Legal

legal Has the Covid-19 pandemic changed what you do?

As a result of the pandemic, many more people have become aware that their personal affairs need to be in order. This kept our team extremely busy in the past year.

What do you advise on?

Garner & Hancock is a full-service firm. I personally deal with private client matters. This includes wills, lasting powers of attorney, trusts and estate administration. I specialise in international estates and related tax issues.

What sort of tax do I need to worry about?

It is important to plan how your assets may be affected by tax, not only during your life, but also on your death. People should consider when and how capital gains tax, income tax and inheritance tax will be paid.

What is inheritance tax?

Often referred to as ‘death duty’, inheritance tax is payable on your assets when you die (or potentially during your life if you are thinking of setting up trusts). The tax rate is 40% and is payable when the value of your assets exceeds a certain threshold.

What sort of threshold?

We all have a £325,000 inheritance tax free threshold. Inheritance tax would become payable if you die with assets in excess of this figure. Having said this, inheritance tax law is quite complex. For example, transfers between spouses are tax free and your threshold can be increased if your leave your house to your children. However, you can also reduce your threshold by making financial decisions during your life such as making gifts or setting up trusts.

Can I transfer my home to my kids to avoid inheritance tax?

Please do not, if you can help it. If you give your home away and continue to live there, your estate could get taxed twice. First, the value of your home will remain in your estate for inheritance tax purposes. Second, your children will have to pay capital gains tax when they sell the property. This is commonly known as a gift with reservation of benefit.

What do you mean by paying capital gains tax?

We often buy assets (e.g. properties) hoping that they will increase in value. When you sell those assets, the gain in value can be taxed. Unless you are selling your primary home, you should always take capital gains tax into consideration.

Should I put my property in trust?

Trusts are still very popular tax saving vehicles. However, again, this is a complex area of law. I would say that it is important to consider what tax would be paid. This can be on the transfer into a trust, during the trust’s life, and when the asset leaves the trust.

What is a trust good for?

It can protect assets from excessive tax, irresponsible beneficiaries and so on. A trust can be created during your life or on death through a will. I recommend that anyone wishing to set up a trust fund seeks legal advice.

What do you mean by protecting assets from irresponsible beneficiaries?

Certain forms of trusts such as discretionary or disabled persons’, enable your trustees to make decisions as to how and when the trust fund may be paid. This can provide long term benefits for your chosen beneficiaries.