Unfair probate treatment.

bostonerimus

Keep_pedalling said:

bostonerimus said:

Keep_pedalling said:

bostonerimus said:

I just got my "affairs in order" and one of the goals was to avoid probate. So when I die everything except my retirement accounts passes to a trust and the retirement accounts pass directly to my heirs. This avoids probate entirely. I'm in the US, but I believe similar steps can be taken in the UK.

I don’t think that is possible in the UK for anyone holding things like equities in a GIA or ISA. Large cash deposits or sole ownership of property would also make it impossible to avoid probate. 

Google "Probate Trusts". Yes, you have to be careful what you put into trust as tax can be an issue. In the US cash, houses, insurance policies and possessions often go into a "revocable trust" so that the trust can distribute the items and cash to the beneficiaries without going through probate. Retirement accounts and GIA's are best left out of the trust as they complicate the taxes, but in the US those can be passed directly to nominated beneficiaries and also avoid probate. It will be different in the UK, but trusts can be used for probate planning purposes. The good thing in the US is that you can give $15k per year per person to any number of individuals without tax consequences and so with some planning it's possible to give most of an estate away to family.

Not really suitable for the vast majority of us, can’t be used for our homes (not that I would ever want to to do that) or for our ISAs and probate is really simpler that setting up any trust just to avoid it.

Yes, it's important to use the right structures in the right contexts. Generally I think we ignore things like wills and what will happen after we are gone because it simply isn't something we want to think about, but a little time with a solicitor or just in doing basic organization and telling your family or heirs how your finances are organized can make things go a lot more smoothly ... after you are past caring.

jcontest

bostonerimus said:

Keep_pedalling said:

bostonerimus said:

I just got my "affairs in order" and one of the goals was to avoid probate. So when I die everything except my retirement accounts passes to a trust and the retirement accounts pass directly to my heirs. This avoids probate entirely. I'm in the US, but I believe similar steps can be taken in the UK.

I don’t think that is possible in the UK for anyone holding things like equities in a GIA or ISA. Large cash deposits or sole ownership of property would also make it impossible to avoid probate. 

Google "Probate Trusts". Yes, you have to be careful what you put into trust as tax can be an issue. In the US cash, houses, insurance policies and possessions often go into a "revocable trust" so that the trust can distribute the items and cash to the beneficiaries without going through probate. Retirement accounts and GIA's are best left out of the trust as they complicate the taxes, but in the US those can be passed directly to nominated beneficiaries and also avoid probate. It will be different in the UK, but trusts can be used for probate planning purposes. The good thing in the US is that you can give $15k per year per person to any number of individuals without tax consequences and so with some planning it's possible to give most of an estate away to family.

Two states charge "Gift Tax", the $15k limit has now been raised to $16k.  Generally it's non-taxible to transfer cash to a partner who can then "Gift" another $16k.  Also there's a mix of Estate, Inheritance, and "other" taxes that can come into play upon death OR gifting.  Laws in the US change regularly enough for it to be difficult to keep things in order.  If Keep_Pedalling is having some of those trust paid to UK residents then they should be aware of how their choices will impact the UK side for foreign gains and taxation.  The UK side is quite simple compared to the US side, but you can still be stung if your not careful.

bostonerimus

I only brought up the idea of trusts as an alternative to probate. The rules will have to be followed and tax might be an issue. Don't even think about the issues surrounding cross border treatment of trusts.

For me in the US a trust is a simple and tax transparent way to avoid probate. The law for a revocable trust is a lot simpler than for a UK discretionary trust. Also the US has a fairly high Federal inheritance tax threshold, but some states have their own estate taxes and so it's prudent to give money away before death. The US makes that fairly simple as the $16k/person/year gift allowance makes it fairly easy to gift hundreds of thousands of dollars to family members each year with no tax consequences. Just with siblings and their spouses, nieces and their kids I could gift almost $300k per year without tax implications.

In the UK tax is a bigger issue and planning isn't as straight forward because of the tracking of gifts for tax purposes.