Monthly Archives: September 2017

Business Property Relief; none of your business

Tax. Famously one of life’s inevitabilities, it is a necessary evil that can’t be avoided (just ask Al Capone).

Rightly or wrongly, inheritance tax is often named as one of the UK’s most hated taxes. Thankfully, with the introduction of the Residential Nil Rate Band earlier this year, we are in a much more fortunate position than we have been previously. Theoretically, a married couple can now leave up to £1 million pounds to their descendants without paying a penny to HMRC, but is there anything else you can do to avoid your estate going to the tax man? If you have a business interest or run your own company then indeed there is. So sit down at the back and pay attention.

If you have owned a business for at least two years prior to your death, your executors will be able to claim Business Property Relief (BPR) on certain business assets. Good news, huh? It gets better. Qualifying assets can obtain relief of up to 100%. That means that even if the assets are worth £1 billion, you can give them away without paying a penny in tax.

You can get 100% business relief on a business or interest in a business, or shares in an unlisted company, while 50% relief is available on:

  • shares controlling more than 50% of the voting rights in a listed company;
  • land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled; and
  • land, buildings or machinery used in the business and held in a Trust that it has the right to benefit from.

It’s important to be aware that you can’t claim business relief if the asset is not needed for future use in the business.

What’s more, business assets can actually be given away while the owner is still alive and qualify for business relief. However, certain criteria need to be met – for example, the recipient must keep them as a going concern until the death of the donor.

Despite the booming buy-to-let industry, it should also be clarified that rental property does not qualify for the relief, as it does not meet the criteria of ‘trading’. A business which only generates investment income will not attract BPR, so this excludes:

  • A residential or commercial property letting business
  • A property dealing businesses
  • A serviced office business.

Some business activities are borderline: whether they will qualify for relief depends on the nature of services provided, typically these include holiday businesses, property management and caravan parks – where there is letting, holidays and caravan sales.

Business property relief can make a huge difference to the eventual inheritance tax bill of your loved ones and can also help with succession planning. But it requires careful planning in order to ensure it is available when you need it. Dictating exactly what happens to your assets after you die is incredibly important, whether you own a business or not, and a Will is the best way to do that. It is a terrific way to reduce the uncertainty and upset your loved ones face after you pass away.

If you own a business, or are interested in becoming a business owner, and would like advice on how to include this within your Will, talk to legalmatters. Check your eligibility and ensure that what HMRC is entitled to, is none of your business.

Live to work, or work to live?

Unfortunately fellas, it is a proven statistic that ladies are winning in the longevity stakes, compared to their hairier counterparts.

Figures published by the Office for National Statistics have the average female’s life expectancy coming in at 88.3 years, with the chaps not far behind at a nevertheless none too shabby 85.6 years.

Reasons for this difference are down to a variety of factors; socio economic, geographic and last but not least, being unbelievably stubborn (presumably). In addition, recent data from the ONS also uncovered that different jobs can also affect people’s life expectancy, and not just for the obvious reasons (needless to say, supervillains and Road Runner pest control operatives don’t fare too well).

The study concluded that for both sexes, if you work in a higher managerial position or in a professional occupation, such as a doctor or architect, you can expect to add an additional 365+ days onto your life. If on the other hand you work in what is classed as a ‘routine occupation’ (such as a lorry driver, bar staff or labourer) then statistically, you can shave off just over a year.

More men and women from professional jobs are likely to make their magic 100th birthday than those not working in the professions. Indeed, men are a whopping 3 times more likely to reach this milestone, compared with their non-professional male counterparts.

Since the mid-1980s when this 30-year study commenced, life expectancy across all jobs has been steadily increasing. This is brilliant news. Against all the odds, and in the face of constant nuclear and cold war threats, hairspray related holes in the ozone layer and a diet consisting almost entirely of microwavable meals, e-numbers and Findus Crispy Pancakes, we made it out the other side. Well done everyone!

Naturally, the longer you live, the more risk you have of developing various illnesses. Nearly 60% of those aged 80 or over have a disability. The leading cause of disability, ahead of stroke, heart disease and some cancers, is dementia.

And therein lies the poignant issue; whilst a long life in certainly something to be applauded, surely a happy, healthy and fulfilled life is what we all strive for?

Obviously, none of us can predict the future. For every base jumping, bomb disposal expert who dies peacefully in their sleep well into their 90s, you will have a sensible, cautious, risk assessor who gets hit by a bus at 26. We are only on this beautiful planet for such a short amount of time but being in a job you dislike is certainly one way to make the days feel longer. Life is, quite frankly, too short. So follow your bliss to make the years happy ones, regardless of what job you are in. It’s not particularly realistic to think about changing your job to try to affect the statistics, but it is worth planning ahead.

Whatever your vocation, everyone should have a Will in place, and one which is reviewed from time to time to reflect changing circumstances. Given that the chances are increasing of developing an illness which might affect mental capacity, everyone should have a Lasting Power of Attorney (LPA) set up too.

Legalmatters will definitely be receiving a telegram from the Queen (or presumably the King by then) congratulating us on our centenary. A heady mixture of the best clients in the land and a steady stream of cake, means job satisfaction levels are through the roof and eternal life is surely on the cards.

But if loving your job really is the key to a longer life, surely you can’t get better than the recently advertised ‘International Gin Taster’ as a key to eternal youth? Legalmatters imagines that the successful ‘gintern’ may well live forever (if indeed, their liver can keep up). Chin chin.

How Pensions Have Changed

It’s just over two years since the pension reforms were introduced to give people more choice in accessing their pensions. One of the benefits it’s brought is that it is encouraging people to think more about their pensions when they’re younger.

According to research by Aegon, 15% of people have realised they need to plan more for their retirement. The number of people talking to an advisor has almost doubled in the last 12 months.

What is particularly good to hear is that since the reforms, 14% of working age people are saving more in their pension pot. As a result, there has been a big jump up since April 2015 in the average amount that people have saved, from £29,000 to £50,000.

Just as it’s important for people to seek advice on how to grow their pensions, the new freedoms mean that people should equally take advice to manage when and how much they take out at retirement.

There may be a temptation to withdraw a large sum and leave yourself with too little to enjoy in a long retirement. Before splashing out on a long, exotic holiday, it pays to take a moment to think about some of the costs you may need to prepare for now.

When planning for your future, you may need to consider funeral and possible future care costs, as well as any outstanding debts. If you have built up a large pot and plan to invest it, you will need solid financial advice to ensure you get the best return.

Figures from HMRC show that many people are taking advantage of the freedom to withdraw money from their pension pot after the age of 55. During the last year, an average of 164,000 people withdrew money each quarter. The average withdrawal per individual was nearly £9,900.

The beauty of the pension reforms is that people have more choice to decide what to do with their pension pot. There are 6 options once you get to age 55:

1. Leave the pot until a later date
2. Buy an annuity
3. Invest the pot to produce an income
4. Withdraw cash in chunks
5. Withdraw the whole pot in one go
6. A mix of the above

Many people are still following the traditional route of buying an annuity, but as the figures go to show, many are also enjoying their new-found freedom. But the choices you make at retirement may have a big implication on the inheritance tax your dependents will need to pay.

It is worth discussing this with both your financial advisor and your Will writer. It’s a complex area and in some situations, it may be advisable to set up a Trust.

For advice on planning your Will please contact legalmatters today on 01243 216900 or email us at info@legalmatters.co.uk.

Where There’s A Home, There’s A House – Using Your House In Retirement

A house is far more than simply a home. It’s also an enormously valuable asset, which can help you meet the costs of retirement.

In truth, most of us aren’t saving enough to cover our retirement needs. A recent study by Prudential found that more than half of those planning to retire this year will work beyond state pension age, with many pointing to a lack of money as the motivating factor. Around 1 in 12 said they simply could not afford to retire before they reach the age of 70.

However, the value tied up in our properties represents a potential answer for some with insufficient savings. According to Key Retirement, the property owned by the over-65s is worth a massive £1.054 trillion. So how can people tap into that money?

One answer is to downsize to a smaller property. These will usually be substantially cheaper, meaning that you can move into a property which is less difficult to manage and bank thousands of pounds to supplement your pension.

If you don’t want to leave your property, perhaps because of sentimental reasons or because it is close to family, then looking to remortgage may be an option. However, some lenders are less than eager to lend to people in their later years, so it may not be possible. Your chances of successfully remortgaging will depend on your individual circumstances.

An increasingly popular option is equity release, where you essentially unlock some of the equity you have built up in your property. Interest in equity release is at record levels and in the first half of 2017, retired homeowners cashed in £1.25 billion of housing wealth, according to Key Retirement. While these products are more expensive than remortgaging, they provide a useful alternative and should allow you to leave some form of inheritance for your loved ones after you pass away.

Interested to see how your property can supplement your retirement or be left to your loved ones after you’re gone? Speak to us today on 01243 216900 or email us at info@legalmatters.co.uk.

Spoiling Legacies For Celebrity Children

Father of 4, Gordon Ramsay, has joined a growing list of celebrities who have decided not to leave their inheritance to their children. The celebrity chef, perhaps as well known for his colourful language as his culinary genius, believes in instilling a strong work ethic in them instead.

He has homes in London, Cornwall and LA and an impressive income – he is in 26th place on the Forbes rich list, with an income for the last year of £46 million. Despite this, he shares the view with many that to leave his offspring a fortune would be to spoil them.

He and his wife Tana have agreed they will give their children the 25% deposit they will need for a flat – but that’s it.

The common theme among the people taking this stance is that they want their children to grow up hard-working and fulfilled. They believe that handing on large sums of money changes people for the worse.

There are many who feel that their money is better spent on charitable works. In 2010, Bill and Melinda Gates and Warren Buffet set up the Giving Pledge. They encouraged 40 of America’s wealthiest people to join them in committing to give more than half of their wealth away, either while they are living or through their Will.

In an interview on ITV’s This Morning, Bill Gates summed up his attitude towards inheritance: “It’s not a favour to kids for them to have huge sums of wealth. It distorts anything they might do creating their own path.”

Simon Cowell has also said he plans to leave his money to charity. Whether he has changed his mind since the birth of his son, Eric, remains to be seen.

Sting on the other hand has said he intends to spend his wealth while he’s still alive. He, along with Nigella Lawson and Lenny Henry have echoed similar concerns as Bill Gates about over-privileging their children.

Back in 1992, three female inheritors set up the Inheritance Project. They wanted to talk about how inheriting wealth can be a negative thing and the effects it had on them. They interviewed 200 people in a similar position to them. They found that it was common for people who had inherited large sums of money to be trapped by their lack of needing to work and that many of them found it difficult to sustain relationships and had problems with addictions.

Obviously, all these examples involve very large sums of money and the people in question are not leaving their children penniless. But regardless of the size of your estate, it is worth putting some thought into what you leave to who and ensuring that it’s drawn up correctly.

For help on any aspect of preparing your Will, please call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

From here to maternity; why sorting out your Will needn’t be a Royal pain…

This week, a statement from the palace made the happy announcement that William and Kate are expecting once again. This news makes legalmatters feel all gooey inside. Legalmatters does love a baby, particularly a royal one with a rosy cheek and a knee sock, and extends the warmest of congratulations to the Cambridges on their impending bundle.

It has been baby news all around this week at LM towers with many clients sharing their news of family additions. New babies, together with holidays, are often one of those trigger events that get people thinking about their legal affairs. It’s a funny old thing having babies. Along with an indescribable love and exhaustion that you never thought possible, becoming a parent (and legally responsible for another tiny human) slaps you in the face with a fear of mortality like no other experience. No longer will you approach life’s risks with the same reckless abandon as your childless life before; bungee jumping and sky diving may take a backseat for a few years. Let’s face it, even that initial drive home from the hospital can be one of the most tense and apprehensive of your life. Don’t they realise you’ve got a baby in the back for goodness sake? You’ve even fashioned a gaudy yellow sign to warn other drivers of your precious cargo – yet they’re still driving like Bowser from Mario Kart as you indicate half a mile before your turning and drive at 15mph in a 40mph zone.

One client in particular has been in touch to put their instructions ‘on hold’ whilst they await their first baby in the next few weeks. They cheerily informed us that they would be back in touch in 6 weeks or so to finish off their Will and as we hung the phone up we wanted to ruffle their hair with an ‘aawww’ and a head tilt.

It may well be that 4 weeks post birth they will be straight back on the phone with confirmation of who is to inherit the family clock and who their executors are. But, it may be that there are other things taking up their time when they are at home with a one-month old. Such as brushing their teeth, wearing something that isn’t covered in milk and – the holy grail – actually managing to drink a cup of tea whilst it’s still hot.

Life with a new baby is hard. Physically, emotionally, financially. It can take time – a lot of time – being caught up in the wonderful, confusing, exhausting and worrying whirlwind of looking after a new baby before you step outside, blinking into the sun, and make steps to reintroduce a semblance of routine and anything which resembled your life before.

Of course you should get your Will sorted, now more than ever. But we are realists and know that life has a habit of getting in the way. Sorting out your Will in the months post birth is on the list with getting the car serviced, shaving or sorting out the weird drip in the downstairs cloakroom tap. You know you must do them, but seriously, all hours in the day are spent keeping a small person alive. Making it out of the house to get to Rhyme Time can be an effort of Herculean proportions, let alone the time and expense of going to see a Solicitor to sort out your Will and LPAs. Legalmatters knows that your time is precious and time spent going to see a Solicitor at their office – around naptimes- could be time spent watching Netflix and eating Hobnobs. Sleep when the baby sleeps? Yeah, right. I guess you then cook when the baby cooks and clean when the baby cleans too?

Legalmatters can take all of your instructions over the phone (or email. Might as well spend those 3am feed times productively rather than Facebook stalking ‘Gemma from Accounts’ holiday photos from Faliraki in 2007). Sorting out your Will and LPA with legalmatters can be quick, easy and super cost effective (as maternity leave pay is not the time to be paying extortionate fees for your legal documents).

So, whilst Catherine spends the next few months with her feet up contemplating suitably regal names (top tip: Arthur, Henry, Richard = good; Kong, Joffrey, Wenceslas = avoid), why not spend the time putting legal documents in place before the big day?

Choosing guardians for your children is nowhere near as fun as choosing nursery colours – but it is far more important. For help preparing your Will, please call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.

Only 5% Are Prepared For The Future

 

Whenever we spot a new wrinkle or grey hair, we often pause for a moment and consider how the years are rolling by. Most of us at some point will also worry about how our health might deteriorate in our later years.

In a recent study by a national law firm, 75% of respondents said they worried about getting older and 70% were specifically concerned about developing dementia. Surprisingly, despite these worries, only 5% had made plans to deal with such an eventuality.

When someone develops an illness such as dementia, or is involved in an accident that takes away their capacity to make decisions for themselves, someone else needs to make decisions for them. But nobody has the automatic right to do so. Neither your partner nor your children nor your closest friends and relatives can, unless you have specifically given them permission in advance in the form of a Lasting Power of Attorney (LPA).

An LPA can only be made while you have the mental capacity to do so. If you lose capacity to make your own decisions and there is no LPA in place, your loved ones will need to apply to the Court of Protection to appoint a deputy to make your decisions for you. They can apply to be appointed as your deputy, but it will be the court that makes this decision rather than you.

It costs £82 to register an LPA with the Office of the Public Guardian.

On the other hand, the costs for setting up a deputy via the Court of Protection are more expensive. The application fee is £400 for each type of deputyship: health/welfare and property/financial affairs. An appeal, if required, is another £400 and if the court decides a hearing is required, that’s a further £500. In addition, there is an assessment fee of £100 for new deputies and an annual supervision fee.

No-one likes to consider what may befall them in the future. It’s a much easier job to plan for though if done in advance. The financial and emotional cost for your family to deal with it after the event can be significant. Perhaps most importantly of all, LPAs allow the individual concerned to document their wishes around what happens to them at a later date and decide who will make those decisions on their behalf.

For help preparing an LPA, please call legalmatters on 01243 216900 or email us at info@legalmatters.co.uk.