Blog
Drop in session at Reeth

Terry will be at The Memorial Hall, Reeth, DL11 6QT on Friday 3rd August from 9am – 12pm.

Accountancy

It’s an ideal opportunity to drop off your account’s paperwork or to find out about our new Business Service.

Wills and Estate Planning Service
As well as accountancy, we will also be offering our Wills and Estate Planning Service at these sessions.
We can help you discuss your options for:

  • Writing a Will
  • Create a Lasting Power of Attorney
  • Help in completing Probate Administration
  • Inheritance Tax Planning.

These sessions are available to current clients and non-clients and future drop in sessions dates are:

  • Friday 7th September
  • Friday 5th October
  • Friday 2nd November
  • Friday 7th December

For more information please call in and see us at Reeth or call our office. Telephone: 01969 624999. 

For further details click here

There will also be the opportunity to make an appointment to see your accountant on any of these days so please call our office.  Telephone – 01969 624999

We look forward to seeing you.
Dawn and the team


Inheritance Tax – Fact Sheet

Inheritance tax is often called a voluntary tax in that, with planning, the payment of inheritance can be avoided. It is a tax levied on a person’s estate when they die and on certain gifts made during an individual’s lifetime. We can provide taxation advice to help you minimise the potential charge to inheritance tax.

Inheritance tax (IHT) is levied on a person’s estate when they die, and certain gifts made during an individual’s lifetime.

Gifts between UK-domiciled spouses during their lifetime or on death are exempt from IHT. In this factsheet spouse includes married couples and registered civil partners. Most gifts made more than seven years before death will escape tax. Therefore, if you plan in advance, gifts can be made tax-free and result in a substantial tax saving.

We give guidance below on some of the main opportunities for minimising the impact of the tax.

It is however important for you to seek specific professional advice appropriate to your personal circumstances.

Summary of IHT

Scope of the tax

When a person dies IHT becomes due on their estate. IHT can also fall due on some lifetime gifts but most are ignored providing the donor survives for seven years after the gift.

The rate of tax on death is 40% and 20% on lifetime transfers where chargeable. For 2018/19 the first £325,000 chargeable to IHT is at 0% and this is known as the nil rate band.

Residence nil rate band

An additional nil rate band is introduced for deaths on or after 6 April 2017 where an interest in a qualifying residence passes to direct descendants. The amount of relief is being phased in over four years; starting at £100,000 in the first year, £125,000 for 2018/19 and rising to £175,000 for 2020/21. For many married couples and registered civil partnerships (hereafter referred to as spouses in this factsheet) the relief is effectively doubled as each individual has a main nil rate band and each will also potentially benefit from the residence nil rate band.

The residence nil rate band can only be used in respect of one residential property which does not have to be the main family home but must at some point have been a residence of the deceased. Restrictions apply where estates (before reliefs) are in excess of £2 million.

Where a person died before 6 April 2017, their estate will not qualify for the relief. A surviving spouse may be entitled to an increase in the residence nil rate band if the spouse who died earlier has not used, or was not entitled to use, their full residence nil rate band. The calculations involved are potentially complex but the increase will often result in a doubling of the residence nil rate band for the surviving spouse.

Downsizing

The residence nil rate band may also be available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets of a

Charitable giving

A reduced rate of IHT applies where 10% or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the 40% rate will be reduced to 36%.

IHT on lifetime gifts

Lifetime gifts fall into one of three categories:

a transfer to a company or a trust (except a disabled trust) is immediately chargeable

exempt gifts which will be ignored both when they are made and also on the subsequent death of the donor, eg gifts to charity

any other transfers will be potentially exempt transfers (PETs) and IHT is only due if the donor dies within seven years of making the gift. An alternative way of looking at this is that they are potentially chargeable until seven years has passed. The primary example of a PET is a gift to another individual.

IHT on death

The main IHT charge is likely to arise on death. IHT is charged on the value of the estate treated as beneficially owned by the deceased. This may include certain types of interest in trust property. Furthermore:

PETs made within seven years become chargeable

there may be an additional liability because of chargeable transfers (usually lifetime gifts to trusts) made within the previous seven years.

Estate planning

Much estate planning involves making lifetime transfers to utilise exemptions and reliefs or to benefit from a lower rate of tax on lifetime transfers.

However, careful consideration needs to be given to other factors. For example a gift that saves IHT may unnecessarily create a capital gains tax (CGT) liability. Furthermore the prospect of saving IHT should not be allowed to jeopardise the financial security of those involved.

Gifts to individuals during lifetime

As these gifts are PETs rather than chargeable transfers when made, no tax at all is due if the donor survives for seven years. Even where a death occurs within seven years IHT may be saved as a result of the lifetime gifts because the charge is based on the value at the date of the gift and does not include any growth on value to date of death.

Nil rate band and seven year cumulation

Chargeable transfers (such as lifetime gifts to trusts) covered by the nil rate band can be made without incurring any IHT liability. Once seven years have elapsed between chargeable transfers an earlier transfer is no longer taken into account in determining IHT on subsequent transfers. y seven years a full nil rate band will be available to make lifetime chargeable transfers

Transferable nil rate band

It is possible for spouses and civil partners to transfer the nil rate band unused on the first death to the surviving spouse for use on the death of the surviving spouse/partner. On that second death, their estate will be able to use their own nil rate band and in addition the same proportion of a second nil rate band that corresponds to the proportion unused on the first death. This allows the possibility of doubling the nil rate band available on the second death. This arrangement can apply where the second death happens after 9 October 2007 irrespective of the date of the first death.

Annual exemption

£3,000 per annum may be given by an individual without an IHT charge. An unused annual exemption may be carried forward for use in the immediately following tax year only.

Gifts between spouses

Gifts between spouses are generally exempt, if both are either UK or non UK domiciled. It may be desirable to use the spouse exemption to transfer assets to ensure that both spouses can make full use of lifetime exemptions, the nil rate band and PETs. Special rules apply where only one spouse has a UK domicile.

Small gifts

Gifts to individuals not exceeding £250 in total per tax year per recipient are exempt. The exemption cannot be used to cover part of a larger gift.

Normal expenditure out of income

Gifts which are made out of income which are typical and habitual and do not result in a fall in the standard of living of the donor are exempt. Payments under deed of covenant and the payment of annual premiums on life insurance policies would usually fall within this exemption.

Family maintenance

A gift for family maintenance does not give rise to an IHT charge. This would include the transfer of property made on divorce under a court order, gifts for the education of children or maintenance of a dependent relative.

Wedding presents

Gifts in consideration of marriage are exempt up to £5,000 if made by a parent with lower limits for other donors.

Gifts to charities

Gifts to registered charities are exempt provided that the gift becomes the property of the charity or is held for charitable purposes.

Business property relief (BPR)

When ‘business property’ is transferred there is a percentage reduction in the value of the transfer. Often this provides full relief. In cases where full relief is available there is little incentive, from a tax point of view, to transfer such assets in lifetime. Additionally no CGT will be payable where the asset is included in the estate on death. Professional advice should be sought to determine whether you have qualifying business property.

Agricultural property relief (APR)

APR is similar to BPR in that it reduces the value of the transfer but it may not give full relief on the value. It is available on the transfer of agricultural property so long as various conditions are met.

Use of trusts

Trusts can provide an effective means of transferring assets out of an estate whilst still allowing flexibility in the ultimate destination and/or permitting the donor to retain some control over the assets. Provided that the donor does not obtain any benefit or enjoyment from the trust, the property is removed from the estate.

We can advise you on whether a trust is suitable for your circumstances and the types of trust arrangements available.

Life assurance

Life assurance arrangements can be used as a means of removing value from an estate and also as a method of funding IHT liabilities.

A policy can also be arranged to cover IHT due on death. It is particularly useful in providing funds to meet an IHT liability where the assets are not easily realised, eg family company shares.

Complexity – is your Will up to date?

From April 2017 we have three nil rate bands to consider. The standard nil rate band has been available for many years. In 2007 the ability to utilise the unused nil rate band of a deceased spouse was introduced which may enable surviving spouses to have a nil rate band of up to £650,000.

From 6 April 2020 some surviving spouses will also have an additional £350,000 in respect of the residence nil rate band to arrive at a total nil rate band of £1 million. However this will only be achieved by careful planning and, in some cases, it may be better for the first deceased spouse to gift some assets to the next generation and use up some or all of the available nil rate bands.

For many individuals, the residence nil rate band will be important but individuals will need to revisit their wills to ensure that the relief will be available and efficiently utilised.

How we can help

Whilst some general tips can be made about IHT planning it is always necessary to tailor the strategy to fit your situation.

Any plan must take account of your circumstances and aspirations. The need to ensure your financial security (and your family’s) cannot be ignored. If you propose to make gifts the interaction of IHT with other taxes needs to be considered carefully.

However there can be scope for substantial savings which may be missed unless professional advice is sought as to the appropriate course of action. Please do not hesitate to contact us.

 


What is a lasting power of attorney?

What is a Lasting Power of Attorney?

There has been a lot of coverage in the press recently around Powers of Attorney, so we have put together a summary of what it’s all about:

If you’re married or in a civil partnership, you may have assumed that your spouse would automatically be able to deal with your bank accounts and pensions, and make decisions about your healthcare, if you lose the ability to do so. This is not the case.

  • Thinking and talking about what would happen if we lost the mental capacity to make decisions for ourselves is uncomfortable. Yet it’s important to consider how much worse the situation would be if you had a stroke, serious accident or dementia (e.g. Alzheimer’s) without sorting it first.
  • If someone has difficulties that mean they can’t make decisions anymore, they will need help managing their finances. A Lasting Power of Attorney (LPA) is a legal document where someone (while they still have mental capacity) nominates a trusted friend or relative to look after their affairs if they lost capacity. The key point to remember …
  • Don’t think you suddenly give up control. You can choose whether it can be used either before, or only when, you lose mental capacity.
  • Your representative should only ever make a choice for you if you’re unable to make that specific decision at the time it needs to be made. For example, if you experience a short-term period of incapacity, your representative would start to look after your affairs, yet if you regain your capacity, you should be able to make your own decisions again.

What happens if I lose mental capacity and don’t have a power of attorney?

If you lose capacity to make your own decisions and you don’t have a valid lasting power of attorney or enduring power of attorney, you will need to apply to the Court of Protection.

The Court of Protection can:

  • decide whether you have the mental capacity to make a decision.
  • make an order relating to your health and care decisions or your property and financial decisions if you lack mental capacity.
  • appoint a deputy to make decisions on your behalf if you are no longer able.

What does a deputy do?

  • A deputy must follow the same principles as an attorney to make sure decisions are made in your best interests.
  • The court order will set out the extent of the deputy’s authority to act, so they must always make sure they are not exceeding their powers. A deputy also has a duty to act in good faith and not to take advantage of their position for their own benefit.
  • You can’t choose your own attorney and the process of appointing one can be lengthy and costly.

It’s much better to nominate a trusted friend or relative before you lose mental capacity, by setting up a Lasting Power of Attorney (LPA).

If you would like to have an informal chat about your options, please feel free to call Dawn on 01969 623092.

 

Dawn Clarkson – Wills and Estate Planning Ltd, Thornborough Hall, Leyburn

Email:   dawn@willsandestateplanning.co.uk


The cost of not writing a will

When a close one suddenly passes away, it can be a shock for the whole family.  My Mum was diagnosed with terminal cancer in June this year and passed away in August.  Even now, it is hard to believe that she has gone.  However, I am grateful that Mum had a Will.  It has made things a lot easier to deal with.

 

This was nearly not the case when a family friend passed away earlier this year.  For the purpose of this article, I will refer to him as Tom.  Tom first asked me to write his Will in 2016 as he knew he had terminal cancer.  Despite this, Tom kept putting it off and eventually signed his Will one week before he passed away. Tom’s Estate was bequeathed to a close friend.

Had Tom’s Will not been signed, he would have died intestate and his whole estate would have gone to the Crown, as Tom had no surviving family.

 

Only with a valid Will can you be certain that your estate will go to the right people:

  • you can specify how long funds must be held in trust for children, to any age you deem appropriate.
  • You may wish friends or charities to benefit.
  • You may also want to outline personal wishes, such as funeral arrangements or who should inherit particular property or items of worth.
  • You may also exclude family members who you don’t want to benefit from your estate in a will.

Even if you have made a will, you need to ensure it is updated.

 

If you do not draw up a proper Will:

 

  • the rules of intestacy award none of the estate to stepchildren and live-in partners, regardless of the longevity of the relationship.
  • Unless you have a joint mortgage, the house that you share with your live-in partner could potentially be passed onto your children, parents, siblings or the state, leaving your partner homeless.
  • In the event that both you and your spouse die, you would have no say in who becomes your children’s guardian. If your child or children are under the age of 18 it is important you have a Will for this reason.
  • You may not want parents or siblings to benefit to the detriment of your spouse.
  • There may be personal wishes that cannot be fulfilled without a will.
  • Friends or charities would not benefit.
  • Failure to have a Will can cause acrimony and complications. Look no further than famous stars such as Barry White, Bob Marley and Jimi Hendrix whose families squabbled for years because they all died intestate.

 

A client’s mother recently passed away and they were unable to find the Will.  Not knowing their mother’s wishes, they decided upon a cremation ceremony.  Only weeks after the funeral, they found a document stating that their mother had purchased a burial plot many years ago.  This has been difficult for the family to come to terms with, knowing that their mother’s wishes have not been met.

 

It is vitally important that family members know where your Will is kept and that a duplicate is stored with a Will writer or financial adviser.

 

For an informal chat, contact Dawn on 01969 623092.

 

Dawn Clarkson – Wills and Estate Planning Ltd, Thornborough Hall, Leyburn.

(Sister Company to Dawn Clarkson Associates)

 

Drop is sessions: Reeth Memorial Hall, 1st  Friday of every month – 9am to 12pm from April 2018

Email:  dawn@willsandestateplanning.co.uk


Can I protect my home from Care Costs?

Can I Protect my Home from Care Costs?

Protecting our homes from care costs is at the forefront of many people’s minds.

It is important to be aware that there are many unregulated providers in the market offering asset protection to protect your home from care fees.  Some of the arrangements are successful but it is a lottery.

If North Yorkshire County Council (NYCC) believe that your home or your money have been given away deliberately to avoid paying care fees, then they have the power to recover any money that they are owed.  This may mean that if the property has been put into a trust, NYCC may ask for the care fees to be paid by the trustees.

However, you are entitled to a free needs assessment to consider what help can be provided to help you stay in your own home.

A needs assessment is a discussion between you (or the person you look after if you are a carer) and a trained person, either from NYCC or another organisation that they work with. You will talk about the care and support needs you have and how these affect your wellbeing. This will include identifying any physical needs, such as whether you need help to wash or dress, get in and out of bed or keep your home safe to live in. The assessment will also look at your mental and emotional needs and ask what is important to you in how you live your life, such as being able to carry on working or volunteering, or being able to meet your friends.

A needs assessment won’t ask about your finances.

To discuss an assessment with the Local Authority, contact:

Email: careact@northyorks.gov.uk or Phone 01609 780780

Paying for Care

Different ways to pay for care and support are available, so people should not have to sell their home in their lifetime to pay for care.

A Deferred Payment Agreement is an arrangement with NYCC that will enable people to use the value of their homes to help pay for care home costs. If you are eligible, NYCC will help to pay your care home bills on your behalf. You can delay repaying them until you choose to sell your home, or until after your death.

You might choose to rent out your home and use the income to reduce the amount you asked to defer.

Your home and your money still belong to you if you have a Deferred Payment Agreement, so you can make gifts to your children. But a Deferred Payment Agreement for care costs will always need to be repaid – either by the sale of your home after your death, by someone else, or by something like the pay-out from a life assurance policy.

Carers and families can help people to make decisions about their care and how to pay for it. If NYCC are concerned that the person applying for the Deferred Payment Agreement does not have the capacity to understand, or won’t have capacity to understand in the near future, then another person may need to represent them. Only a person that is properly authorised, like someone with legal power of attorney, can represent someone in applying for a Deferred Payment Agreement.

For an informal chat or to discuss legal powers of attorney, contact Dawn on 01969 623092.

 

Dawn Clarkson – Wills and Estate Planning Ltd, Thornborough Hall, Leyburn.  

(Sister Company to Dawn Clarkson Associates)  

Drop in sessions: Reeth Memorial Hall, 1st Friday of every month – 9am to 12pm from April 2018

Email: dawn@willsandestateplanning.co.uk or Phone: 01969 623092


Lasting Power of Attorney – Fact Sheet

Lasting Power of Attorney – Fact Sheet

 

A Lasting Power of Attorney (LPA) is a legal tool that allows you to appoint someone to make certain decisions on your behalf. The appointed person can manage your finances for you in the future if you reach a point where you are no longer able to make decisions relating to your health and welfare. This sheet explains what an LPA is and you should consider making one.

 

There are a number of ways that you can plan your care for the future, this is called ‘advanced care planning’. The purpose is to allow you to make choices and decisions about your future care, in case there is a time in the future when you are unable to make decisions for yourself (lacking mental capacity). This can ensure that a person that you have nominated has the power to act on your behalf in situations that you have agreed, and that you are not given treatment that you don’t wish to receive.

 

LPA’s

 

A Lasting Power of Attorney (LPA) allows you to choose a person you trust to act for you, this person is referred to as your attorney.

 

There are two different types of LPA; property and affairs, and health and welfare. Each type covers different decisions and there are separate application forms for each. You can choose to make both types, or just one. You can have the same attorney for both, or you can have different attorneys.

 

Property and Affairs LPA

 

A property and affairs LPA covers decisions about your finances and property. If there comes a time when you can’t manage your finances any more, your attorney will do this for you. This can include paying your bills, collecting your income and benefits, or even selling your house. If you wish, you can restrict their powers, or place conditions on what they can do. It can only be used once it has been registered with the Office of the Public Guardian (OPG). The OPG is responsible for the registration of all LPA’s. Once registered, it can then be used, even while you have mental capacity with your consent.

 

Health and Welfare LPA

 

A Health and Welfare LPA allows the attorney to make decisions on your behalf about your health and welfare. Your attorney could make decisions about where you live, or day to day care including your diet and what you wear.

 

You can also give your attorney the power to accept or refuse life-saving treatment on your behalf. You would be asked whether you wish to do this or not on the form, and you will need to clearly state your intentions.

 

A health and welfare LPA can only be used once the form is registered with the OPG and you are in a position where you no longer have the mental capacity to make decisions about your own welfare.

 

Benefits of making an LPA

 

  • It can be reassuring to know that, if you are unable to make a decision for yourself in the future, your chosen person can make these decisions for you.
  • Registering an LPA ensures that the person that you want to make decisions on your behalf is able to do so. This also prevents a stranger, or someone you do not trust, from obtaining this power.
  • An LPA can reduce problems that may occur in the future. It can be more expensive and time consuming for family and friends to try to gain a similar power in the future if you do not already have an LPA.
  • Registering an LPA can help prompt discussions with your family or friends about your future wishes.

 

Who can make an LPA?

 

To make an LPA you must be over 18. You must also have the mental capacity to make this decision, this means that you are deciding for yourself that you wish to make the LPA, and that you understand what this means.

 

Who can be an attorney?

 

You can choose anyone to be your attorney, provided they are over 18. For a property and affairs LPA they cannot have been declared bankrupt.

 

It is important to think carefully about who you wish to appoint, it should be someone that you trust, and is reliable and has the skills necessary to carry out this role. You can choose to have more than one attorney.

 

Most people will choose a relative or close friend, but you can also ask a professional who you trust, for example your accountant.

 

You should also consider appointing a replacement attorney, if your first choice attorney is no longer willing or able to be your attorney.

 

How an attorney acts

 

If you choose to have more than one attorney, you must decide how your attorneys will act. They can make decisions together (‘jointly’), they can act together and separately (‘jointly and severally’), or a combination of the two:

 

  • Jointly – means that the attorneys must always act together, and therefore must agree all decisions and both sign all documents.
  • Jointly and severally – attorneys can act together, but can also act on their own.
  • Jointly in some matters and severally in other matters – for certain decisions all your attorneys must agree, but for other decisions they can act independently. For example, decisions regarding selling a property or medical treatment could be for all attorneys to agree, but other decisions concerning diet or dress they could act on their own.

 

When making decisions your attorney must follow the Mental Capacity Act, this means that they:

 

  • Must act in your best interests
  • Must consider your past and present wishes.
  • Cannot take advantage of you to the benefit of themselves.
  • Must keep all of your money completely separate from their own.

 

If the attorney fails to comply, the LPA could be cancelled. If an attorney has taken advantage of you, this will be investigated by the OPG and the person could face prosecution. Having an LPA in place can therefore offer you protection from potential future abuse.

 

Making a valid LPA

 

You will need to decide on someone to witness your signature on the LPA, and to state that you have the mental capacity to make an LPA. The signed form is a certificate of capacity and the person is called the certificate provider. They can be:

 

  • A professional, like your Doctor
  • Someone who has known you for at least two years, but isn’t a family member or an attorney, and they will not benefit from the LPA, i.e. a family friend or neighbour.

 

Each attorney must sign the form to say that agree to act as your attorney if needed in the future. They will also sign to show they understand the duties that this involves. You are also asked to list one or more named person. This is someone who you want to be notified when we register your LPA. This could be anyone, i.e. a friend or relative could be your ‘named person’. The purpose is to provide you with an additional safeguard. I none are listed, an additional certificate of capacity must be provided.

 

Next steps

 

The forms will be sent to the Office of the Public Guardian. The form must be registered with the OPG before it can be used. There is a fee for registering each LPA (this is currently £82.00 each), so if you are registering a property and affairs LPA as well as a health and welfare LPA, the fee will be £164.00. You may be exempt from having to pay the fee if you cannot afford it and are in receipt of certain benefits. Also if you earn less than £12,000 per year then we can apply for a 50% reduction of your fees.

 

Office of the Public Guardian

 

The OPG is responsible for the registration of all LPA’s, including dealing with objections and maintaining the register of LPA’s.

 

The OPG will also deal with any issues (or complaints) about the way that an attorney is exercising their powers. If there are any problems, the OPG may pass the case on to the Court of Protection, who can:

 

  • Decide whether a person has capacity to make decisions for themselves.
  • Make declarations, decisions or orders on financial or welfare matters affecting people who lack capacity to make these decisions themselves.
  • Decide whether an LPA is valid.
  • Remove attorneys who fail to carry out their duties.
  • Hear cases concerning objections to register an LPA, i.e. someone may object to an LPA being registered if they feel that person was forced into making it. Or that the proposed attorney was not suitable.

 


Contact Us

Wills and Estate Planning Ltd,
Thornborough Hall,
Leyburn,
North Yorkshire DL8 5AB

Tel: 01969 623092

Email: dawn@willsandestateplanning.co.uk

View our privacy policy here

 

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What our Clients Say
We had put off writing our wills for a long time, as it all seemed so hard and daunting. However both Dawn and Terry made the whole process easy, and uncomplicated. This was truly excellent service and we are very grateful.
Brenda & Ced Colling
About

Wills and Estate Planning ltd is licensed by the Institute of Chartered Accountants in England and Wales to carry out the reserved legal activity of non-contentious probate in England and Wales.

Details of our probate accreditation can be viewed at icaew.com/probate under reference number C004760414