Probate Fees Hike
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Probate Fees Hike
A Grant of Probate is a document issued by the Probate Registry giving executors named in a Will the legal authority to administer the estate of a deceased person.
Probate professionals and bereaved families alike suffered a collective and significant fright back in 2019 awaiting the introduction of drastic increases to the cost of obtaining a Grant of Probate – set to be as much as £20,000 based on a sliding scale. We all then breathed a collective sigh of relief as that proposal was shelved, although many were frantically submitting applications just in case the measures were pushed through.
Another round of increases has been announced, but fortunately these are nowhere near as swingeing.
At the moment, the cost of applying for a Grant of Probate depends on whether a professional is applying - £155 - or an individual (known as a ‘personal application’) - £215.
The new proposals set to take effect in early 2022, will mean a flat fee of £273 for all applications, regardless of the value of the estate.
The reason for the increase? The Ministry of Justice claim that the increase is needed to cover the administrative cost of running the service, currently operating at a loss it claims. Interestingly, the 2019 proposals were intended to generate extra revenue to help subsidise increasing costs across the court service as a whole. At that time, the probate service wasn’t loss-making as it now appears to be!
A consultation period on the proposed increased has recently ended and so we await the outcome with interest.
If you have any questions about matters covered in this article, please contact Clare Young on 07802 618 132 or at clare.young@legalstudio.co.uk
2021 09 01
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Should you disclaim or vary an inheritance
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Should you disclaim or vary an inheritance?
Introduction
Receiving an inheritance from a loved one can be a very emotional experience and may also give rise to tax issues. It may be that your personal circumstances are such that receiving an inheritance increases the value of your estate to a level where you become concerned about inheritance tax (IHT).
Redirecting an Inheritance
It is possible for changes to be made to the distribution of an individual’s estate after they have died to mitigate capital gains tax (CGT) and IHT. The changes can be made in one of two ways:
- A Variation; and/or
- A Disclaimer.
What is a Variation?
A Variation allows you to redirect the inheritance you receive under a Will or the Rules of Intestacy so that the person you are gifting your inheritance to is deemed to have received it under the terms of the deceased’s Will for IHT and/or CGT purposes.
For a Variation to be valid the following conditions must be satisfied:
- The Variation must be evidenced in writing and signed by the beneficiary who is redirecting their inheritance. The executors of the deceased’s estate will also need to sign the Variation if it results in a larger IHT bill;
- The Variation must be executed within two years of the deceased’s death;
- The Variation must not be made for any consideration in money or money’s worth. In other words, the person who is receiving the benefit of the gift should not pay anything to the individual who is making the gift.
- The Variation must contain a statement to the effect that certain tax provisions under the IHT and CGT tax codes should be included.
What is a Disclaimer?
A Disclaimer operates differently from a Variation. It is where a beneficiary under the Will chooses not to accept the gift made to them by the deceased. It is important that the beneficiary has not accepted the gift as it is not then possible to disclaim it.
The following should be noted to ensure a disclaimer is valid:
- A beneficiary is unable to disclaim only part of a gift; and
- It is advisable for a disclaimer to be made in writing to the executors of the deceased’s estate although it may be made orally.
The main differences between a Variation and a Disclaimer is:
- The individual who is disclaiming their inheritance may seek some form of monetary consideration from the person who benefits under the Disclaimer. This is prohibited under the rules applying to Variations; and
- Under a Variation the beneficiary who is making the gift can decide who should receive the benefit of the gift whereas the beneficiary cannot do this with a Disclaimer because the terms of the Will to determine who will inherit it.
This can often produce some unexpected results.
Example
Mr Lucky sadly dies and leaves his estate equally between his two children, Soo and Not-Soo and if either child dies before him then the deceased child’s share passes to his or her children in equal shares on reaching the age of 25.
Soo has done very well financially and decides that she would like her brother, Not-Soo to receive her share of their late father’s estate. Soo does some research on the internet and decides to disclaim her interest in her late father’s estate thinking that it will pass to her brother under the terms of their late father’s Will.
By entering into the Disclaimer Soo is treated as having died immediately before her father for the purposes of the Wills Act 1837. Under s33 of this Act Soo’s children will inherit her share of her late father’s estate. The Disclaimer is therefore, ineffective.
If Soo had taken legal advice she would have been advised to enter into a Variation where she could have nominated her brother, Not Soo to receive her share of their late father’s estate.
For more information call Malcolm Emery on 07708 613 789 or email him at malcolm.emery@legalstudio.co.uk
2021 10 30
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How to generate tax free income
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Generating Tax Free Income!
Introduction
You may be thinking of ways to mange your exposure to inheritance tax by making provision for your children and/or grandchildren.
One way is to gifts assets directly to family members but there is always a risk of it being spent immediately or it could be swallowed up in divorce proceedings if they are in the process of a marital break-up.
What is the Solution?
Rather than make an outright gift direct to the child or grandchild a trust could be created which would offer greater protection against the issues mentioned above.
You could appoint yourself as a trustee so that you can continue to be involved in investment decisions and decide when money should be released from the trust to a beneficiary in terms or income and/or capital.
How to generate tax-free income using a Trust
Another benefit of making gifts via a trust is that, in certain circumstances, you can generate tax-free income in the hands of the beneficiary who has received income from the trust.
The trustees of a discretionary trust pay income tax at 20% on the first £1,000 of their income (7.5% on dividend income) and 45% on the balance (38.1% on dividends). Whilst this may be higher than your current rate of income tax do not worry as help is at hand.
If the trustees make income distributions to a beneficiary, the income tax that they have paid is credited to the beneficiary who is receiving the income. Therefore, if the beneficiary pays tax at a lower rate than 45% then they can recover the excess from HM Revenue & Customs through their self-assessment tax return.
Example
The trustees of the ABC Trust receive gross rental income of £10,000. Ignoring the £1,000 basic rate band the trustees will pay income tax of £4,500 on this income leaving a sum of £5,500 available for distribution to one or more of the beneficiaries of the trust.
The trustees decide to make an income distribution to John of £5,500. John is studying at university and has no other income.
For tax purposes John is deemed to receive gross income of £10,000 with a tax credit of £4,500. As John has no other income sources the gross trust income he has received is covered by his personal allowance which for the current tax year, 6 April 2021 to 5 April 2022, is £12,570. John can submit a tax repayment to HM Revenue & Customs to recover the income tax of £4,500 paid by the trustees, thereby generating tax free income in his hands.
A Word of Warning!
The above planning will not work if the beneficiaries of the trust are your children and are under the age of 18. If you have created the trust and trust income is distributed to your minor children, it is treated as your income for tax purposes.
This type of planning works very well if the beneficiaries are your children and are aged 18 or over or your grandchildren (any age). This is because the income will be treated as their own for income tax purposes.
For more information call Malcolm Emery on 07708 613 789 or email him at malcolm.emery@legalstudio.co.uk
2021 42 30
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Financial Affairs of the Heart!
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FINANCIAL AFFAIRS OF THE HEART!
With hits such as “toxic” and “criminal” we probably should not be surprised by the recent court case that has developed between Britney Spears and her father.
What is a Conservatorship?
Due to Britney’s troubled past and her vulnerability, her father was appointed to look after his daughter’s financial affairs and wellbeing by the Court under an arrangement known as Conservatorship. This arrangement has been in place now for some 13 years and whilst Britney may not have had the mental stability to make decisions for herself when the Conservatorship was put in place, it appears that her mental state has clearly improved and she now wants to take control back for all aspects of her life. This is the decision that the courts must consider and decide on.
Can you put a Conservatorship in Place in the UK?
The UK does not have an equivalent of a Conservatorship although a trust is sometimes used to manage the affairs of an individual who is vulnerable or perhaps does not have capacity to look after their own affairs.
A trust can be a very flexible arrangement to manage an individual’s financial affairs, offer protection against undue influence and potential tax savings. The individuals who manage the trust are known as the trustees although their powers can only be used to manage the financial assets held subject to a trust. The trustees’ powers do not extend to making decisions about the beneficiary’s health and welfare.
The Benefits of putting Lasting Powers of Attorney in Place
If you have capacity to make your own decisions, there may come a time when this is not the case. To safeguard against this, you can put legal documents in place known as lasting powers of attorney. There are two different types. The first is known as a property and affairs LPA (PAFLPA) and allows the people you appoint (known as your attorneys) to make decisions about your financial affairs such as paying bills or buying/selling property.
The other type of LPA is known as a Health & Welfare LPA (HWLPA) and allows your attorneys to make decisions on your behalf about your health (i.e., medical treatment) or your welfare (i.e., living accommodation, how you live day to day, etc).
Your PAFLPA and your HWLPA cannot be used until they have been registered with the Office of the Public Guardian. Your HWLPA cannot be used by your attorneys unless you have lost capacity. Whilst your PAFLPA can be used before you lose capacity you can include a restriction in the document itself which specifies that it cannot be used unless you have lost capacity. This ensures that you retain control over all financial and health and welfare decisions until you are unable to make the decisions for yourself. A crucial difference from the conservatorship that Britney Spears is subject to.
A recent survey has identified that at least 25% of the UK population will suffer some form of mental health issue during their lifetime. Therefore, it is crucial that you consider putting PAFLPA and HWLPAs in place before it is too late.
For further information on the use of trust and LPAs to protect you and your family please contact Malcolm Emery.
2021 49 29
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Law Society Round Table
Managing Risk and Compliance in the era of Remote Working
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Following Covid-19, remote working in the legal sector became ubiquitous overnight. How can firms control and manage risk, and ensure that they remain compliant?
Legal Studio's Ian McCann attended April 2021's Law Society Round table event which discussed risk and compliance in the context of remote working. The full article can be viewed here.
Ian featured in the section enitled 'People', parts of which are reproduced below:
People
As a profession, the law has always policed its ‘gateway’, with members assessed most heavily on entry. It is no surprise therefore that careful recruitment is the most important risk safeguard for many.
‘The greatest risk management tool that you’ve got is actually recruitment,’ Ian McCann, chief executive of Leeds litigation firm Legal Studio, says. ‘Start right with culture and character – find the right people to become part of your team.’
Legal Studio operates on a consultant model. McCann advises that when looking at candidates, the way to do it is ‘reckless honesty’. ‘Having those conversations with people and understanding: why do you want to do this? What motivates you? What is it that you want to bring to this? Why do you want to become a consultant? What does your client base look like?’
Keeping the welfare of consultants front of mind is also important in limiting risk, he adds: ‘Make sure you’re looking out for them, because another risk factor is that it’s been a challenging year.’
2021 57 12
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Yorkshire Post Coverage
Clare Young joins Legal Studio
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Clare Young featured in a great article in the Yorkshire Post by Ismail Mulla about the reasons behind her move to Legal Studio Solicitors and the trend of lawyers becoming Consultant Solicitors during the Pandemic.
Clare says: “It has brought into focus what you think is important in your life”.
Clare specialises in Private Client Services and can assist you with:
- Making a Will;
- Making a Lasting Power of Attorney;
- Creating a lifetime trust to protect property and other assets for children;
- Inheritance Tax and ways in which you might reduce your tax bill;
- Declarations of Trust to protect unequal contributions when buying property;
- Probate to sort out the estate of a loved one who has died.
Clare says:
The peace of mind brought about by knowing that have put your affairs in order is immeasurable. By ensuring that you have a valid Will in place in the event of your death and that you have appointed trusted people to act on your behalf if you become physically or mentally incapacitated, you can rest assured that your loved ones will not be left with any difficulties later on in life. If you have accumulated some wealth during your lifetime, you are likely to want to preserve that wealth for the benefit of the next generation and our expert advice can assist you to achieve this.
2021 53 22
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Catch up Coffee
Profession “on the cusp” of explosion in consultants
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Legal Studio featured in Legal Futures on 9 March 2021 following the recent study by Arden Partners predicting that in five years’ time, a third of solicitors would be working as consultants.
Whilst that number is high, even half that level of growth would see a massive expansion.
Legal Studio Consultant numbers have grown from 10 to 16 in the past year and the stated aim is to move that to “a consultant a month” from now on.
Chief executive Ian McCann said the only limit was the firm’s “culture and character”, which he wanted to maintain.
“We treat our consultants as our clients. We are genuinely interested in what their aims and ideas are, and we listen to them.”
Mr McCann said that to celebrate relaxation of the lockdown and the ability to meet a single person outside for a chat, every consultant had been sent a recyclable coffee cup this weekend, with a bag of locally hand-roasted coffee, branded as Legal Studio Catch-up Coffee.
2021 10 10
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