Wills Probate and Inheritance Tax Planning

• Making or amending a Will at any time
• Handling the estate (the property and assets) of another person after death
• Explaining Powers of Attorney & Enduring Powers
• Advice on retirement and savings

For too many people, the thought of making a Will at a young age is just being pessimistic, as the concept of death, and the responsibilities it entails are not urgent issues, but this is a very important matter which should be addressed as soon as possible.

Making a Will is about providing for your loved ones in the event of your death, by arranging for executors, (people whom you trust to ensure that the terms of your will are carried out after the date of your death) to identify and value all of your assets and debts, make an application, if required, for a grant of the probate, to settle your income tax affairs and pay any debts, pay any inheritance tax due on your death, and to carry out your instructions as set out in your will.

Trusts

What is a Trust?

In some cases, because of their age or mental incapacity, beneficiaries may not be able properly to look after assets themselves. A trust would therefore be created under such circumstances in order to protect their interests.

Trusts can also be created for tax-planning reasons.

Probate

Executors appointed under a will, would usu all y have to obtain a grant of probate before they have authority to deal with the assets in an estate. The procedure for obtaining a grant of probate will vary depending upon the nature of the assets and their value.

If an estate is "excepted" (i.e. the value of the assets and relevant lifetime gifts is under a certain figure) then executors should only have to sign an oath before forwarding the will and the oath to the Probate Registry. A fee will be payable to the Probate Registry (currently £50) and a grant of probate should follow within three to four weeks. Once a grant of probate is received then the executors have authority to deal with assets within the estate and can proceed with the administration.

If the estate is not "excepted", then in addition to the above, executors will need to complete a detailed Inland Revenue account and pay any tax that may be payable on the death. There are stringent penalties imposed upon executors by the Inland Revenue if the executors fail to include in the Inland Revenue account full details of all assets.

Intestacy

If you die without having made a will then you are said to have died "intestate". If this happens then the laws of intestacy govern who is to inherit your estate and this can lead to unexpected and undesired results. For example, if you do not leave a will then:-

• If you are married your spouse will not automatic all y inherit all of your estate.
• If you are not married your partner will not inherit your estate.
• You will not have made any provision for who should be appointed as guardians for your young children.
• You have not appointed anyone to act as your executor.
• The administration of your estate is likely to take significantly longer to complete than if you had left a will.

What to do next.

Assets of non-UK residents, which are physic ally situated in the UK, although protected from Income Tax would be subject to Inheritance Tax on death.

For the year 2005 – 2006 Inheritance Tax is payable from your Estate on all assets above the current threshold of £275,000 at a rate of 40%. Your Estate in the UK includes the following:

• everything owned in your name;
• your share of everything owned jointly;
• gifts you have made but from which you still derive a benefit e.g. a house you have given to someone else, but which you still use or live in rent-free;
• assets held in trust from which you get some personal benefit e.g. an income

However, anything you give during your lifetime or leave to your spouse is free of inheritance tax only if you are both domiciled in the UK. Although, your spouse may then be liable for inheritance tax on her own estate if the value exceeds the above threshold. Also, gifts to a UK charity plus any debts are free of inheritance tax.

Ownership of property in the UK

Without careful planning, ownership of property in the UK could have significant taxation implications. The simplest way to overcome this problem is to vest the ownership of the property in an offshore company, the shares of which are tot ally owned by an overseas national (yourself), who is neither resident nor domiciled in the UK. Therefore, as far as inheritance tax is concerned, the shares become the relevant asset and as they are not situated in the UK (but in an offshore jurisdiction), they are excluded from assessment for UK Inheritance tax.

Offshore Trust & Tax Advice Illustration

You will note from the above, that the Inheritance Tax payable in the sum of £290,000 may result in the sale of the property, as the tax is due before probate is granted. However, if the property is held offshore, no Inheritance Tax is payable to the Inland Revenue.