Here is the 2017 edition of our Newsletter which we hope you will find both interesting and informative. If you would like to receive future editions by post or email, please complete the simple subscription form.
Issue 8 2017
Finding out how the Law can help you
KNOWLEDGE of the Law enables you to anticipate problems, protect your hard-earned finances and provide security for your family. To help you find out more, we have made available some essential information on Wills, Lasting Powers of Attorney, Inheritance Tax and Care Home Fees.
Each month we give a free talk on these subjects at Orpington Library. You may ask as many questions as time allows and you are under no obligation to use our services. Please see local press or visit our website for dates and times.
We have a wide range of leaflets that can be collected, sent to you or downloaded from our website. They are jargon free and provide the essential information you require. Please call in or telephone us for them to be posted.
Website & Videos
Our website provides a vast amount of legal information and news items. In addition there are a number of short videos on key topics.
Please visit us at www.thomasdunton.co.uk
Treated as a person
We have been helping people with all their legal needs for over 40 years, so whatever 2017 has in store for you, your family or your business, come and talk to us.
When you need reassurance and good professional advice, a call to your local lawyer should be your first step
We value the relationship we have with our clients and your needs are always our first priority.
Vernon Hadida partner
Protecting your children’s inheritance when you remarry
Family structures nowadays can be quite complex and issues may arise when both parties in a second marriage have children from previous relationships. What is the best way for them to look after each other and also to ensure that their own children ultimately benefit?
One option is for the couple to make Wills in which the first person to die leaves all his/her assets to the other, on the understanding that the survivor will divide the assets between the two sets of children on the second death.
It allows both partners to be sure that the other will be financially secure when left alone. However, as the surviving partner is always free to change their Will, this option runs the risk of one set of children ultimately being disinherited – perhaps due to a subsequent family upset.
This option is therefore only suitable where each partner is absolutely sure that the other will respect his/her wishes.
An alternative option is for the couple to enter into Wills where they each pass their individual assets to their own children. This makes absolutely sure that the children are not excluded, but it could mean that the surviving partner may not have enough to live on in his or her old age.
Fortunately, there is a third way. Take the example of Jane and Joe, a married couple who each have children from previous relationships.
Jane and Joe both enter into Wills containing a life-interest trust. They also split the ownership of their property so that they each own a defined 50% share. Each then chooses who they want to benefit in the long run: Jane chooses her children, and Joe chooses his. When Jane dies, her share of the property goes into a Will trust. The trustees allow Joe to live in the property for the rest of his life; to move and reinvest the proceeds in the new house, or even (if the trustees agree) to sell the property and use some or all of the proceeds for his own needs.
When Joe dies, his Will will pass his assets to his children and the remainder of Jane’s share of the property will pass to her own children under the terms of her Will trust.
Both partners can therefore die secure in the knowledge that regardless of who dies first, they have provided for their surviving spouse and also made arrangements to benefit each set of children.
Ending a relationship
WHEN a relationship breaks down, you need clear, practical and cost-effective advice so that you can start to plan your future.
The questions that we are frequently asked include:
• Where will I live?
• Can I stay in my home?
• Do I have to share what I already had before the relationship?
• How much money will I have to live on?
• Do I have to pay maintenance?
• Do I have to obtain employment?
• Who is responsible for the mortgage?
• Can my spouse/partner claim a share of my inheritance?
• What will happen to my pension?
Finance, Property and Pensions
The division of assets, including possessions, property, pensions, and future inheritance is an important part of the divorce settlement.
Both parties should seek independent legal advice, and then to try to reach an agreement between themselves, using mediation if necessary. Expert legal advice can help you to negotiate a fair settlement with your partner.
If a negotiated agreement cannot be reached, court proceedings will be necessary. The court will consider all assets of the marriage, including the length of the marriage, age and health of the parties, children and the earning capacity of each party and others.
Maintenance for wife/husband and children
If you have been financially dependent on your wife or husband you may be eligible for maintenance from them. The court would consider the income and outgoings of both parties and then make an Order.
If you are earning an income and not living with your child you may have to pay child maintenance. Your net income, the number of children and how many nights they stay with you, will influence the amount you have to pay.
You can also obtain further information about child maintenance from the Child Support Agency website.
A pension may be the largest asset of the marriage and you require expert advice in order to ensure maximum protection for the future.
For further advice, please contact us on 01689 822554.
Helping your children buy their home
Many young people are struggling to find the necessary capital for a deposit to get their foot on the property ladder.
If you are thinking of providing financial support to your children, please visit our website for more guidance to some of the questions that we are regularly asked as outlined below.
Do I make a gift or a loan of the deposit?
If you may need the money back at some time then the money must be loaned.
If the deposit is a gift, you will have no right to reclaim the money whatever your or your child’s financial circumstances.
My child is buying the property with another person. How do I protect the investment?
If you are making a loan to your child this can be protected by a Charge being registered at the Land Registry.
If your child is raising a mortgage to finance the purchase, they will need to obtain consent for you to have a second Charge.
If you are making a gift, you need to decide and document whether the gift is just to your child or to them and their partner.
Are there any taxation issues I should consider?
If you gift money to your child, provided you survive for seven years, the gift will be a potentially exempt transfer (PET) for Inheritance Tax purposes.
Gifting money to your child to invest in a property can therefore be a very efficient method of tax planning.
YOU are having issues with someone, either a dispute with another business, or in your personal life; how do you seek a resolution?
There is always the Courtroom, but these days there are potentially more productive and far less destructive alternatives to consider.
Where Court litigation deals in confrontation and argument, mediation encourages reasoned discussion. A skilled mediator can help you establish communication even where it has completely broken down. Whether in business or in a personal relationship the benefits can often include savings in emotional stress, time and cost. Even the most strained relationships can sometimes be restored and preserved, or at least brought to a close on a more respectful basis.
Ten benefits of Mediation
• A better chance to have your say, and explain why you feel as you do.
• To negotiate a solution for yourself with which you are comfortable, rather than have one forced upon you.
• A solution which might seem fairer to both parties than one the law might provide.
• A faster, less expensive solution, incurring less time and stress.
• The opportunity to regain mutual respect.
• To keep animosity to a minimum.
• To provide an environment in which both parties can discuss issues in a confidential setting.
• To enable you to stay in control of the process and the solution.
• Tailor-made solutions to meet the needs of your family or business.
• To help you continue to parent your children together.
If you are moving home… your property is our priority
BUYING a property is one of the biggest investments you will make and it is essential to have a dedicated legal team working for you.
We will provide a dedicated experienced Conveyancer to handle your transaction from start to completion.
• You will benefit from the good relationships we have with local estate agents and others with whom we have to deal. This helps to keep the transaction moving and reduces your stress levels.
• We will guide you through all aspects of your sale and/or purchase and we’re readily available at the end of the phone, email or fax and, of course, in person if you want to pop in and see us.
• You will be made aware of any potential problems, such as a major road or building projects that could have a long term impact on your new property.
For a FREE estimate of your costs or for more information, please visit our website or call 0800 371219.
What is a Will?
Why do you need a Will?
It is always recommended that you have a valid Will because you can:
• Decide exactly who receives your assets, and leave gifts and monies to your chosen beneficiaries.
• Appoint someone you trust to deal with your estate.
• Protect your spouse who may not automatically inherit your estate if there is no Will.
• Protect your partner, if you are unmarried, as they would receive nothing.
• Leave assets to friends if you have no relatives, otherwise your whole estate could go to the Crown!
• Make provisions for children and dependants who may not be able to manage money for themselves.
• Appoint guardians for children under 18 years.
• Consider the impact of care home fees and whether you can protect your estate from these.
• Ensure that your Will is tax efficient and avoids unnecessary Inheritance Tax liabilities.
If you have a Will, is it time for a review?
We recommend you review your Will every two to three years. It should be updated to reflect any change in your circumstances, including:
• If you have recently married or are contemplating marriage.
• If you are buying a property in joint names.
• If you are contemplating divorce proceedings.
• If anyone mentioned in your Will has died.
• Any major change in your financial circumstances, such as an inheritance.
• The new rules on Inheritance Tax — can you leave £1 million tax free?
What is a Lasting Power of Attorney?
ANYONE who wants to have peace of mind, knowing that, if the need arose, their affairs and welfare would be looked after by a person they know and trust, should think about Lasting Powers of Attorney.
An illness or accident can rob you of the ability to look after yourself at any time of your life but what if you were also unable to make decisions for yourself?
• Who would look after your property and finances?
• Who would make decisions about your care and welfare?
If these issues concern you, you should think about Lasting Powers of Attorney (LPA). If someone suddenly finds themselves unable to look after their affairs and has no Lasting Power of Attorney in place, a relative has to apply to the courts if they want to take control.
They will need to be appointed as a deputy by the Court of Protection — a process that can take up to six months, during which time their relative’s finances will be frozen. No one will be able to pay your bills, maintain your property or fund your everyday needs.
Costs involved include an application to the Court of Protection plus solicitor’s charges. There is an annual supervision fee to pay each March, too. This ranges from £35 to £320 for those with more complicated affairs. All fees are paid out of the person’s estate.
The deputy will need to submit a report to the court each year detailing decisions made on the person’s behalf, along with evidence, such as bank statements.
Can you leave £1 million tax free?
From 2017, the Inheritance Tax (IHT) rules are changing.
If you read the papers, you could be forgiven for thinking that all couples will soon be able to pass on £1m worth of assets tax-free after their deaths, thanks to the new Residential Nil-Rate Band (RNRB). Sadly, this is not a wholly accurate picture.
The current position
The position at the moment is that each person can leave up to £325,000 of assets to anyone without paying tax. This is known as the Nil-Rate Band (NRB). Married couples can have a combined NRB of £650,000. These rules remain and the RNRB will sit alongside them.
An outline of the new position
The new RNRB will enable the estates of certain people to claim an additional nil-rate band to set against residential property left to their children, step-children, grandchildren, or to the spouses of any of these (just referred to as “children” hereafter).
Married couples with property and children
The new measure is designed to help traditional families who want to pass on their homes to the next generation. The greatest benefits will be for married couples with children and a valuable property. If this property is left to the children, then up to £350,000 of its value can be passed on free of inheritance tax. This is in addition to the couple’s ordinary NRBs of £325,000 each – hence the headline figure of £1m.
Unmarried couples with children
The picture is far less rosy for unmarried couples with children. Such couples may find themselves in a quandary. Each member of the couple is able to benefit from the RNRB individually, and so can pass on a share of residential property to children. This, combined with the usual NRB, will give them each a total of £500,000 which can be left tax-free. This is therefore the best path to take to maximise the tax benefits.
However, this is rarely ideal. Unmarried couples (like married couples) often want to leave their property to each other – either outright or in a trust for life. Neither option will attract the new RNRB. So unmarried couples will have to choose: a tax break on the first death or their partner’s security? An unenviable choice.
People without children
Individuals (married or unmarried) without children cannot benefit from the RNRB.
For more information please call 01689 822554 or visit our website www.thomasdunton.co.uk
Dear Legal Eagle,
A few months ago, I had the proposal of my dreams. The solitary diamond glittered in the moonlight as the love of my life went down on one knee on a deserted beach. I accepted him without hesitation. But I’ve overheard a few of his conversations recently and now I’m wondering:
Does he love me… or is he just doing it for the tax benefits?
Legal Eagle says:
Your boyfriend is wise to be aware of the many tax benefits which come from being married. If he dies after you marry he will be able to leave you everything he owns without any inheritance tax being charged at all.
There’s even better news to come. If the two of you marry, and he dies leaving everything to you, your own estate will benefit after your death. Your estate should be able to claim double the normal tax-free rate of £325,000, allowing you to leave £650,000 free of tax – and even more if these rates have gone up by the time you die. In the best circumstances (say you leave a house and children), the two of you may be able to increase this tax-free amount to a million pounds.
The position could be much, much worse if he dies and you have not married. Then, not only could tax be charged on everything he leaves to you in excess of £325,000 (including his share of the house), but also you will only have a single tax-free amount of between £325,000 and £500,000 on your own death.
Imagine the two of you have children together; he dies first and then you die some years later. Suppose that you have assets of £500,000 each – he leaves everything he owns to you and you then leave the whole lot to the children. There may be no tax to pay at all if you are married. But if you are unmarried, there could be a tax bill of £70,000 on his death and a tax bill of £172,000 on your own death. That’s a total of £242,000 going to the tax office instead of to your children – a hefty amount!
Add to this the ability of married couples to pass assets to each other without attracting a charge to Capital Gains Tax (so that both annual exempt amounts can be used) and you can start to see some of the opportunities for financial planning between spouses.
So it seems that the pair of you have found a rare combination of romance and financial astuteness. Legal Eagle hopes for an invitation to the wedding and wishes you much happiness in the years to come.
Most of the subjects in this newsletter are covered in more depth on our website or for more information, please call us on 01689.