Monthly Archives: March 2018

Trusts vs Prenups

Some recent research indicated a rise in families using discretionary trusts instead of pre-nuptial agreements to protect family assets.

Typically, people think of pre-nuptial agreements as the standard approach for couples to take when considering marriage. They are designed to separate personal property and wealth accumulated prior to marriage and safeguard it in the event of a divorce.

However, although a court will take a prenup into consideration if a couple are divorcing, they are not legally binding in the UK.

Whilst courts tend to uphold them, there are many factors which can result in them not being upheld, perhaps if the court deems the agreement unfair, if the couple did not receive independent advice, for instance.

Equally, prenups still hold a certain stigma and couples and families can often feel uncomfortable discussing them.

On the other hand, discretionary trusts are viewed more as a planning tool and allow parents to protect family wealth and assets against a future divorce.

Typically, in this type of trust, the parents will set themselves up as trustees. As well as having full control over the assets, they can also decide who can benefit from the trust whilst maintaining discretion to make payments or transfer assets from the trust if they wish.

Each parent can put up to £325,000 into a discretionary trust during their lifetime. (This figure may be reduced if other gifts have been made). As long as the value of the gifts made and the value being put into the trust do not exceed £325,000 in the last seven years there will be no immediate inheritance tax to pay either. If the parents live for another seven years, these assets will not form part of the estate for inheritance tax purposes.

In light of these factors, discretionary trusts are certainly something that families should consider. Not only can it protect family wealth in the event of a divorce later on, it can also help to reduce a future inheritance tax bill.

Whilst they are complex, setting up a trust can be straightforward if you received the right advice. As well as minimising tax responsibilities a trust can also help to protect your assets in the future.

To find out how you could benefit from a prenup or a trust, give us a call at legalmatters on 01243 216900 or email us at info@legalmatters.co.uk for further details.

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Could you be a royal legacy?

Most of us at some point have probably wondered about our family history. Sure, you may know about your grandparents’ roots and perhaps even a generation or two before that, but where does your family line start?

What sort of riches or scandal have your ancestors seen? It’s because of this curiosity about our family histories that shows like ‘Who Do You Think You Are?’ have become so popular, as have websites helping you to trace your family tree.

So could you have royal blood? According to a study from researchers at the University of California and the London School of Economics, your last name could be a good indicator of whether you are one of the top 1%.

The study looked at unique surnames among the richest – names like Atthill, Bunduck, Balfour, Bramston, Cheslyn, and Conyngham – and found that when it comes to social mobility, moving in and out of the upper classes takes centuries, not just generations.

In fact, on average upper-class families took between 300 and 450 years before their descendants dropped into the middle classes.

Fascinatingly, of the people who died between 1999 and 2012, if they had one of the 181 rare surnames of wealthy families in the mid-19th century, they were generally three times wealthier than the rest.

Whether you come from generations of wealth or are completely self-made, it is vital that you take steps early on to ensure that you pass it on to your family members as seamlessly as possible.

That may mean considering your likely inheritance tax liabilities, but you will also need to write a Will.

After all, writing a Will is the best possible tool at your disposal to ensure that your assets are divided precisely as you wish after you pass away. If you don’t, you may be exposing your family to unnecessary heartache at an already difficult time.

For help and advice on writing your Will, get in touch with us at legalmatters by calling us on 01243 216900 or emailing us at info@legalmatters.co.uk for further details.

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What can legacy giving do for your tax bill?

Who are you going to leave money to in your Will? Your spouse or partner is probably first in line, any children or extended members of the family may pop up here and there too.

But what about charity?

Thousands of people every year choose to leave a gift to charity in their Will, whether it’s a fixed amount, a fixed percentage of their estate or even just what’s left after other gifts have been handed out to their surviving loved ones.

It doesn’t have to be a charity that you’ve been particularly involved with during your life either – you can leave money to any registered charity.

There’s another bonus to doing this, besides simply helping a good cause. Legacy giving – where you leave money to a charity – can also reduce your inheritance tax bill.

With inheritance tax, you – or rather your estate – is charged a rate of 40% on every £1 that the estate is valued above the nil rate threshold, which currently stands at £325,000 (though couples essentially enjoy a £650,000 threshold).

However, when you leave money to charity, it won’t count towards the value of the rest of your estate, giving you the opportunity to reduce the value of your estate below that threshold, ensuring no further tax is payable.

Even if your estate is still valued about the threshold, charitable giving can help reduce your tax bill. If you leave 10% of your net estate to charity, then the inheritance tax charged on the remainder of your estate falls from 40% to 36%, a reduction which could see the estate save thousands of pounds in tax.

Many of us regularly give to charitable causes while we’re alive. To do so after your death will not only help support good causes with some of your estate, but for your beneficiaries there are tax benefits that can come with it. Obviously, you should discuss this carefully with your loved ones and your will writer when drafting your Will.

It’s important for you to be clear when drawing up legal documents. Legalmatters can help, we’re always happy to discuss your needs or answer your questions. Call us today on 01243 216900 or email us at info@legalmatters.co.uk for further details.

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Do you need a living Will?

A living Will (or an advance decision as it is also known) allows you to make a decision about refusing medical treatment in the future. It means that if you are ever in a position where you cannot communicate your wishes, medical staff know what they are. This can even include a decision not to receive certain life-sustaining treatment.

An advance decision is a legally binding document. However, if your family or medical staff are unaware you have prepared one, then your wishes may not be honoured.

This was the case for Brenda Grant. Brenda suffered a stroke in 2012 and although she had prepared an advance decision stating that she did not want certain treatments, she was fed artificially for two years.

In this case the hospital was in possession of the advance decision but had misplaced it.

Whilst Brenda had informed her doctor of her decision, she had not told her family, so it was only when her doctor flagged it up two years later that her wishes were finally respected.

If she had chosen to prepare a lasting power of attorney (LPA) instead, this situation could have been avoided.

An LPA for health and welfare covers a wide range of issues relating to the care of an individual if they don’t have the capacity to make decisions for themselves.

Though it is a legal document just like the living Will, it must be lodged with the Office of the Public Guardian in order for it to be recognised. This ensures that it will be recorded on a national and searchable register. One or more attorneys (normally family members) must be appointed to make the decisions, so in the event of you not being able to make them yourself, there is less risk that your wishes will not be known.

An attorney must make decisions that are in the best interest of the donor (the person who the LPA relates to). The donor can detail what their preferences are and list any instructions for specific circumstances.

Whilst it is possible to have both a living Will and an LPA for health and welfare set up, the latter will take precedence should a conflict arise.

At legalmatters we’re always happy to discuss our clients’ needs and to answer their questions. Call us today on 01243 216900 or email us at info@legalmatters.co.uk.

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