Wills and IHT - which professional to use ?

cornerstone13

I've read through several threads on IHT and tax and would like advice on which professional to use at what stages - eg IFA, solicitor, tax specialist etc.

Our situation is that we are both in our early 50s with 3 "independent" children. We both have DB pensions with our employers and do not wish to enhance them; house is worth c£500k and we have paid off the mortgage. We have other savings/shares etc of c£100k. We have arrived this very comfortable position by ourselves and we both have an aversion to trusting others with our financial future (sorry!). Add into this that both of us will inherit (probably about another £200k) and there are two endowments which were taken out to pay off the mortgage but will now be ours (£30k in 2010 and £58k in 2016).

We don't currently have wills and the research we've been doing on this suggests that the way forward is probably to set up some form of trust within our wills to ensure the children benefit as much as possible with the lowest tax bill and we know we will need to use professionals for this. My question is - do we need an IFA, would a solicitor only consider the will and trust side, would a tax specialist know enough about trusts, who would know about the various types of trusts available, if we need to see various professionals which order should we see them in................ I could go on !

Any help or advice would be much appreciated

Willman_Rodders

Hi cornerstone13,

Please be aware that as a professional will writer my suggestions may be slightly biased but ....

My suggestions are ...
1. Do not dwell too long on your options before putting into place a will. If you and your spouse just make simple wills now it means your family can use the 'Deed of Variation' rules to amend your distribution if you should die in the short term. By putting your simple wills into place now you give yourself a window of opportunity to think through and research your options. In due course you can then upgrade your wills to include the complex trusts you might want to include in your will.

If you fail to make a will then your family will find it much harder (and maybe even impossible) to vary the distribution made by the Rules of Intestacy - thus loosing any tax planning opportunities. So please put into place a will as a matter of priority.

2. If you own your properties jointly as 'Joint Tenants' then consider splitting the tenancy of your property/ies. [Please note I am not advocating at this stage you go the full IHT planning route - with the inclusion of trusts in your wills - just split the tenancy of your property.] By so doing you can each gift away your respective share of your property in your will - so if you and your spouse both die within 30 days of each other you will probably be able to make use of your individial inheritance tax allowances (and thus save upto £120,000 of avoidable IHT); if your property is held as 'Joint tenants' then title to the property is automatically transferred to your surviving spouse, irrespective of what your will might stipulate, and you may therefore not be able to fully use your allowances.

With points 1 and 2 done you now have time to consider your options.

Looking at your post there are a number of ways your potential IHT liability could be reduced, significantly. But as the present thread in the Over 50's Silver Savers Money Section entitled 'Tenants in Common' shows those solutions might be available to you, but are in fact unsuitable for you, because of personal preference. The afore mentioned thread does highlight the need to seek out an adviser who will explain your options to you so you can understand the benefits and risks, and then make an informed decision.

So who do you choose?

There are some solicitors who have specialist teams/departments drafting wills on a regular basis; the majority of solicitors however find more lucrative income streams than writing wills - and you will know that if you are not dealing with something on a regular basis you tend to forget the tricks of the trade. Those solicitors who have specialist departments should explain to you the options and choices available; they should explain to you the tax implications also. Their advice is likely to be biaised towards being appointed executor within your will (which is a very profitable area of business for solicitors), and the creation of trusts (again a nice fee income to start with, and profitable admin fees once the trust is established.) Solicitors can set up
lifetime trusts - these can be very effective estate planning tools for the larger valued estate; IFAs cannot arrange these trusts, or indeed the testamentary trusts created within a will.

IFA's offer a number of alternative solutions for inheritance tax planning. Governed by the FSA they can offer simple products like 'Whole of Life 2nd death' life policies through to equity release schemes. The solicitor cannot offer these products. However few IFAs will draft a complex will; some will draft simple wills seeing it as an opportunity to earn extra money. If your IFA does offer to draft your will for you check out that they hold professional indemnity cover for so doing; most IFAs do not, and thus leave you exposed.

Will writers come from various backgrounds. The larger national firms offer the same facilities as solicitors mentioned above,and often come with the same bias towards executor appointment. The difference (when compared to the smaller solicitor practise) is that they are dealing with drafting wills on a daily basis and so their advice should be up-to-date. In my humble opinion however their weak link is the fact that many of their salesteam are just that - commission earning salespeople who have been trained to sell estate planning products. Their knowledge of the technical aspects of trusts, and taxation, may well be lacking.

The smaller, independant, will writers are often former IFAs who have specialised in estate planning. They network with IFAs (who offer financial advice). They will probably not offer probate work themselves (which they will hand out to local solicitors), but their training in financial services products will enable them to identify other opportunities and solutions the IFA can offer, and because they receive business from introducing IFAs they will be pleased to refer the client back to the IFA to sort out these other services. (This is how I operate; I have around 15 professional IFAs, a stockbroker and accountants introducing business to me; and I will recommend my clients use these professional's services where they offer a more appropriate solution.) There may be a bias towards offering a complex trust - which pay sizeable fee income.

Hopefully from the above you can see that within all three disciplines -solicitor, will writer, and IFA - there are good and bad points. I'd be tempted to seek out an independant will writer first (but then I would do so because I am one!) but by so doing these people often do not offer the high income earning probate services, they liaise with IFAs to offer the financial solutions, and in most cases their fees for the production of a simple will are much less than those of the solicitor or national will writer.

Whatever choice you make ...
1. ask around; people in your area will be pleased to tell you of good experiences (and even more pleased to share bad experiences);
2. once your simple will is in place take time to find out your options;
3. remember a will should be drafted on the assumption that you will die one day after signing it; it should not be drafted on the belief you will life your '3 score years and ten' - a basis upon which many wills are drafted and come unstuck when someone dies prematurely.

I hope the above helps.

cornerstone13

Thanks for this which is very helpful - to prepare simple wills now to give us time to think everything through seems so obvious now ............. just didn't occur to us !!

margaretclare

Please do make your 'simple wills' ASAP. Everyone should have - at the very least - the most basic of wills. Everyone!

In addition, make sure everyone knows your wishes re final disposal i.e. your funeral. Leave a list of people to contact, bank addresses and account numbers, who to contact etc. Keep all your important documents in a safe place and make sure someone knows where they are.

Look on the 'Silver Savers' board for a thread I started a couple of days ago about putting your affairs in order.

Most CABx will do a 'simple will' very cheaply i.e. usually for the cost of a donation - a fiver? This is better than having no will at all.

Best wishes

Margaret