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What is the Nil Rate Band?
The Nil Rate Band is the threshold on which there is no Inheritance Tax to pay on your death.
The current Nil Rate Band threshold is £325,000. This means that if your estate is below this threshold then Inheritance Tax will not be charged on your estate. However, anything over this threshold is subject to a 40% Inheritance Tax charge.
What is the Residence Nil Rate Band?
The Residence Nil Rate Band is an additional tax-free allowance that is applied together with the Nil Rate Band, where certain conditions are met.
When does the Nil Rate Band Apply?
The Residence Nil Rate Band will apply if you leave either the whole or part of a qualifying property to be inherited by a direct descendant, these include:
- – Child or grandchild of the deceased
- – Step-child
- – Adopted or fostered children
- – Any child the deceased was appointed to as a guardian, whilst the child was under the age of 18.
If you choose to leave your estate to someone who is not a direct descendant, for example, a niece or nephew, then the Residence Nil Rate Band does not apply.
What is the value of the Residence Nil Rate Band in 2019/20?
From April 2019 if you leave property that you own to a direct descendant then the Residence Nil Rate Band is an additional £150,000.
What if I leave my estate to my spouse and then to my children?
Anything passing between spouse’s passes free of Inheritance Tax. On the second spouse’s death, they would have the benefit of having the Transferable Nil Rate Band, meaning they have their own Nil Rate Band together with any of their spouse’s unused Nil Rate Band. On top of this they would each have their own Residence Nil Rate Band which means that potentially up to £950,000 of the estate can pass free of Inheritance Tax.
What if I am cohabiting?
Unfortunately, cohabiting couples can end up paying more Inheritance Tax than married couples as they do not benefit from the spousal exemption or transferable Nil Rate Band. However, there may be alternative tax planning methods to consider when drafting Wills to relieve some of their Inheritance Tax burden.
What if my estate is over £2 million?
If your estate is over £2 million then the additional threshold is gradually reduced, even if the qualifying property has been left to a direct descendant. Once an estate is over £2 million this additional threshold is reduced by £1 for every £2 in excess of £2 million.
Do the changes in the Residence Nil Rate Band mean I need to update my Will?
We always advise that Wills are reviewed every 3-5 years or when circumstances change. We would recommend you review your Wills to ensure they do not preclude the availability of any potential Residence Nil Rate Band and to ensure your wishes are adhered to on your death.
Inheritance Tax Planning is a complex area of law and it is important when naming beneficiaries in your Will that you are fully informed of any tax implications that may arise.
For more information, advice or guidance on the Nil Rate Band or Residence Nil Rate Band, please contact our Wills team on either 01908 660966 or 01604 828282 or by email on wills@franklins-sols.co.uk
Accordingly to a law firm in London, RadcliffesLeBrasseur, using a relative’s online bank account information to arrange payment of their care home fees, even if it is done in good faith with the account holder’s permission, is probably a criminal offence.
Not only may it be a criminal offence to use the online banking information to access the funds, but also care home providers who ‘know or suspect’ that fees have been paid using these means, may also be committing an offence of acquiring criminal property pursuant to the Proceeds of Crime Act 2002.
This highlights the real dangers of making or facilitating informal payments for care and the importance of putting Lasting Powers of Attorney in place, whilst you have the capacity to do so. Through making a Lasting Power of Attorney, you have the ability to appoint individuals that you Trust implicitly to act in respect of your property and financial affairs (so that they have the legal authority to access your funds to ensure your best interests are looked after) which will overcome the issues explained above.
In the event that you are currently assisting a relative in a care home and they do not have the capacity to put a Lasting Power of Attorney in place, you have the ability to apply to the Court of Protection for a Deputyship order which will then allow you to deal with their affairs accordingly.
If you require some more information in respect of putting in place Lasting Powers of Attorney or require assistance in respect of making a Deputyship Application, please get in touch on 01908 660966 or email me on kathryn.thornewill@franklins-sols.co.uk.
We always recommend that you review your Will every 3-6 years to ensure that it does exactly what you want it to do, especially with the changing of laws surrounding Wills and Probate. On 6th April 2017, the Residence Nil Rate Band (RNRB) came into effect. It is important that you understand what this means for your estate as it may mean that you wish to review your Will to take full advantage of the new rules.
What is the Residence Nil Rate Band?
Currently, as many of you are aware, inheritance tax (IHT) is currently charged at a rate of 40% based on the value of your assets at the date of your death. The charge of IHT is only on assets exceeding the current nil rate band, that is £325,000 for an individual. The introduction of the RNRB means that if an individual is over their IHT allowance, there may be less IHT to pay at 40%, if the family home is left to direct descendants, i.e. children, grandchildren or other lineal descendants such as step-children.
How much is the Residence Nil Rate Band?
The Government announced in April 2017 that the RNRB for the tax year 2017-2018 is £100,000. What this essentially means is that if you leave your residence to a direct descendant in your Will you will still have your current nil rate band which is £325,000 for an individual plus an additional £100,000 tax free allowance on top of the nil rate band which essentially means that you have £425,000 which will not be subject to IHT.
Moreover, if you are married or in a civil partnership, you still get the advantage of the transferable nil rate band and the RNRB also has the ability of being carried forward, which essentially means that on second death there could be up to £850,000 tax free estate.
According to the government announcement the RNRB, currently at £100,000, is due to increase to up to £175,000 in 2021 which ultimately could provide a combined nil rate band (i.e. if you are married or civil partners) of as much as £1 million, provided the criteria is met.
What should you do now?
To ensure that you maximise the tax-saving effect of the RNRB, I recommend that you review your Will or if you do not have a Will in place at the moment, make a Will. There are various rules surrounding the new RNRB and the terms of your Will can affect your ability to claim the same.
If you would like some more information in respect of preparing a Will or if Franklins have prepared a Will for you in the past and you wish to review the same, please get in touch on 01908 660966 or email me on kathryn.thornewill@franklins-sols.co.uk.
As you are all aware, when someone passes away decisions need to be made in respect of what happens to the body whether it be cremation, burial, green burial or anything else. Disputes at this point can arise between family members as to what should happen with the body and therefore, it is always helpful to understand what the legal position is.
Ownership
The general rule, confirmed by case law, is that no one has ownership of a deceased’s body. For this reason, the body does not form part of the estate and thus, no beneficiary can claim any right over the deceased’s body.
However, if the deceased’s body has undergone a process such, as embalmment or dissection, which results in the body or part of it acquiring a value in itself then the general rule outlined above does not apply.
Possession
Despite the general rule that no one can own a deceased’s body, certain people do have the right to possess it. For instance, those responsible for disposing of the body have the right to possess the same in order to do so. Furthermore, the coroner also has the right to possession if an inquest is required and at this point, no one else has a right to possess or dispose of the deceased’s body.
So, who has the responsibility of disposing of the deceased’s body?
- The personal representative(s) – whether this is given by the Will or if the deceased has passed away intestate, from the Grant of Letters of Administration;
- Their parents;
- The homeowner of the property where the deceased’s body is; or
- The local authority for the area in which the body is found.
It is important to note however, that the list provided above has no order of priority and therefore, more than one individual may have the responsibility of disposing of the deceased’s body at one time.
The above highlights the importance of including funeral wishes within your Will or including a detailed letter of wishes in respect of the same. Including provisions in respect of funeral wishes may limit the likelihood of a dispute arising as your wishes will be clearly set out for family members, executors and others to see.
If you would like some more information in respect of preparing a Will or if Franklins have prepared a Will for you in the past and you wish to review the same, please get in touch on 01908 660966 or email me at kathryn.thornewill@franklins-sols.co.uk
There are all sorts of reasons someone may bring a claim under the Inheritance (Provision for Family Dependents) Act (IPFDA) 1975. It might be because an individual has been left out of a Will entirely, they receive less than they expected, or the deceased has passed away without making a Will. Here’s what you need to know about getting your Will right…
The Stats
The Times recently revealed that the number of cases involving adult children disputing their parents’ estates in the High Court is up on previous years. Significantly, the statistics released in relation to claims issued in the High Court in 2015, highlight an increase of 11.5 per cent since 2014 – an increase from 104 claims in 2014, to 116 in 2015. This, when compared to the fact that only eight claims were heard by the High Court in 2005, illustrates the steep rise in claims being bought in the High Court under the IPFDA 1975.
However, it’s important to note these statistics still don’t give us the full picture. Essentially, the stats don’t take disputes settled prior to court action into account. Or the number of cases being brought in the County Court, which is a forum of choice for most contentious probate claims.
The reasons
1. Complex family structures
The complexity of modern family structures – the increase in cohabitation, civil partnerships and multiple marriages, for example – is thought to be a contributing factor to the increase in claims. For instance, with multiple marriages, it’s suggested tensions may arise among the children the deceased has left behind, especially between children who are from different marriages.
Moreover, with the increase in cohabitation, the problem arises when one of the individuals pass away without leaving a Will. At this point, the intestacy rules apply, which means the cohabitee won’t benefit from the estate. It’s argued this problem will not be overcome until the intestacy rules are updated to meet the changes in wider society.
2. Property Prices
It has also been suggested that the increase in property prices has contributed to the rise in claims being issued. This has the effect of increasing the value of the average net estate in this country to rise. In turn, this provides a much greater incentive for people to go to law to dispute their inheritance.
3. Knowledge and accessibility to law
The highly publicised case of Ilott v Mitson from July 2015 may have been a contributing factor to these increased statistics. The attention it received from the general public is said to have created awareness of the ability to bring a claim under the IPFDA 1975.
In the case, an estranged daughter was awarded a substantial sum of money, despite being deliberately disinherited by her mother’s Will. You can read our blog about this case here, dated 28 July 2015.
The legal advice
All this highlights the importance of getting professional legal advice when you’re putting a Will in place. A Will can prevent disputes between your family members and you’ll be advised if there are any potential claims against your estate.
If you’d like further information about Wills, please do get on contact with myself or one of our Private Client team on 01604 828282 who will be happy to help.
Image courtesy of 123rf.com.
Since becoming a Dementia Friend with my colleague, Natasha Thorne, in October 2016, Franklins has joined the initiative to understand more about the disease. Read on to find out how we’re helping to spread the word and get others to become Dementia Friends, too…
Understanding dementia
Franklins are on a mission to understand more about dementia and how we can help others who are suffering from the disease. Since we joined the initiative back in October, Franklin’s whole Private Client Department, in Milton Keynes and Northampton, are now Dementia Friends, together with 16 other employees.
Dementia UK published statistics that 1 in 79 people in the UK population and 1 in 14 people aged 65 and over will suffer from dementia. This highlights the importance of being more aware of the disease and how it can affect the mind.
Through becoming a Dementia Friend, you learn how the disease affects the mind, how this may affect the individual’s perception of their surroundings, and techniques to help the individual concerned.
Become a friend
At Franklins, we’re working towards all of our staff becoming Dementia Friends and recommend that others join, too. You don’t have to be in an organisation to join the initiative – anybody of any age can become a Dementia Friend and spread their knowledge and experience on to others.
As a Private Client Solicitor, I meet people of all ages on a daily basis to talk about Wills, Lasting Powers of Attorney and how to administer an individual’s estate when they have passed away.
The information provided by Dementia Friends has been invaluable. It’s helped me to understand the disease and how we can help people who are suffering from it, even if this is simply by making sure they feel comfortable and safe.
Having Dementia doesn’t mean you’re unable to make critical decisions about where you’d like your estate to go after your death, or who you’d like to appoint to look after you and your affairs if you lose capacity.
If you’d like some advice about preparing a Will or Lasting Powers of Attorney to ensure your affairs are in order, please get in touch on 01908 660966 or email me.
Image courtesy of 123rf.com.
Many people in the UK support charities during their lifetime, but many don’t realise they can also leave a gift in their Will. Here’s how you can carry on giving after you’re gone…
Where there’s a Will
When it comes to leaving a charity a gift in your Will, there are a number of ways to go about it. You can leave:
- a specific sum of money
- a share of your estate
- a specific item, such as furniture or jewellery
It’s important to remember, that the correct information is included when you write your Will, so your gift to the charity is clear and unambiguous. This is where specialist advice from a Solicitor is helpful, to make sure your gift to the charity is honoured.
Effects on inheritance tax
Leaving a gift to a charity doesn’t count towards the total value of your estate for inheritance tax (IHT) purposes, due to the ‘charity exemption’. Leaving a gift may also have the effect of reducing the amount of IHT payable on a taxable estate. This is a more complex area of law, so if you wish to leave a gift to charity with the main purpose of reducing IHT payable on death, it’s a good idea to get specialist legal advice.
Effects on claims under the Inheritance (Provision for Family and Dependants) Act 1975
It’s also important to note that charitable legacies are not immune from attracting a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (IPFDA). A claim under this act is usually bought by a family member or partner who don’t believe they’ve been adequately provided for under the Will.
The number of claims of this nature being issued against charities is on the increase and the courts appear to have a certain degree of distaste for upholding a Will, which excludes family members in favour of charities the deceased had no links to during their lifetime.
For this reason, it’s important to obtain advice about the ways you can limit the possibility of a claim being bought by a family member or partner. This could be done, for example, by including a detailed letter, which explains why certain family members are not benefiting under your Will. Alternatively, you could include them in your Will, but leave them a smaller percentage/sum of money.
Ask the experts
If you do want to include a gift to a charity in your Will, whether it’s a specific sum of money or a share of your estate, it’s important you get the right legal advice. This is to make sure your gift is valid and clear, you understand the implications on IHT through making the gift, and the possible knock-on effects for those who are benefiting less, or not at all, due to your gift to charity.
If you’d like help preparing a Will and would like advice on inheritance tax or ways to limit the possibility of an IPFDA claim being brought against your estate, please get in touch on 01908 660966 or email me on kathryn.thornewill@franklins-sols.co.uk.
We take a look at the recent case of Moore v Moore to illustrate the High Court of England & Wales’ application of the long-standing principle of Promissory Estoppel – that fairness should be maintained where possible…
The case
Roger Moore ran his family’s 650-acre Manor Farm in Stapleford, with the assistance of his son, Stephen Moore. Stephen worked on the farm, for minimal pay, since childhood, but in 1998, he became a salaried partner, and in 2003 his father, Roger, made him a full equity partner.
Sadly, in 2008, Roger Moore began to show signs of early onset Alzheimer’s disease, which forced him to take a less dominant role in running the family business. As Roger’s mental decline continued, the relationship between father and son deteriorated as arguments began.
In 2012, Roger decided to make a new Will, which disinherited Stephen. Although Roger has not yet passed away, the Will was cited as evidence in this case, to illustrate Roger’s change of mind in respect of Stephen’s right to the farm.
Furthermore, Stephen claimed that his father had been influenced by his wife, Pamela, when making the Will. She wasn’t on good terms with Stephen, and wanted her daughter to inherit a share of the business. Another point Stephen contended was that his father has explicitly promised the farm to him, creating an expectation on Stephen’s part that he would inherit the same.
The principle of Promissory Estoppel
Essentially, Promissory estoppel is an equitable doctrine, which is based on fairness. In some instances, it can stop a person going back on a promise, which is not supported by consideration.
There are three main requirements which need to be satisfied:
- A pre-existing legal relationship between the parties (A) and (B);
- A clear and unambiguous promise or representation that one party to that contract (B) will not insist on their strict legal rights against the other (A). This may be expressed or implied, but it is key that (B) intended for the promise or representation to affect the legal relationship between the parties; and
- (A) has changed their position in reliance on that promise or representation, so that it would be unfair for B to go back on the promise.
The outcome
Essentially, the High Court found that the criteria set out above was fulfilled, as there was clearly a contractual relationship between Stephen and Roger. Stephen persuaded the Court that Roger made a promise that he would inherit the farm from his father in its entirety, and had acted in a manor reliant on that promise by working and contributing to the family business for the whole of his working life.
Monty J in his judgment stated: “It seems to me that everything points to an over-arching plan under which Stephen would inherit the whole farm and business in due course and that Stephen was told this was the case. The fact is that promises were made, and in reliance on them, [Stephen] devoted his entire working life to the farm and the business.”
As a result, Stephen was awarded sole ownership of the farming business as the Court was satisfied that the requirements for his equitable estoppel claim to Roger’s share of the farm, as well as all associated cash, were met. Monty J dissolved the farming partnership between the father and son, due to the fact that Roger was suffering from dementia. However, the court also ordered that Roger and Pamela Moore continue to reside in the farmhouse at Stephen’s expense, received an income of £200 per week from the business for as long as they need it, and for Stephen to pay all reasonable health and care costs for them from the partnership funds.
This particular case must have been quite an emotional journey for all parties. Here at Franklins we work to support our clients during these kinds of matters that can be incredibly tricky to navigate. Please feel free to contact myself or one of our Private Client team should you find yourself in an equally complicated situation with a family member. You can reach me by email, or call 01908 660 966.
Alzheimer’s Society’s ‘Dementia Friends’ programme is the biggest ever initiative to change people’s perceptions of dementia. It aims to transform the way the nation thinks, acts and talks about the condition. Recently two of our solicitors have become Dementia Friends…Kathryn Thornewill explains more.
Myself and my colleague, Natasha Thorne, have recently become Dementia Friends. A Dementia Friend learns a little bit more about what it is like to live with dementia and then turns that understanding into action. Franklins Solicitors LLP as an organisation are also helping to make more Dementia Friends with a number of our employees already becoming Dementia Friends. Natasha and I work in the Private Client team and we have found becoming a Dementia Friend really informative and useful, and would definitely recommend others to become involved.
1 in 79 people are diagnosed with Dementia
Dementia UK provides the most up-to-date evaluation of the numbers of people with dementia in the UK, projections on numbers of people in the future and the prevalence of dementia. According to their data, 1 in every 79 people of the entire UK population and 1 in every 14 people of the population aged 65 years and over will get dementia. Significantly, if current trends continue, the number of people with dementia in the UK is forecast to increase by 40% over the next 12 years and 156% over the next 38 years.
So why are these statistics so important?
Through analysing the steady growth in dementia it highlights the importance of understanding Dementia and assisting those who are living with Dementia.
It also highlights the importance of getting your affairs in order. This could be through preparing a Will or putting Lasting Powers of Attorney in place.
Wills
Essentially, Wills can only be put in place while you have the mental capacity to do so. Wills are important to ensure that your estate passes to those that you wish benefit and makes the administration of your estate easier for family members or friends left behind. In the event that you lose capacity to make a Will and do not have a valid Will in place when you pass away, the intestacy rules apply which means that you have no say in who benefits from your estate and could mean that family members who you do not wish to inherit from your estate, will.
Lasting Powers of Attorney
There are two types of Lasting Power of Attorney:
- Property and Finance; and
- Health and Welfare.
Importantly, both types of Lasting Power of Attorney can be used once the individual loses capacity, albeit the Property and Finance Lasting Power of Attorney can be used if the individual still has capacity but only if they authorise the Attorneys to use it.
What this means is that you can appointment a family member, friend or professional who you Trust implicitly to deal with your Property and Finances and make decisions in respect of your Health and Welfare. Ultimately, this will ensure that the people you Trust will have the authority to act on your behalf should you be unable to do so. This could be by, for example, by paying bills and managing your accounts, and make decisions about the care you receive.
The Attorney appointed in the Lasting Power of Attorney must always act in your best interests and, as far as possible, in line with your wishes expressed prior to losing capacity. Again, like Wills, Lasting Powers of Attorney can only be prepared while you have the capacity to fully understand the document and appreciate its affect. Thus it is important to put Wills and Lasting Powers of Attorney in place before it is too late. Essentially, this will ensure that your affairs are in order and will simplify matters for your family members or friends should you ever lose capacity or pass away.
If you would like some further assistance in preparing Wills or Lasting Powers of Attorney please get in touch on 01908 660966 or email me on kathryn.thornewill@franklins-sols.co.uk.
A few people choose the ‘cheap and cheerful’ route to putting a plan in place to leave behind their wishes in the event of their death. Unfortunately, as we have learned from this case, choosing not to sit with a qualified Solicitor, like our team at Franklins, can have some serious consequences.
Barclays are being taken to Court by a lady arguing she should be compensated after claiming their will-writing service is responsible for her losing a share in her father’s London property.
In 2007 Ebenezer Aregbesola used Barclays’ £90 will-writing service to make a Will. Within his Will Mr Aregbesola gifted half of his London home to his daughter, Miss Aregbesola.
However, Mr Aregbesola jointly owned the property with his wife, (his wife was not Miss Aregbesola’s mother). The property was held by them as ‘joint tenants’ which means that on his death the property passed by survivorship automatically to his wife. This happens despite any contrary wishes within the Will.
If he wished to gift his share of the property by Will, the property title should have been ‘severed’ by Barclays, which would have allowed the gift to take effect. However, as this had not been done Mr Aregbesola’s widow is legally entitled to the whole property which she can now gift as she pleases.
This case highlights the danger of low cost ‘do it yourself’ wills which are often too simplistic to reflect accurately the testator’s wishes, but are worryingly becoming increasingly more common.
Where parents remarry and enter into property transactions with their new spouse, Wills leaving assets to children of former relationships need to be checked thoroughly by a solicitor. There are many different options to allow people to provide for new spouses, but to also ensure their children from a previous relationship are not left out or excluded. Furthermore, it is worth also mentioning that marriage automatically revokes a Will unless specifically provided for.
I always recommend to my clients that they review their Will every three to four years, or earlier, especially if their circumstances change.
If you have recently re-married, or haven’t yet drafted your Will, feel free to contact me to arrange an appointment. I will give you some guidance as the types of information I will need from you as well as the questions I will ask as part of the process of drawing up your Will.
If you are looking to revise your Will, please do bring your existing Will with you when you come to see me. You can contact me on 01908 660 966 or by email on Kathryn.thornewill@franklins-sols.co.uk.
