Transferring and Tapering the Residential Nil Rate Band

Residential Nil Rate Band – Qualifying Residential Interest

By | RNRB | No Comments

Residential Nil Rate Band – Qualifying Residential Interest The rules for the Residential Nil Rate Band (RNRB) introduce a variety of new terms that need defining. The first of these is a Qualifying Residential Interest. The new S8H Inheritance Tax Act 1984 defines a Qualifying Residential Interest (QRI) as an interest in a dwelling which has been the deceased’s residence at some time during his period of owning the property. This includes a property’s garden or grounds. Residence itself is not defined in the Act. In the majority of cases it will likely be clear whether a property is a person’s residence (as the majority of people will only own one property, their main residence). For when it is not, it is assumed that Capital Gain Tax case law will be relevant in this area. The property doesn’t have to be a main home and there is no minimum ownership…

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Disabled/Vulnerable Person’s Discretionary Trusts

By | Guardianship, Inheritance, Legal, Trustees, Trusts, Wills | 2 Comments

The Disabled/Vulnerable Person’s Discretionary Trusts These are useful trusts to use when your client has a child or another relative with a disability and who needs constant support. If this person inherits from a Will directly, this may affect what disability benefits they may receive. We can put the assets into a Discretionary Trust with the disabled beneficiary as the Principal Beneficiary. As with any other Discretionary Trust, there must be more than 1 appointed beneficiary. The main reason for this is because whenever a person in receipt of disability benefits receives an inheritance, the Local Authority will want to assess them. This means if they hold over a certain threshold (this can vary) the Local Authority can cut the benefits that person receives. If the estate of the testator is due to pay any IHT. This will need paying before the assets are passed into the Trust, at 40%…

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Introduction to Guardianship

By | Guardianship, Inheritance, Intestacy, Legal, Uncategorized, Wills | No Comments

Appointment of Testamentary Guardians The appointment of testamentary guardians is rarely considered by parent, but it is highly desirable that they should consider who should look after their children if both were to lose their lives while their children are under eighteen. The appointment of a testamentary guardian can only be made by a person with parental responsibility. What is Parental Responsibility? The legal definition of Parental Responsibility is the rights, duties, powers, responsibilities and authority which by law a parent has in relation to their child and their property. This includes: Providing them with a home maintaining them Choices about their medical treatment How and where they are educated Deciding their name It does not include a duty to maintain the child financially, all parents have this duty regardless of whether they have parental responsibility. More than one person can have parental responsibility for the same child at the…

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Flexible Life Interest Trust

By | Inheritance, Legal, Property, Trustees, Wills | One Comment

Flexible Life Interest Trust  Due to more complex estates and greater wealth, greater flexibility is essential to cope with any future changes to the family structure (such as new family members) and changes in the tax regime. The best way to gain the maximum flexibility is by the use of a Flexible Life Interest Trust (FLIT). How a FLIT works The residue of the estate is held on trust for the surviving spouse or civil partner for their lifetime, after which or when the life interest is ended, a discretionary trust will arise in favour of nominated beneficiaries, usually children and issue. Trustees are given a number of powers. They can grant the income of the trust fund to the surviving spouse/civil partner and have the power to grant the capital of the trust fund to them as either absolutely or as a loan, which would be repaid when the…

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Roles of executors and trustees

By | Executor, Inheritance, Legal, Trustees, Wills | 2 Comments

Who are trustees? A trustee is someone who is given legal responsibility to hold property in the best interest of or for the benefit of someone else (the beneficiaries). As the name implies, the trustee acts under a “trust” to do what is best and to act in the interests of the beneficiaries and not themselves. Number of trustees No more than 4 trustees can be appointed to act at once, however reserve trustees can be appointed. If the property of the trust includes land a minimum of 2 trustees must be appointed. Where a Trust is inserted within a Will in favour of a spouse (as a beneficiary) upon first death, it is almost always advisable that a MINIMUM of two other trustees be appointed to act jointly with the spouse. This is in order to prevent any conflict of interest due to the spouse acting as the sole…

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Intestacy

By | Inheritance, Intestacy, Legal, Wills | No Comments

Intestacy can be a complicated issue. Difficult to wrap your head around the ins and outs, if you haven’t worked much with it before. Below we’ve outlined the the rules in a simple flowchart to give you an idea on who will benefit from your estate if you a) have no Will or b) have no further levels of residue outlined in your Will.

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Understanding the decision in Ilott v Mitson: Does your will now mean nothing?

By | Executor, Inheritance, Legal, Wills | No Comments

The recent case of Ilott v Mitson caused a bit of a stir in the media over its possible impacts on testamentary freedom in England and Wales. ‘Your will means NOTHING’ was the headline in the Express, with similar headlines in the Mail and the Telegraph and much of the media named it as a landmark or ground-breaking case. Much of the reporting of the case was done without a full account of how the decision was made and is likely to be an overreaction. The Law The Inheritance (Provision for Family and Dependants) Act 1975 allows a child to apply for an order (for a lump sum or periodical payments) where the deceased has not made reasonable financial provision for their maintenance. In such a case the court can make an order for a lump sum or periodical payments that will, directly or indirectly, pay for the costs of…

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Could Changes to the Taxation of Pilot Trusts Affect You?

By | Food for thought, Legal | One Comment

Following the Chancellor’s Autumn Statement at the end of 2014, legislation is now going through parliament which aims to limit the use of ‘pilot’ trusts. Pilot trusts are an accepted form of Inheritance Tax (IHT) planning, commonly used to reduce the impact of the special IHT regime which applies to trusts, known as the ‘relevant property regime’. If a trust falls within the relevant property regime, the assets do not form part of the estates of any of the beneficiaries of the trust. Instead, there are potential charges to IHT when capital leaves the trust by way of outright distribution (an ‘exit’ charge) and on each tenth anniversary of the creation of the trust (a ‘periodic charge’). The calculation of these charges is complex but, broadly, they only apply to the extent that the trust fund exceeds the available nil rate band (currently a maximum of £325,000) at the time…

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