Tag: inheritance | Wills Jacobsen

Will they or won’t they? Why making a Will is a must.

Did you know that most adults in the UK have not written a Will? This figure includes a staggering three-quarters of people in their thirties and 9 out of 10 people aged 20-29.

What is of surprise is that almost two-thirds of 40-49 year olds and 60 per cent of 50-59 year olds have no Will so if they died now, they would die intestate, meaning their wealth and assets would be distributed under UK intestacy laws, which often leads to unwanted results and increased legal costs.

In a survey by unbiased.co.uk people said the most common reason for them not having a Will is that they are “putting it off until they are older”. This statement was made by one in seven people in their sixties! Others, around 17% believe they have too few assets to make a will necessary.

Writing a Will can have emotional implications, so it could be that people delay making one due to a combination of denial and simply not getting around to it.

However, it is important to remember that making a Will is a simple, inexpensive business, and can save your loved ones from a significant amount of stress after you die. In view that pension freedom has completely rewritten the rule book on what can and cannot be inherited, it has never been more important to make your wishes legally binding by writing a Will.

If you already have a Will it is important you update it so you are not caught out by changes in the law. In July, the government announced a main residence Inheritance tax (IHT) allowance of £175,000 will be given in addition to the existing nil rate band of £325,000 per person, for parents who pass the family home to their children from 2017.

The total IHT exemption will be £1 million by 2020 for couples who own their home. It is important that you write your Will properly to take advantage of these new rules. If you neglect to update your Will you could risk being wrong-footed by the new IHT regime.

Changes to Inheritance tax rules don’t have to be taxing with our guide

In the Summer Budget of July 2015 it was proposed that Inheritance tax (IHT) be scrapped on homes which parents or grandparents pass on to children, grandchildren or step children. The new rules will be phased in gradually between 2017 and 2020. However, they are complicated and the way the new legislation works in practice needs explaining.

Who pays IHT? You do if your assets are above the threshold!

As a starting point it is worth remembering who currently pays IHT. In the 2015/16 tax year, everyone is allowed to leave an estate valued at up to a £325,000 without their beneficiaries paying IHT. The amount is set by the Government and is called the nil-rate band threshold.

Above the nil-rate band, anything you leave behind is subject to tax of 40% (or 36% if you leave at least 10% of your assets to a charity).

So if you leave assets worth £500,000, your estate pays nothing on the first £325,000, and 40% on the remaining £175,000 – a total of £70,000 in IHT – if you’re not leaving anything to charity or a spouse or civil partner.

The £325,000 limit has been frozen until at least 2020/21, although the “extra” main residence allowance will be brought in from 2017 onwards.

The new proposals are as follows:

The current allowance where no IHT is charged on the first £325,000 (per person) of someone’s estate remains unchanged. Above the threshold, the charge is 40%.
A new tax-free ‘main residence’ band will be introduced from 2017, valid only on a main residence and where the recipient of a home is a direct descendant (classed as children, step-children and grandchildren). This will be phased in gradually, starting at £100,000 in April 2017, rising by £25,000 each year until it reaches £175,000 in 2020.
In 2017 the maximum that can be passed IHT free will be £850,000 for married couples and civil partners and £425,000 for others. For singles, this is made up of the existing £325,000, plus the “extra” £100,000 main residence band. For couples, when the first dies their allowance is passed to the survivor, so that £425,000 is doubled to £850,000.
In 2020, the tax-free amount will rise to £1m for couples and £500,000 for singles, made up of the existing £325,000 and the “extra” main residence allowance of £175,000.
On properties worth £2 million or more, homeowners lose £1 of the ‘main residence’ allowance for every £2 of value above £2m. So for a couple, with a property worth £2,350,000 or more there will no “extra” allowance.

Cheap Will costs woman her inheritance

A woman is seeking hundreds of thousands of pounds compensation from Barclays, claiming the bank’s will-writing service resulted in her losing a stake in a valuable London home. Barclays is contesting the claim.

The woman’s complaint has already been assessed by the Financial Ombudsman Service and the bank found at fault. The Ombudsman ordered Barclays to pay “a fair and reasonable settlement” but unusually, Barclays decided to ignore the Financial Ombudsman’s recommendation, on the grounds its will-writing division is not regulated, and therefore does not have to adhere to the Ombudsman’s findings. The Ombudsman has accepted this is technically correct.

In 2007 Ebenezer Aregbesola used Barclays’ £90 will-writing service to make a will dealing with his various assets including homes overseas and in London. His will instructed half of the London home to be given to his daughter, Tinuola Aregbesola, on his death.

The property was owned jointly by Mr Aregbesola and his wife as joint tenants and because of this, on Mr Aregbesola’s death, the property went wholly to his wife – in contravention of the wishes spelt out in the will.

In order for the Will to work as it should, Barclays should have severed the joint tenancy. This would have enabled the deceased’s half of the property’s to pass to his daughter. This is a simple formality and basic procedure in such cases. A solicitor would issue a notice of severance as a matter of good practise. However, because it was neglected in this case, Mr Aregbesola’s widow is legally entitled to the whole property.

The case highlights the danger of popular, cheap “DIY” wills which are often too simplistic to accurately reflect a person’s wishes.

How to avoid similar problems:-

Where parents remarry and enter into property transactions with their new spouse, wills bequeathing assets to children of former relationships need to be checked.
Wills should be reviewed regularly (every 12-24 months) to ensure they are up to date
Professional advice from a solicitor should be sought when making a Will. Average fees are around £200 but you are covered by the solicitors indemnity insurance if things go wrong, and a legal firm is regulated giving you extra protection
There is now a growing complexity of family structures, and this coupled with the rising value of house prices and estates, means that a properly qualified and experienced lawyer is best placed to make your Will for you.