple leaving their estates (on second death) to their children have a property worth £200,000 and cash/investment assets of £800,000.  The maximum amount of main residence nil rate band claimable would be £200,000 and the maximum amount of nil rate band claimable against the cash assets would be £650,000, leaving in this example £150,000 subject to Inheritance Tax.

Therefore, for those who thought they would no longer have an IHT liability, there may be disappointment. It has never been more important to have a well thought out estate plan, complete with an appropriate Will and supporting documentation, to ensure your assets can pass to your loved ones in a tax efficient manner.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

The £1m IHT-FREE allowance explained! Read More »

will

Wife begs a judge to turn off ex-soldier’s life support machine

Wills /

‘Please let my husband die’: Wife begs a judge to turn off ex-soldier’s life support machine a year after he suffered severe brain injury in motorbike

A judge has been asked to decide whether doctors should stop providing life-support treatment to a soldier-turned-policeman who was left in a coma after a motorcycle accident.

Gulf War veteran Paul Briggs, 43, suffered a severe brain injury in a crash while serving with Merseyside Police in July 2015.

His wife Lindsey wants his life-sustaining treatment to stop but doctors disagree.

Mr Justice Charles is expected to make a ruling after a hearing in the Court of Protection – where judges consider issues relating to people who lack the mental capacity to take decisions – in the near future.

Many people genuinely believe that a Lasting Power of Attorney (LPA) is something that can be left until we get older or when the circumstances arise.

Unfortunately life can be unkind, and should an accident happen or illness takes place, an LPA could make life much easier at a difficult time.

So, what happens if you do not have an LPA in place and the worst should happen? As in the case of Paul Briggs, his wife now has to apply to court to be granted permission to make such decisions. This will not only take months to be resolved but will also cost in excess of £5000.

There are two types of LPA.

Lasting Power of Attorney for financial decisions can be used when someone still has mental capacity. The attorney can make decisions on matters such as:

• Buying, selling and making repairs to property

• Paying the mortgage and bills

• Investing money

Lasting Power of Attorney for health and care decisions can be used when someone loses capacity. In this instance the attorney can make decisions on:

• Where you should live

• Your medical care and what you should eat

• What activities you should take part in

Ensuring the right person is in place when the need arises is vital for your peace of mind. More importantly, it is a peace of mind for your family who will have to go through the turmoil of getting help at a time when life should be made easier for them.

It is a harrowing experience for the family when a person who has become unexpectedly incapacitated, and they are left helpless. The family wont be able to disagree with medical decisions taken by doctors. Further, the family maybe left in financial difficulties as bank accounts are frozen.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

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