Holding your properties as tenants in common is a simple change to the way your property or properties are held which can save you thousands of pounds.
But what does this mean? This article aims to explain the legal terminology of tenants in common in plain English and how it could benefit you.
How tenants in common works
Most couples own their homes as joint tenants, meaning they both own the whole home. Holding the property as tenants in common means that each owns a share of the property, either a percentage or half each. This protects the agreed share for couples who have put unequal deposits into a property. If parents are gifting deposits to their children, it is also a way of easing fears in case of a break-up or death.
In the case of tenants in common, one partner can leave their share of the property on death whilst allowing the other partner to continue living there, passing the remaining share on death. It can also prevent your home being sold in the event you need to go into long term care.
There is no Inheritance Tax (IHT) for assets left in a Will to their spouse – in other words the surviving partner doesn’t have to pay IHT. After the remaining partner dies, the beneficiaries of their estate, usually the children, do have to pay IHT.
The rising cost of houses means that one property alone can put the estate over the IHT threshold. If the house is owned as joint tenants, both own the whole property. If one partner dies, the other automatically becomes the sole owner of the home. In the case of tenants in common each person owns a share of the house, usually split half and half.
Joint owners can split their home in two, therefore benefiting from tenants in common. By doing so, the half belonging to the person who passes away first, would be inherited by the beneficiaries immediately.
Provided the half is worth less than £325,000 – the current IHT threshold, no tax will be due. When the remaining partner dies, their half, inherited by the same children, could be under the threshold which again would mean no IHT is due.
Making it happen
You’ll need to inform Land Registry of the split and also write to each other to specify your intentions of the split.
As providers of Wills, Lasting Powers of Attorney and Trusts we can take care of all of this on your behalf. For further information or to arrange an appointment please call one of our expert team at legalmatters on 01243 216900 or email us at firstname.lastname@example.org.
Cryptocurrency is, in the most basic terms, an alternative digital currency to traditional government-issued currency. A recent survey by Dalia revealed that 5% of the UK are planning to buy cryptocurrency in the next six months, with 9% already owning cryptocurrency. Experts even predict that 33% of millennials will own some form of cryptocurrency by the end of this year.
The question is – with more people investing in cryptocurrency, how will it affect inheritance when these people die?
Firstly, it’s important to learn which types of cryptocurrencies are currently the most popular. Here are some of the most common forms of cryptocurrency and their codes:
- Bitcoin (BTC)
- Litecoin (LTC)
- Ripple (XRP)
- Ethereum (ETH)
- Zcash (EC)
- Monero (XMR)
Make sure you provide wallet keys in your Will
It’s essential to tell you future beneficiaries you have invested in cryptocurrency and to list the details of your cryptocurrency wallet in your Will. This is because it’s purchased under a pseudonym and can be very hard to trace if your beneficiaries don’t have the wallet details. By providing your public and private keys in your Will, you’re making it much easier for your beneficiaries to access the wallet. Some cryptocurrency providers have policies in place to transfer any cryptocurrency to beneficiaries or next of kin, though at the moment they are hesitant to have these crucial conversations for fear of fraudster activity.
Cryptocurrency is an intangible asset and eligible for Inheritance Tax
HMRC now treats cryptocurrencies as any other currency – so it’s not exempt from Inheritance Tax and should be listed on your Will. Cryptocurrency is one of the fastest growing currencies in value, so it’s important to keep track of how much your cryptocurrency fluctuates over time. The current standard exemption threshold for Inheritance Tax is £325,000. For example, if you have £100,000 in Bitcoin in 2018, it may grow to £400,000 by the time you die. If this is the case, your beneficiaries will need to pay a 40% Inheritance Tax rate on the £75,000 that exceeds the threshold.
For help with this, or on any aspect of Will writing, please give us a call at legalmatters on 01243 216900 or email us at email@example.com for further details.
Civil partnerships were reserved for same sex couples only. However, in recent years, opposite sex couples have been campaigning for civil partnerships for heterosexual couples. The Supreme Court of England and Wales ruled in favour of civil partnerships for all, as the Civil Partnership Act 2004 was seen as an infringement of the European Convention of Human Rights. The legislation will be changed, though this is thought to take some time.
So how does a civil partnership affect estate planning? Firstly, it’s important to determine what ‘estate planning’ actually is. Your estate covers everything you own including property, finances, material possessions and even your social media accounts. An estate plan is how you wish to distribute your assets and possessions among your loved ones.
Here are six ways a civil partnership changes estate planning for all couples:
- If you die without making a will your partner will still inherit your assets
If you’re in a civil partnership and you die intestate (without making a Will) then your partner will automatically inherit a portion, or all, of your property. For example. if you and your partner own and live in a house together, they will stand to automatically inherit it after you die – unless there are special circumstances.
- If you die having made a valid will your wishes will be carried out
If you or your partner dies after making a valid Will, then all wishes will be carried out as they would be for a Will from a marriage. For example, if you want to pass down your home to your partner and your holiday home to your children then the wishes will be carried out as specified.
- Civil partners are exempt from Inheritance Tax
Neither you nor your partner will pay Inheritance Tax if the value of your entire estate is below £325,000. You will also be exempt from Inheritance Tax if you leave all your estate to your civil partner, community sports club or a charity.
- The Inheritance Tax increases to £450,000 if children are the heirs
If you want to leave your property to your birth children, the Inheritance Tax exemption threshold increases to £450,000. This also extends to foster, adopted and stepchildren.
- You can add surplus Inheritance Tax threshold to your partner’s threshold
If your estate is under the threshold, the ‘unused’ threshold can be added to your partner’s threshold when they pass away. This pushes the maximum Inheritance Tax threshold to £900,000.
- You can pay a reduced Inheritance Tax rate in some circumstances
The standard rate for Inheritance Tax is 40% but you can reduce it to 36% if at least 10% of your net assets are left to charity in the Will. If you and your partner owned farmland or woodland you may be eligible for Agricultural Relief on your Inheritance Tax bill.
Estate planning can look complicated. If you’d like some help in writing your Will, contact one of the team at legalmatters on 01243 216900 or email us at firstname.lastname@example.org.
According to the latest research, the majority of over-50s don’t understand essential Inheritance Tax terminology. Furthermore, this lack of financial education could result in them passing on less than they expect.
The research, from Alan Boswell Group, found that of the over-50s surveyed:
- Fewer than 30% understood key Inheritance Tax terminology
- Only 27% were able to correctly identify that ‘nil-rate band’ referred to the threshold at which an estate became liable to Inheritance Tax and that this threshold is set at £325,000
- Only 44% were aware that the current rate of Inheritance Tax was 40%.
With the Government announcing record Inheritance Tax receipts of over £5bn in 2017/18 (that’s an increase of over 50% since 2014), there are fears that people could be failing to minimise their tax liability correctly.
Rising property prices are impacting Inheritance Tax liability
An increase in property prices across the UK has meant that more and more people are now liable for Inheritance Tax.
Since 2009, the tax has been set at 40% on all assets over the £325,000 threshold; despite the fact that house prices have rocketed over the past ten years. What this means is that Inheritance Tax now hits an increasing number of estates. Before 2009, the threshold was set each year to reflect inflation and rises in overall asset prices.
As such, it’s perhaps no surprise that forecasts from the Office for Budget Responsibility (OBR) show that the number of estates on which Inheritance Tax is paid has more than quadrupled over the last seven years.
It’s also important to note the introduction of the residence nil-rate band (RNRB) last year, providing an additional inheritance tax allowance for individuals who leave their main residence to lineal descendants.
The additional allowance is to be brought in gradually, increasing by £25,000 on an annual basis. The amount began at £100,000 in 2017/18 and eventually grow to £175,000 in 2020/21.
In total, as this is on top of the current threshold, this amounts to an allowance of £1 million for a couple.
The problem facing the over-50s
With Inheritance Tax affecting more people than ever before, it is vital that the over-50s are fully informed about this topic. Worryingly, however, the latest research shows that this is not the case. As a result, it is likely that families will lose out while the Government benefits.
But there are ways to reduce a person’s Inheritance Tax liability (e.g. by using ISAs, a deed of variation, discretionary will trusts, etc.). So, it is vital that careful and professional estate planning is carried out to ensure assets are left to family members rather than the taxman.
To find out how you can pass on your estate in a tax-efficient way, speak to one of our expert team at legalmatters on 01243 216900 or email us at email@example.com.
Latest figures reveal only 59% of the UK have written a Will. Of those people, 6% have written a DIY Will. While there are some advantages to create-your-own Wills, there are even more pitfalls. Here, we explore some of the reasons why DIY Wills may not be the answer…
Whilst most of us have come across DIY Will kits or online Will creation websites, have you ever asked yourself “are DIY Wills legal?” The short answer is yes, although they must still meet all requirements of a professionally written Will.
A DIY Will kit doesn’t provide sufficient help and guidance for the more complex circumstances in your life. This includes, for example, if you aren’t married to your partner, have children from a previous relationship or hold an inheritance in a trust until a child’s 18th birthday. Using the services of a Will writing professional means you have access to all the assistance you need, greatly reducing the risk of mistakes in your Will.
Although a DIY Will may cut costs initially, it could cost you in the long-term. All Wills must be written using the correct terms and language, as well as ‘witnessed’ by the right people. If this isn’t done properly, then the Will is invalid and could cost your heirs their estate, or money intended for them. Hiring a Will writing professional helps you to avoid this pitfall; a well-written Will is more robust when faced with any potential objections.
Even if your Will is still valid, there’s a bigger chance that distributing assets to your heirs could take a lot longer than usual. This can come with additional fees and, in some cases, unnecessary tax. According to the Co-operative Legal Services (CLS), 38,000 families a year experience prolonged probate ordeals for poorly written DIY Wills.
What’s more, up to 10% of your estate could be subjected to unnecessary fees if your Will is ineffective. The average value of a person’s estate in the UK is currently £160,000 – so this could incur costs of up to £16,000, a cost which could be avoided if a Will writing professional was used.
It’s also worth thinking about what could happen if your circumstances change during your lifetime. For example, if you get married, have children or grandchildren, someone named in your Will passes away or if your financial situation changes then your Will also needs to be altered. Significant changes to your Will means you’ll need a new one, whereas smaller changes call for a codicil (a document that allows you to make minor adjustments to your Will).
It can be daunting to make these changes, especially if you’re already going through a stressful time due to a death in the family, a divorce or financial issues. Calling on the help of a Will writer can greatly reduce stress and the worry of whether or not your Will has been rewritten correctly.
For help and advice on the potential pitfalls of DIY Wills, speak to one of the team at legalmatters today. Call us on 01243 216900 or email us at firstname.lastname@example.org.
What is Critical Event Protection and is it relevant to me?
If you are a member of a Death in Service Scheme, if you have a separate Critical Illness and Life Insurance Policy or even if you have a Pension Plan, you should look at Critical Event Protection.
What are these schemes and policies for?
Death in service schemes are often part of your employers’ group policy scheme which provides a lump sum for family or to cover the death of a shareholder in a business.
Critical illness policies produce an income supplement in the event of a critical illness and on death there is usually a lump sum paid.
Life insurance policies may make provision to cover inheritance tax, provide a lump sum for family or to cover the death of a shareholder in a business.
An occupational or self-invested pension plan may have a lump sum which will be paid on death.
What happens to these assets when I die and why would I need Critical Event Protection?
These valuable assets usually only pass to your next of kin if you’ve nominated them. If you haven’t, they go into your estate and may then become subject to Inheritance Tax at 40%. In this way, sometimes funds are wasted or end up with people you don’t even know yet, for example if your current partner or next of kin starts a new relationship.
How can I protect these assets for my dependents?
Using a trust preserves the use of these funds for your dependents, avoids direct ownership, can avoid the need to incur estate administration costs and may save inheritance tax. A trust protects and ringfences these lump sum proceeds and means a quick claim by the trustees upon your death can make the funds available in a protected trust environment to meet family costs.
At legalmatters, we have put together a simple solution, which will enable you to deal with these valuable assets, called Critical Event Protection.
Over half of people have not updated their Will. That’s according to a recent online poll. The survey found that while people have started to recognise the importance of Wills when it comes to establishing their final wishes, the majority are still unaware of the need to review them.
However, life can change quickly, so it is recommended that you review your Will after any significant life event, or every five years.
When do you need to update your Will?
The poll shows that people are largely unaware of the impact legislative and domestic changes can have on the distribution of their estate.
For example, even where a Will already exists, most people don’t know that getting married automatically invalidates it.
Here are just some of the instances when you should check your Will:
- The birth of a child or grandchild
- When buying a home (or other property)
- When getting married
- If you inherit any money or property
- If you get a divorce
- If you remarry
- If you sell a home (or other property)
- If you start a second family
- If you need care and assistance.
Each of these circumstances will have an impact on your Will and some could even nullify it. Likewise, increases (or decreases) in wealth also require a Will review as it is crucial to ensure it reflects your current financial situation. That’s why, even if everything else stays the same, it is important to review your Will at least once every five years.
Regulatory amendments, such as inheritance tax changes, should also prompt a review to make sure you are taking advantage of all available exemptions and allowances.
Updating your Will is easy
Efficient and regular planning will give both you and your family peace of mind, and minimise the amount of inheritance tax due. By speaking to one of our expert team and taking the time to update your Will, you can help to ensure that your wealth is passed on in-line with your wishes.
We can provide all the guidance you need to update your Will so that it accurately reflects your wishes. Call us on 01243 216900 or email us at email@example.com.
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 firstname.lastname@example.org for further details.
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 email@example.com for further details.
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 firstname.lastname@example.org for further details.
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