INSIDE THIS ISSUE
THE
ESTATE PLANNER Issue 32 – August 2017
Welcome to the August 2017 issue of The Estate Planner. Inheritance Tax affects not just the very rich – other people may be liable without realising it. Few taxes are quite as emotive – or as politicised – as IHT. The structures into which you transfer your assets can have lasting consequences for you and your family. In the opposite article, we explain how we can help you choose structures and trusts designed to protect your assets and give your family lasting benefits. If you think your health will affect your ability to make decisions in the future, you can make an advance decision to refuse medical treatment. This can detail treatment you don’t want to have. Some health conditions may mean you can’t make and communicate your own decisions (known as a ‘lack of capacity’). If you’re concerned about having a lack of capacity in the future, you can state what medical treatments you would not want at that future time. The statement (verbal or written) is called an ‘advance decision to refuse treatment’. Find out more on page 02.
It’s good to talk To arrange an appointment or to discuss any concerns that you may have in relation to making appropriate protection for you, your loved ones and your estate, please contact us. We look forward to hearing from you.
PRESERVING WEALTH FOR FUTURE GENERATIONS
Should you review your situation with further changes on the horizon? pass it down the generations without paying a significant IHT bill, which in some cases can only be met by selling the property.
Inheritance Tax (IHT) affects not just the very rich – other people may be liable without realising it. Few taxes are quite as emotive – or as politicised – as IHT. GIVE YOUR FAMILY LASTING BENEFITS The structures into which you transfer your assets can have lasting consequences for you and your family. We can help you choose structures and trusts designed to protect your assets and give your family lasting benefits. It is crucial to find out now if you potentially have an IHT liability – or could do so in future years. Historically, IHT planning used to be an activity confined to the very rich. However, growing affluence means that this is no longer the case. Even families and individuals with a relatively moderate level of wealth should consider planning ahead to ensure that their assets are passed on to their loved ones as efficiently as possible. SAFEGUARDING YOUR OWN FINANCIAL FUTURE Property price increases have also dragged many middle-class working families into the IHT bracket. Safeguarding your own financial future is very important, and giving too much away could put this at risk. At the moment, if your estate is worth more than £325,000 when you die, your assets may be subject to IHT. This means the value of your assets above
the £325,000 threshold could be subject to IHT at 40%. PASSING ON ASSETS WORTH UP TO £650,000 Married couples and registered civil partners are allowed to combine their allowance, so they can pass on assets worth up to £650,000 before IHT is due. Since 6 April 2017, the Government has added a family home allowance to the tax-free allowance. It started at £100,000 per person and will rise to £175,000 by April 2020. This means that individuals will eventually be able to pass on an asset worth up to £500,000 without any IHT being due. For married couples and registered civil partners, this adds up to a combined tax-free allowance of £1 million. However, if your estate is worth more than £2 million, the family home allowance will gradually taper away. This change is designed to allow middle income families whose only large asset is their home to
FAMILY HOME ALLOWANCE DRAFT LEGISLATION The draft legislation currently states that the family home allowance is only applicable if the assets are passed on to children, including stepchildren, adopted and foster children, grandchildren, and other lineal descendants or the spouses of lineal descendants. So if you don’t have children or grandchildren, you may still face an IHT bill. If you want to move to a smaller property, you will be able to still keep an allowance based on the value of your previous property as long as assets of equivalent value are left to direct descendants. m you. INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
One of life’s unpleasant facts IHT is a very complex area of financial planning, and in the UK may be one of life’s unpleasant facts, but IHT planning and obtaining professional advice could help you pay less tax on your estate. To discuss your situation and the options available to you, please contact us – we look forward to hearing from you.
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UNDERSTANDING LACK OF CAPACITY
Making an advance decision to refuse medical treatment
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f you think your health will affect your ability to make decisions in the future, you can make an advance decision to refuse medical treatment. This can detail treatment you don’t want to have. Some health conditions may mean you can’t make and communicate your own decisions (known as a ‘lack of capacity’). If you’re concerned about having a lack of capacity in the future, you can state what medical treatments you would not want at that future time. The statement
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(verbal or written) is called an ‘advance decision to refuse treatment’. You may have heard of a ‘living will’ or an ‘advance directive’ before. These were ways of explaining how you wished to be cared for in future if you lost mental capacity. They might have included how you wanted or preferred to be cared for, such as always having a shower instead of a bath. However, an advance decision only applies to where you want to refuse medical treatments.
YOU CAN’T USE AN ADVANCE DECISION TO: • Ask for specific medical treatment or anything that is against the law, for example, requesting help to commit suicide • Say you want someone else to decide what treatment you should have If you want to choose someone to make decisions about your treatment, you have to make what is called a ‘Lasting Power of Attorney’.
Your advance decision will only be valid (accepted legally and by health care professionals) if you: • Are 18 or over and had capacity when you made it • Have set out exactly which treatments you don’t want in future (if you don’t want lifesaving treatment, your decision must be signed and witnessed) • Have explained the circumstances under which you would want to refuse this treatment • Have made the advance decision without any harassment
by, or under the influence of, anyone else • Haven’t said or done something that would contradict the advance decision since it was made Advance decisions to refuse treatment are covered by the Mental Capacity Act 2005 that became part of law in April 2007. By law, a valid advance decision refusing life-saving treatment means you can’t be treated. If a doctor did treat you, legal action might be taken against them. THERE IS NO SET FORMAT FOR MAKING AN ADVANCE DECISION, BUT IT IS HELPFUL TO INCLUDE THE FOLLOWING: • Your full details • A clear statement of the treatment to be refused and the circumstances in which the decision applies • The date you wrote or reviewed the document • Your signature or that of the person writing for you (if you aren’t able to write)
A DOCTOR MIGHT NOT FOLLOW AN ADVANCE DECISION IF: • You have done something to contradict the advance decision (for example, changing your faith to a religion that doesn’t allow refusal of treatment) • They think that new circumstances would have affected your decision (for example, a new treatment that could have a big effect on your health condition) • The advance decision isn’t clear about what should happen
and the case has been referred to the courts.
Want to review your situation? To arrange an appointment or to discuss any concerns that you may have in relation to making appropriate protection for you, your loved ones and your estate, please contact us – we look forward to hearing from you.
Also, a doctor might not follow an advance decision because it refuses treatment for a mental health condition. Under Part 4 of the Mental Health Act, a doctor is allowed to treat you without your consent for a mental health condition. An advance decision to refuse other forms of treatment will still be valid. A doctor can also treat you if there is a doubt or a dispute about the validity of an advance decision
Make sure your close relatives, friends, GP and medical staff know about what you have put in your verbal or written advance decision. You can also get help from your care coordinator or doctor. BY LAW, IF YOU WANT TO MAKE AN ADVANCE DECISION REFUSING TREATMENT TO KEEP YOU ALIVE, YOU HAVE TO: • Make a written statement (if you can’t write, ask someone else to do it for you) • Sign the decision and put a date on it (if you can’t sign it, ask someone to sign it while you are present) • Get a witness who has mental capacity to sign the decision confirming that you have signed it (or asked someone else to sign it) while they were present • Make sure the decision says that you are refusing the treatment you have mentioned even if your life is in danger You could allow for new treatments in your advance decision even if you don’t want ones that are presently available.
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REVOKING YOUR WILL
What to do if your true intentions aren’t reflected There are several situations where revoking a Will may be feasible. For instance, life changes – such as marriage, divorce or the birth of a child – may change how you wish to dispose of your property upon death. While the reasons for changing a Will may vary, it is important to know how to reflect your current intentions in your Will.
who has made the Will. With that in mind, you will probably want to make some record of your intent to revoke the Will, such as a revocation clause in a new Will (as discussed below) or, if you are not making a new Will, some other signed written document indicating that you intended to destroy your Will and allow the intestacy rules to apply.
There are several ways of revoking a Will. This can happen when the person who made the Will intends to revoke it, but there are also some ways that it can happen automatically, by operation of law, and even if the person who made the Will did not intend to revoke it.
REVOCATION CLAUSE When a solicitor is drafting a new Will for someone, they will usually include an express revocation clause, indicating that any old Wills are revoked by the new Will. In fact, even if you intend to keep elements of an old Will, it is generally regarded as good practice to produce a new document that includes any provisions of an old Will that you wish to retain. Remember, it is in the interest of your executors and beneficiaries to have as little ambiguity or confusion as possible in the documentation, enabling them to get on with the administration of the Will rather than having to worry about piecing together lots of different documents in order to determine what you intended.
LEGAL EFFECT A person can always revoke their Will while they are alive and have legal capacity. A clause in a Will indicating that the Will cannot be revoked has no legal effect – the person who made the Will can still revoke the Will. The destruction of the original signed Will, combined with the intention to revoke the Will, is a valid means of revoking a Will. If a solicitor has drafted your Will, or if you have done it yourself on a computer, there may be an electronic version of the Will. Therefore, if you intend to revoke a Will by destroying it, you might want to ensure that any electronic versions are deleted or amended to reflect the fact that the Will is no longer valid. It is also worth remembering that disputes over Wills generally arise after the death of the person
a civil partnership, then any Will that you may have made prior to doing so is automatically revoked. An exception to this rule is a Will that you have made in anticipation of the marriage to, or civil partnership with, the particular person involved.
spouse’s life interest in the asset would have lapsed.
On the divorce or annulment of a marriage, or the dissolution of a civil partnership, any gifts to the spouse or civil partner in the Will automatically lapse. The rest of the Will may continue to be valid, however.
In summary, a person who makes a Will can revoke it at any time. A Will cannot be made irrevocable. Certain events, such as divorce or the making of a later Will, can partially or completely revoke the Will by making certain terms of the Will ineffective. If a person gets married or enters into a civil partnership, their Will is automatically revoked unless it was made in anticipation of the marriage or civil partnership.
This can have various consequences. For example, if the spouse were to be given a life interest in a particular asset, with the asset to go to another beneficiary on their death, the other beneficiary would immediately get the full interest in the asset when the person who made the Will dies – because the
MAKE SURE YOUR WISHES ARE CARRIED OUT Some people put off making a Will, often until they’re in their later life. Making a Will can save your family unnecessary distress at an already difficult time and makes sure your wishes are carried out when it comes to who inherits what.
If a new Will does not include an express revocation clause, the new Will does not revoke and supersede the old Will in its entirety. A new Will without an express revocation clause does, however, automatically revoke provisions of the old Will that are inconsistent with the provisions of the new Will. MARRIAGE AND DIVORCE If you get married or enter into
The content of this publication is for your general information and use only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Will Writing, Inheritance Tax Planning or Taxation Advice. All figures relate to the 2017/18 tax year, unless otherwise stated.
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