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A B C D E F G H I J K L M N O P R S T V W Y

Wealth Protection

A quarterly newsletter covering topical issues relating to wealth matter including tax planning, wills, power of attorney, trust and family law. The bulletin is designed to provide useful information and advice to business owners, entrepreneurs, family businesses, those who are retired or coming up to retirement and those in senior management across all sectors.

Latest Issue

In the latest issue of our Wealth Protection bulletin we look at the implications from Brexit for private client matters and family law proceedings, plus an update on the Residence Nil Rate Band which comes into effect next April where we outline the conditions to qualify.

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Inheritance Tax Avoidance – Woman Jailed for Nearly 3 Years after Lying to HMRC

Wednesday 10th June 2015

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Wealth Protection Bulletin - Issue 15

A recent case has highlighted the risks of failing honestly to disclose the full value of a deceased’s estate to HMRC.

Ms Theresa Bunn, 56, has been jailed for 2 years and 8 months after failing to disclose to HMRC the extent of her deceased aunt’s assets on the relevant tax forms completed when applying for probate.

Ms Bunn, whose wealthy aunt died in 2010, claimed that the estate was worth £285,000, which is below the nil rate band limit for inheritance tax of £325,000. In fact, Ms Bunn had inherited an estate worth more than £1.5 million. Ms Bunn also admitted failing to disclose the fact that she had received substantial cash gifts from her aunt during her lifetime. Consequently, Ms Bunn had avoided paying around £500,000 in inheritance tax.

An investigation was launched into Ms Bunn’s finances when HMRC officers were alerted to the fact that Ms Bunn could have been concealing evidence of an inheritance by using a friend’s bank account.

Ms Bunn was charged with the offence of Cheating the Revenue contrary to common law. The Assistant Director of HMRC made the following statement:

“Theresa Bunn had the benefit of large amounts of cash and lied purely to avoid paying tax. The vast majority of us pay what is due, when it is due, but HMRC will not tolerate tax fraud and will investigate those we suspect of operating outside the law.”

HMRC will investigate the finances of anyone where suspicion is aroused by unusual activity and its “Connect” software is sophisticated in identifying possible abuse. This case demonstrates the significant penalties which could be enforced if an individual knowingly provides false information to HMRC.

Careful and early estate planning during the lifetime of an individual can however, in many cases, significantly reduce the amount of inheritance tax payable by beneficiaries when an individual dies, or even avoid a tax bill altogether.

If you would like more information about inheritance tax planning and how we can help you please contact our Private Client team.
 


Beware of Home Protection Trusts – Protecting your Estate

Wednesday 10th June 2015

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Wealth Protection Bulletin - Issue 15

Eight people promoting and selling so-called asset protection trusts to elderly clients have been found guilty and given prison sentences.

These sort of trusts, referred to as asset protection trusts or property protection trusts or estate preservation trusts, are promoted as a means for homeowners to protect their property against local authority charges if they have to go into residential care. The theory is that a property placed in trust is not regarded as their asset for means-testing purposes, although local authorities may attempt to disregard the trust under the deliberate deprivation of assets rules.

This type of planning has been an area targeted by the unscrupulous who have attempted to cash in on people’s concerns without giving proper advice.

However, there are legitimate ways of addressing the issue and we can provide you with options that you can consider as part of your estate planning requirements.

If you would like more information about estate planning and how we can help you please contact Duncan Bailey or your usual Brabners contact:
 

Duncan Bailey

Partner
Tel: 0151 600 3451
Email: duncan.bailey@brabners.com

 

 


Inheritance Tax planning – recent developments

Tuesday 24th February 2015

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Wealth Protection Bulletin - Issue 14

Most people will be aware that every individual has an inheritance tax allowance of £325,000 on which no tax is paid on gifts which are not otherwise tax-free e.g. gifts between spouses. Until October 2007 the ability to use this tax allowance died with you and accordingly the surviving spouse would only have their own allowance available on their own death. 

However inheritance tax law was then changed to allow the surviving spouse to inherit all or part of the unused allowance of the first spouse to die. The rules are fairly complex, but allows the transfer of any allowances unused when the surviving spouse dies after 9 October 2007. In cases of remarriage, couples may find themselves with as many as 4 tax free allowances available between them which could enable up to £1.3m of assets to pass tax free. Careful planning through Wills should be considered to make sure that all of the allowances can be used.  

More recently we have seen the Chancellor relax rules relating to the use of individual savings accounts, ISAs.  

The Government have recently passed 2 pieces of legislation to extend the attractiveness/longevity of ISAs. As from 5 August 2013 ISA wrappers can now be used to acquire shares on the AIM market which, after 2 years of ownership, qualify for 100% inheritance tax relief.

In addition, as from 3 December 2014 the Government has allowed the ISA wrapper to be inherited by a surviving spouse on first death.  This, like the transferrable inheritance tax allowance, can have significant effect in terms of lifetime and post-death planning and can greatly increase the tax efficiency of any underlying investment portfolio. 

If you like more information about these developments or to discuss any Private Client matter you may have please contact Mark Feeny or your usual Brabners contact:   


Mark Feeny
Head of Private Client – Liverpool
Tel: 0151 600 3450
Email: mark.feeny@brabners.com


Pilot trust proposals – Update on changes

Tuesday 24th February 2015

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Wealth Protection Bulletin - Issue 14

The Government’s consultation ‘Inheritance Tax: a fairer way of calculating trust charges’ was released in June 2014. The proposals included introducing a single inheritance tax (IHT) nil-rate band (NRB) which was to be divided across all trusts created by a settlor.

At present, individuals can settle property into relevant property trusts and effectively have a nil rate band allowance for each trust for the purpose of determining whether a 6% ten yearly charge or exit charge is levied. HMRC had expressed concerns about using the practice of multiple trusts as a way for settlors to avoid IHT through the use of numerous nil rate bands (so called Rysaffe planning after the case of the same name).

The Government stated that one of the main objectives of the consultation was to ensure consistency of treatment between those individuals who transfer their assets on death and those who make lifetime transfers through the use of trusts. HMRC state that most responses to the proposals were supportive of simplifying the rules, but were generally opposed to splitting the nil rate band. The Government in new legislation published in December has abandoned the idea of a settlement nil rate band and opted instead for a more targeted approach.

The new provisions state that:

“where property is added to two or more settlements on the same day and after the commencement of those settlements, the value of the added property together with the value of the property settled at the date of commencement (that is not already in a related settlement) will be brought into account in calculating the rate of tax” for the purposes of ten year charges, exit charges and for the charge on 18/25 trusts.  

HMRC claim that this will mean that individuals will no longer have the advantage of multiple nil rate bands by creating multiple trusts but they will be able to settle property up to the value of the nil rate band into trust, every seven years.  

The new rule will apply to all charges arising on, or after, the commencement date of 6 April 2015 in respect of relevant property trusts created on, or after, 10 December 2014. To prevent forestalling, it will also apply to relevant property trusts created before 10 December 2014 where additions are made to more than one trust on the same day.

The rule about additions to existing trusts will not apply to a will executed before 10 December 2014, although this exclusion will be limited to deaths before 6 April 2016. This is to allow time for affected individuals to change their will and avoid unwanted tax consequences.

Those with existing wills making use of pilot trust arrangements therefore need not rush to amend them but, if the legislation is enacted as proposed, may want to consider doing so prior to 6th April 2016 or shortly thereafter.

If you like more information about these developments or to discuss any Private Client matter you may have please contact Duncan Bailey or your usual Brabners contact:  


Duncan Bailey
Partner
Tel: 0151 600 3451
Email: duncan.bailey@brabners.com


Marriage and the future of civil partnerships

Tuesday 24th February 2015

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Wealth Protection Bulletin - Issue 14

In December 2014 legislation came into force to enable civil partners to convert their civil partnerships into marriage.

Same sex partners now have 4 relationship options, namely:-

  • Cohabitation without formal legal recognition
  • Civil partnership
  • Conversion of an existing civil partnership into marriage
  • Marriage

Elton John was one of the first to publically celebrate the conversion of his civil partnership into marriage, and many more are expected to follow his lead.

In 2014 a Government review concluded that same sex partners should continue to be able to enter into civil partnerships as there was no “pressing need” for reform despite the 2014 introduction of marriage for same sex couples.

A small but increasingly vocal population of cohabiting heterosexual couples are seeking equal rights as those enjoyed by same sex couples. Under the current law heterosexual couples have 2 relationship options, namely:-

  • Cohabitation without formal legal recognition
  • Marriage

The benefits to heterosexual couples of a “third option”, namely the ability to enter into civil partnerships would be to formalise their relationship and give a cohabiting partner benefits such as:-

  • Pension rights (i.e. widows/widowers pension)
  • Potential inheritance tax and capital gains tax reliefs

All the benefits civil partners currently enjoy without the commitment or label of marriage.  Heterosexual couples seeking reform argue that there should be no difference, in status or options, between same sex and heterosexual couples.

The saying that “marriage may be compared to a cage: the birds outside despair to get in and those within despair to get out” may now equally apply to heterosexuals seeking the option of civil partnership given same sex couples have campaigned long and hard for the opportunity to marry. Perhaps unsurprisingly, in an election year, no change was recommended by the Government to the Civil Partnership Act as the opening up of civil partnerships to heterosexual couples may have been seen, in certain sections of the media, as a further challenge to the institution of marriage.

Whatever the status of a relationship, it is important that couples take legal advice on their rights and enter into an agreement to avoid future property claims and disputes. It is equally important, whatever the status of the relationship, that Wills and Lasting Powers of Attorney are entered into, and reviewed on a regular basis, to ensure that family members are protected whether that be through relationship breakdown or death.

If you like more information about these developments or to discuss any family law issue please contact the Family Law team.


Will dispute: Williams v Seals – Registering a caution to prevent a property sale

Tuesday 24th February 2015

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Wealth Protection Bulletin - Issue 14

A recent decision of the High Court has highlighted the dangers of taking steps to enter a caution at the land registry to prevent the executor of an estate dealing with property in an estate.

In the case of Williams v Seals [2014] EWHC 3708 (Ch) three children brought proceedings to challenge the validity of their father’s Will and his two sons also claimed a provision from their  father’s estate and damages relating to allegations of historic abuse.

The father had specifically excluded his children from his Will and indicated in a letter of wishes that he had not provided for them because they did not visit him although the children did not accept this as true. The Will appointed the father’s friend as both sole executor and beneficiary.

Amongst other things the father’s estate contained properties including a 50% interest in a farm which the executor planned to sell at auction. To try to preserve this asset until their claims were heard and to interrupt the proposed sale the sons registered a caution at the Land Registry.

The executor was successful in an application to the Court to have this caution cancelled. 

In considering that application the Court first considered if the claims had a real prospect of success as, if not, the caution would be cancelled. The Court concluded that the childrens’ claims for provision and arguments about undue influence in the preparation of their father’s Will could not be dismissed as not seriously arguable.

The claims needed to be weighed against the potential damage to the estate if the interest in the farm could not be sold as planned.

The evidence of the deceased’s sons was that they intended to develop the farm land rather than farm it. The children were not able to compensate the estate for any loss which it might suffer if the land could not be sold as planned and there was no evidence that they had the means to buy the other 50% of the farm land or fund the development of the whole site.

Should the caution remain in place until the claims were heard and if the children’s claims did not succeed the losses to the estate could be considerable. Those losses could include lost investment income on the sale price at auction, a potentially lower sale price in the future if the market fell and the costs of maintaining the farm until the childrens’ claims were resolved. On the other hand there was evidence that the executor would be in a position to compensate the children from the estate if the cautions were cancelled and their claims eventually upheld.

Essentially, the children could be adequately rewarded by a monetary payment if their claims succeeded but the estate stood only to lose from the caution remaining in place.

Whether dealing with estates or not when considering whether to enter a caution against property at the land registry any applicant would be well advised to give serious thought to what they are trying to protect. If an applicant is looking at ring-fencing the value of the land rather than a specific interest in the land itself then there are a range of other options available to them.

Review your Will at regular intervals

It's important to ensure that your Will is reviewed at regular intervals as over time circumstances, laws and tax rules can change. You may wish to include grandchildren for instance or additional family possessions or inheritances could call for additional provisions. Our Private Client team can offer you expert advice ensuring your Will meets your requirements and to ensure that it is as tax efficient as possible to avoid any unnecessary Inheritance Tax.

If you need any advice about challenging Wills please contact Simon Morris from our Dispute Resolution team. If you would like to review your current arrangements or any other private client matters you may have please contact Mark Feeny from our Private Client team.


Simon Morris

Associate, Dispute Resolution team
Tel: 0151 600 3394
Email: simon.morris@brabners.com
 

 


Mark Feeny

Partner, Head of Private Client – Liverpool
Tel: 0151 600 3450
Email: mark.feeny@brabners.com


Connecting Generations at the Museum of Liverpool - A look at our successful event held on 12 February

Tuesday 24th February 2015

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Wealth Protection Bulletin - Issue 14

We were delighted return to the Museum of Liverpool on Thursday 12 February alongside the Financial Planning Corporation for our Connecting Generations event.

Mark Feeny, Head of Private Client at Brabners and Moira O’Shaughnessy from the Financial Planning Corporation shared their expert views and anecdotes about some of the legal and financial dilemmas that affect families, and provided a useful insight into the challenges that can affect different generations of families.

This was also a wonderful opportunity to hear from Carol Rogers, National Museums Liverpool about the progress that is being made with the House of Memories project, which seeks to raise awareness of dementia in the community and provides help through a range of practical memory resources and activities. 

For further information or advice on looking after your legal and financial planning arrangements please feel free to contact either:

Mark Feeny at Brabners on tel: 0151 600 3450 or by email to: mark.feeny@brabners.com  or Moira O’Shaughnessy at the Financial Planning Corporation on tel: 01704 571777 or by email to: moira@fpc.co.uk  

Pictured (left to right): Mark Feeny, Carol Rogers and Moira O’Shaughnessy

Pictured (left to right): Mark Feeny, Carol Rogers and Moira O’Shaughnessy

For those that we unable to join us on the evening, we have included information from Carol below on the House of Memories project for 2015 and how you can get involved or support such a worthy cause.

Our 2015 House of Memories fundraising target is £150,000, which will enable us to:

  • Continue to train professional health and social care sector to access House of Memories.

  • Develop the programme for families and volunteers supporting people living with dementia.

  • Provide additional training dates, memory resources and activities.

  • Offer assistance with travel to our museums.

  • Provide home based memory resources and access to the My House of Memories app

  • Link family carers to Liverpool’s Happy Older People network (HoP) - a network of cultural partners supporting older people, led by NML.

All donations will be allocated directly to House of Memories delivery as follows:

  • £50k to support 1,000 family carers, community volunteers to attend a bespoke ‘Buddy’ House of Memories training programme.

  • £35k to enable 2,000 health and social carers attend the House of Memories training programme.

  • £10k to develop ten new memory suitcases, working with diverse communities in Liverpool. This is a free resource for older people to access in their health and social care settings.

  • £20k for digital community content to be added to the My House of Memories app. The app is an excellent tool enabling older people living with dementia to access wonderful museum objects through technology.

  • £35k to support the Happy Older People Network including; access to meetings for older people living in Liverpool; co-ordination of e-newsletter and website; and the HOP Pot, a small funding opportunity to pilot new arts activity with older people.

If you wish to support House of Memories you can do so in two ways:

  1. Online via our website donate page; or
     
  2. By sending a cheque payable to National Museums Liverpool (with note to reference House of Memories) to Louise Kelly, Development Office, National Museums Liverpool, 1 Peter Street, Liverpool, L1 6BL

A big thank you for any donations – we need and appreciate your support.


Wills in the Later Years

Friday 24th October 2014

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Wealth Protection Bulletin - Issue 13

According to Betty Friedan, one of the founders of the Feminist movement “ageing is not lost youth but a new stage of opportunity and strength”.  This is certainly true in estate planning terms as new variables often come into play as we get older that should prompt a Will review:

  1. For younger couples, wills that leave everything to each other outright with unfettered freedom to use or leave assets as the survivor wishes are often seen as crucial particularly whilst there is the risk of having to bring up and support a young family alone.  As we get older however, the need to protect the assets of the first to die can take on an increased importance. The survivor may feel that his or her own assets will be enough to live on with the first to die’s estate  more of a safety net to fall back on just in case.

    In those circumstances, changing wills so as to include the provision of a life interest for the survivor after the first death can become more appealing.This involves the survivor having a right to receive income from the estate of the first to die or to use/live in a share of property without owning the assets completely. This can necessitate putting investments into individual names and ensuring that property is held as tenants in common. With assets in such a trust arrangement, the family will know that part of a couples’ estate is safeguarded if the survivor has to go into care, and that gifts can continue to be made to the next generation using those assets even if the survivor begins to lose mental capacity.
     
  2. As children get older and have children of their own, their financial position may have become more secure. The children themselves may have their own Inheritance Tax planning to consider. Inheriting from parents at that stage could well be counterproductive. It may be better to consider “generation skipping” to give money directly to grandchildren or into trust so as to avoid a potential double charge to Inheritance Tax.
     
  3. With intended beneficiaries less dependent on receiving an inheritance, it may be worth considering widening the list of potential recipients of an estate to include other family members, friends and favourite charities. Leaving 10% or more of your estate to charity not only saves Inheritance Tax on the money given away but reduces the rate of tax for your other beneficiaries to 36%.
     
  4. In terms of house contents, it could be sensible to write out wishes as to who should get what to reduce the risk of squabbles over furniture or jewellery of sentimental value. This could be done either by including a legacy of specific items in your Will or setting out instructions in an informal Letter of Wishes for your Executors to follow.
     
  5. Finally, it is worth looking again at the Executors and Trustees that you have named for your Will. Trusted friends who were appropriate when Wills were first done perhaps many years ago may now fall into the wrong age bracket. Friends or friends of your beneficiaries (if not the beneficiaries themselves) could now be regarded as the right choice.

If you would like more information about Wills or for help with any other Private Client Law matter please contact our Private Client team.

 


The Era of "Later Life" Divorce

Friday 24th October 2014

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Wealth Protection Bulletin - Issue 13

There is extensive media coverage on the number of retired couples who are divorcing, referred to in the press as “silver” divorcees. According to the Office of National Statistics the proportion of people getting married and divorcing, who are over the age of 60, has risen more quickly than in any other age group.

Whilst there has been much speculation over the reasons behind the statistics, the key factor appears to be the rise in re-marriage .The frequency of third marriages has affected the statistical age of marriage as the Office for National Statistic figures do not distinguish between first or subsequent marriages when calculating the statistics. Couples are increasingly aware of the inheritance tax advantages of later life re-marriage and are contemplating re-marriage with the security of a prenup agreement in place to protect pre-marriage acquired assets for children from previous relationships.

Despite the divorce statistics, professional advisors OFTEN do not allow for the impact of separation when building retirement funds and savings portfolios. If a couple separate in their early thirties they will have thirty years to rebuild their pension pot and plan for retirement. With later life divorce often comes the economic consequence of needing to defer retirement plans as there is insufficient income in retirement, John Cleese being one of the most well known examples.

When a couple are separating later in life after, for example, a short second marriage it is hard for the financially stronger spouse to accept that their pre-marriage owned assets may be needed to provide housing and pension provision for the financially weaker spouse who has not saved for retirement and thus has needs that will be considered by a court in divorce proceedings. The rise of the silver divorce and the prevalence of second and third marriages are generating increasing interest in prenup agreements to attempt to ring fence pre-marriage acquired assets and inheritance prospects as, with remarriage after the age of fifty, it is far more likely statistically that a spouse will inherit monies from a parent or extended family. The effectiveness of a prenup agreement is diminished where post marriage inherited or acquired wealth is required to meet the needs of spouses but it can be useful armour.

The prevalence of later life relationships has also generated an increase in late financial remedy claims and inheritance claims due to the increased complexity of family lives and consequent competing claims of first and second spouses, cohabitees, children and step children.

For later life divorcees contemplating new relationships the option of cohabitation may be the preferred choice of relationship from the family law perspective as financial claims are limited between cohabitees, but from a tax perspective, marriage can save significant amounts in inheritance tax and with professional advice, pre-marriage wealth can be protected by trusts and prenup agreements. Sadly many couples do not take advice before making relationship decisions as they and their families are not aware of the significance for them and their families of the status of later life relationships.

If you would like more information about divorcing or separating in later life or for help with any other Family Law matter please contact the Family team.


What if I can’t manage my own affairs?

Friday 24th October 2014

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Wealth Protection Bulletin - Issue 13

Planning Ahead for the Unexpected and the Expected

The purpose of this article is to highlight the importance of putting in place a Lasting Power of Attorney and what the effect could be if you don’t take this step.

Lasting Power of Attorney (LPA)

Old Age, gradual illness, sudden illness, catastrophic, brain injury all these things could result in you being unable to manage your affairs. Putting in place an  LPA means that you can have peace of mind that if any of these things do happen then you have chosen who you wish to look after your affairs by appointing your Attorney. Your family and friends can be reassured that you have planned ahead and that the appointment of your Attorney was made by you at a time when there was no immediate urgency.

Under a Lasting Power of Attorney:

  • You can choose which type of LPA – either in respect of your Property and Affairs (financial) or your Health and Welfare.
  • You can appoint up to four attorneys to act on your behalf.
  • This appointment can be joint so the attorneys do have to act together or joint and several so they can act together or separately.
  • Your Attorney can be family, trusted friend or professional advisers or a mix.
  • You can choose to offer your attorney’s guidance or restrict what they can do.
  • As an extra safeguard at least one other person must receive notice that you have made an LPA before it can be registered.
  • An LPA cannot be used unless it is registered at the Office of the Public Guardian. To read more about LPAs a please follow the links at the end of this article1.
Enduring Power of Attorney (EPA)

I made one years ago is it still valid?

The answer is yes so long as it was completed correctly and before the October 2007 changes occurred.

If you lose mental capacity, or your Attorney have reason to believe that you are losing capacity then they must apply to the court to register the EPA.

It will now be some years since you made your EPA so do take time to review the appointment of your Attorney – is this still valid? Do you need to update it? Did you only appoint your spouse – you may want to think about including someone else in case they cannot act for any reason. For more information please refer to our Enduring Power of Attorney guide below2.

Advance Directives or Advance decision to refuse treatment

If a person wishes to refuse specific medical treatment in specific situations that could arise in the future, they can make their wishes known by making an "advance decision to refuse treatment". These should be in a recognized form and require specialist advice.

Court of Protection – Deputyships

What happens if I don’t make a LPA and I lose mental capacity to deal with my affairs?

In these circumstances someone – a family member/friend or professional adviser would need to apply to the Court of Protection to be formally appointed by the Court to act as your Deputy. The Court will issue an order which sets out what your Deputy can do and in certain circumstances may need to apply to the court for their authority to do certain things. The Deputy will be subject to court review and will need to provide annual accounts to the court and comply with the directions that the court may make.  The process of applying to Court to be appointed as Deputy is lengthier and can be much more costly than making a Lasting Power of Attorney.

Additional Information 

1Online LPAs - Plans Postponed - Private Client Issue 83

1A Guide to Lasting Powers of Attorney

2A Guide for What are the Powers of an Attorney under an Enduring Power of Attorney

 For more information about LPAs and EPAs or for any Private Client matter you may have please contact Louise Scholes or your usual Brabners contact:


Louise Scholes

Senior Associate, Private Client
Tel: 0151 600 3278
Email Louise

 

 

 


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