Inheritance Tax: Save £100,000s with simple advanced planning Article Discussion

marbella

Thanks for all you advice. I have been to see the solicitor who is now looking through all the info regarding 'discretionary trusts' and 'deed of variation'. I am just not quite sure if I am doing the right thing as I don't know if all of this will have tax implications and also if I wanted to sell my property in the future would I be able to claim all of the money myself of would the 'discretionay trust' come into play. Oh I am so confused by it all and want to do the right thing.

localhero

Hi Marbella,

Yes you have done the right thing. I don't know why the solicitor couldn't advise you there and then about a suitable course of action. I suspect they may not be overly conversant with D.O.V. (as very few actually are).

If they do probate work they may be able to help. If not contact the law society to find a probate lawyer in your area and ring them first to see if they know their stuff. Also ask what the cost will be because they can be very expensive.

There will be tax implications, but the ultimate aim is to save your family money when you die.

With the variation, you should be able to borrow from the deceased's estate and you should effectively still own the property. If your joint estate is greater than £300k, it will be worth doing.

If you get no joy from the solicitor pm me, as I know people who specialise in this area who definitely will be able to help you.

MickKnipfler

What happens if a property owner is tax resident in Cyprus on death but has a large estate in the UK?

marbella

Thanks localhero, I am off to the solicitor tomorrow so hope he has all the information I need. As my home and assets amount to about £750k and with only one child and we have no debts or mortgage I hope that I am going to get the right advice. I don't know what sort of tax implications are involved, so at the end of the day I am going to ask whether it would be just worth my while changing my will to the way I want it and then take out a life assurance to cover any potential IHT and put the policy in trust. So many questions and so little time. I know I have to do a 'deed of variation' to my husbands will within 2 years of his death and it is coming up to that time. I have written loads of questions down for tomorrow, so I should know which way to go. Thanks.

torryquine

Lot of useful and interesting information here. Can anyone pleaseadvise if the rules on IHT/wills/trusts and Power of Attorney are the same under Scottish Law.

Andrea24_2

Does anyone know the legal implications in Scotland? We've been told that we cannot register as tenants-in-common in Scotland because the law is different. It seems difficult to find objective advice on avoiding IHT if you live in Scotland. Any advice?

localhero

The laws are different in Scotland on Wills and Enduring Powers of Attorney, and as such I'm not familiar with them.

TheFox

Hi Local Hero............My wife and I have consulted with a will writer and I wonder if you could possibly answer a few questions I have on Wills?
1) What sort of advice should we receive about discretionary trusts? I can see the advantages but what about the disadvantages?
2) We have been told that if we set up discretionary trusts will we need to name a professional body in the will to act as executor - is this correct? (they have suggested one professional firm of executors)
4) If I were to die, once named in the will can these executors be removed?
3) Do pensions and AVC's need to be included in a persons estate?

Many thanks for your time.

localhero

Hi Thefox,

First of all obtain the services of a qualified willwriter. A member of the Institute of Willwriters is preferable (visit www.ipw.org.uk).

The disadvantages of a discretionary trust: - The trust will commence when either of you or your spouse die. Once probate has been carried out, the Trustees must inform Revenue & Customs of the existence of a trust and then decide what to do with the trust fund. Since there must be more than 1 beneficiary (i.e. not just the spouse) they have a choice.

They will usually decide to lend the fund to the surviving spouse. If so they must obtain an iou or accept a charge from him/her, before assigning the property into the sole legal name of the spouse.

Each year the Trustees must decide whether to call in the loan from the spouse or to advance capital or interest to the other beneficiaries. They must act unanimously and keep minutes of their decisions. If the trust fund has assets other than a share of the home (such as shares) that increase in value, then the trust must complete a tax return and pay capital gains tax. In addition if the fund increases in value to above the nil rate band threshold some IHT may also result from time to time.

Your trustees will therefore need to obtain advice at the beginning about the legal practicalities, and from an accountant if and when necessary for the taxation element.

So who to appoint? Many people will appoint the surviving spouse as a trustee with perhaps a member of the family or a professional. I personally advise against the surviving spouse acting. If you have 2 members of the family that you can trust then they will be fine. In many cases the adult children are fine, in some cases somebody independent is more suitable (such as a trusted friend). The important thing is that you trust them to carry out your wishes and they are reasonably sensible.

You do not need to have a professional - in most cases they are not necessary. Your executors can deal with the probate part themselves (and take advice if they need it), and likewise your trustees.

Once you've died, your family may believe they can dispense with the professional executor and do the work themselves, but the professional does not have to renounce their role (and therefore their chunky fee) if they want to act. The family can of course (and should where necessary) take advice when they need it.

And for that reason I almost always advise against appointing a professional. Only where the affairs are particularly complex or the likelihood of a dispute is high would I advise appointing a professional.

Pensions and AVCs (and life policies) do not go into the will. Separate arrangements must be made with the pension trustees and the life companies as to who should receive the benefits when you die. Your nominated beneficiaries will then receive the proceeds directly (rather than go through probate).

It doesn't sound like you've been given brilliant advice (though I don't know your personal circumstances), and before going any further I would check into their credentials, as if you've been following the thread, you will note that in my previous posts I caution against instructing unqualified, unregulated and uninsured willwriters (of which there are many) You don't need to be fleeced by a lawyer either, you just need to appoint a professional who's qualified.

Come back to me or PM me if I can be of any further help. Best wishes.

TheFox

Hi Localhero..............firstly, thanks for your advice. You will be interested to know that the will writer we have spoken to is in fact a member of the ipw!