Make a business trust; it could be the shrewdest thing you ever do

If you are a business owner, then the chances are you are one of the many who don’t have a Business Trust.

Most business owners in the UK don’t. Often, it’s simply because they haven’t been made aware of the risks in not doing so.

Business Trusts exist to protect your business in the event of you passing away. They also provide extra financial security for your family and help to minimise inheritance tax.

How do business trusts work?

When a partner dies, the business is placed in the trust. This means that it now owned by the trust, not the family.

Each trust has trustees appointed to manage the trust’s affairs. Quite often, this will be your business partners.

Not only does this allow the business to continue functioning normally, it also enables your spouse and family to continue receiving benefits from the business.

Furthermore, as the value of the business has passed to the trust this will enable the family to potentially make significant inheritance tax savings.

What would happen if I don’t have a Business Trust?

If you die, your share of the business passes to whoever you have named in your Will. Usually your next of kin.

This might well be fine. However, many businesses run into problems when a family member inherits. They may not have the experience and suddenly find themselves with a controlling stake in the business.

A recent survey found that more than a third of family business owners don’t trust their children to inherit. So, it seems strange that so few of them then make the effort to create a Business Trust in their Will.

Business Trusts are tax efficient

If your family inherits the business, the value will also be added to your overall estate and taxed at 40% (over the nil rate band).

Because a Trust’s assets are not legally owned by its beneficiaries, there can be substantial inheritance tax allowances claimable by your executor.

Family continues to benefit

By making your business partners trustees, the business is protected during what can be a lengthy and potentially expensive probate process.

They can then get on with running the business, whilst your family continues to enjoy the financial benefits from the business.

Summary

Now you understand the huge benefits of putting a Business Trust in your Will, you can see why it’s so shocking that the vast majority of UK business owners don’t have one in place.

This relatively simple and inexpensive process could end up saving your family a fortune and protecting the health of the business for future generations.

If you would like to find out more then please get in touch and a member of our team will be happy to discuss it with you in more detail.

Londoners are most at risk from inheritance tax; yet least prepared

A shocking 67% of Londoners admit to not having made a Will despite facing some of the biggest inheritance tax liabilities in the UK.

London skyline lit up at night with St Paul's Cathedral in the foreground

Property prices in London might be an eye-watering 158% above the national average, but this isn’t enough to make us put down the jackfruit burgers and turmeric lattes long enough contact our local Will Writer.

Just 33% of us have made a Will, leaving a huge number of families and individuals exposed to large inheritance tax bills and the financial hardship caused by the UK’s lengthy and complicated intestacy process.

The problem shows no sign of going away.

Even with the rest of the country voting to leave the EU, in a dastardly ploy to damage London house prices, sold prices in London were 3% up on the previous year and 15% up on 2015*.

This means that today a single person dying without the right inheritance planning in place, can expect to give HMRC around £120,000 in tax.

That’s based on an estate of £628,000 which is the average price of a property in London. If you have a more expensive house and other valuable assets you can expect to pay even more.

Does making a Will minimise Inheritance Tax?

A professionally prepared Will is not designed to reduce a person’s IHT liability. However, through consultation with your Will Writer you can act to minimise the cost to your family with sensible planning.

It’s also a great opportunity to make sure your family don’t have to go through UK intestacy courts, which is what happens if you die without a Will.

Dying intestate (without a Will) can prevent your family from accessing funds from your estate for many months, and sometimes even years. It’s a common problem in London and one we unfortunately see all the time.

Don’t be one of the ones to get caught out; make a Will now

We know that living in one of the busiest and most diverting cities on Earth is pretty distracting. But as you can see, getting caught without a Will can be a real hardship for your family. We’ve seen some families in this situation have to leave London altogether.

So, don’t leave your family out in the cold. Speak to us today and get your inheritance matters sorted. It only takes a phone call or email.

*Rightmove

Image Credit: Jorge Franganillo (Creative Commons)

7 Myths About Lasting Powers of Attorney

A Lasting Power of Attorney (LPA) can be one of the most important documents you’ll ever sign, preventing loss of income and saving your family from huge stresses and struggle at a difficult time.

Confused about taxes and inheritance

An LPA lets you appoint another person, or a group of people, to make important decisions and act on your behalf if you become incapacitated for any period of time.

Despite this, millions of people in the UK don’t have this essential document simply because they don’t realise they exist or because they are confused about what they are and how they work.

With that in mind, let’s take a look at the seven most common myths surrounding lasting powers of attorney.

1: LPA’s are for older people

Although most commonly associated with retirees, an LPA can and should be made by anyone over the age of 18 who has full mental capacity.

Even simple things like paying bills and arranging overdrafts can be carried out on your behalf if you have an LPA, providing an essential safety net should you have an accident or get sick.

2: I can get an LPA once I need one

The danger of this approach is that you cannot make an LPA if you do not have full mental capacity. So, even if you are young, fit and healthy, a sudden accident or illness such as a breakdown or falling into a coma, would mean that it would be too late for your family to gain access to your finances or make important decisions on your behalf.

3: I’m married so I don’t need an LPA

Married couples assume they can act for each-other with legal authority. However, they cannot due to the Data Protection Act. Whether married or not, every adult requires an LPA in order to act on behalf of another.

4: LPAs are for the rich

An LPA is not just for wealthy people. A young working person is just as likely to need someone to able to make important decisions about their medical treatment and finances as anyone else. This is a common mistake that can often lead to real difficulty for people down the line.

5: I’m young, fit, healthy and busy! What do I need an LPA for?

If you are in the prime of life and busy working away and paying off a mortgage, the chances are you need an LPA more than your older relatives!

If you’re self-employed or building a business, think about who would be able to access your account to pay bills and wages in the event of an accident or illness? Running a business without one is a massive risk.

6: Getting an LPA is far too complicated

An LPA is a simple document that can be made quickly and without any fuss, with the assistance of our team. Most prepare one when they write a Will, but you can have one created independently at any time. Don’t put it off just because you think it will be involve lots of toing and froing. We can deal with that for you.

7: LPAs are expensive to organise

The cost of an LPA is often lower than you might think. Everyone’s circumstances are different, and fees vary from one company to another; but in comparison, an application to the Court of Protection (the alternative if you do not have an LPA) is considerably more. It can cost up to £5000 for a single court application!

Still confused? Our consultants are here to guide you through the process. Why not give us a call on 0208 340 3102

What is the Residential Nil Rate Band and how can it reduce inheritance tax?

A terraced house on a typical London street with the sun shining on it
Have you heard about the recent changes to inheritance tax (IHT)? New laws were passed last year to increase the overall sum you can leave to your direct descendants. However, as usual, the facts behind the headlines are never as clear cut as they first seem.

So, let’s take a quick look at everything you need to know about the residential Nil Rate Band and how it could affect you and your family.

What is the Residential Nil Rate Band worth?

Under English law, everyone is entitled to pass on up to £325,000 tax-free to their loved ones. However, if you own a property you are now allowed to add an extra £125,000 to this amount.

This takes your overall tax-free allowance to £450,000.

This is due to rise by £25,000 each year until 2020.

In 2019 the overall tax-free amount you can bequeath rises to £475,000

In 2020 this will rise again to £500,000.

What if I am married?

If you are married, or in a civil partnership, you may pass this tax saving on to your spouse in the event of your death. This means that couples can benefit from as much as £800,000 if they fulfil the required criteria.

By 2020 the maximum joint amount will have risen to £1,000,000.

This is the big shiny number splashed across certain newspapers, which explains why some people have become confused about their overall tax-free allowance today.

Who is eligible for the Residential Nil Rate Band?

Anyone who has property as part of their estate is entitled to this additional tax-allowance. It is an important point, as anyone leaving over £325,000 in their Will us still taxed at 40% on everything above that amount if there is no property in the Will.

Secondly, there are strict criteria around who you can leave your property to if you want them to benefit from this extra tax-allowance.

In order to benefit, your beneficiaries must be your direct descendants. This means that they must fall under one of the following categories:

• Children and their spouses or civil partners
• Grandchildren and their spouses or civil partners
• Great-grandchildren and their spouses or civil partners
• Stepchildren
• Adopted children
• Foster children
• Children who were under the guardianship of the people passing on their estate

Perhaps contentiously, this means that your nieces and nephews, brothers, sisters or other blood-relatives cannot benefit from the extra tax savings if your home is passed on to them.

What if you own more than one property?

If you are lucky enough to own multiple properties, the executor of your Will may decide which of them is counted as your main property.
However, they must be able to show that you did live in this property at some point. Any buy-to-let properties will not count.

Still confused?

We’re here to guide you through these complex inheritance planning issues. If you are considering any changes to your Will or need to review how your estate is currently liable for Inheritance Tax, contact the office today and one of our team will help give you the advice you need.

Image: Jeff Easter (Creative Commons)

How will moving from a civil partnership to a marriage affect your Will?

A rainbow flag in the sunshine

Our clients are a gay couple who wrote their Wills while in a civil partnership. They have recently married so came to us and asked if they needed to update their Wills, asking:

Do we need to rewrite our wills? Is marriage and civil partnership viewed as the same?

As a result of the introduction of the Marriage (Same Sex Couples) Act 2013, which came into force on 13 March 2014, and the Marriage of Same Sex Couples (Conversion of Civil Partnership) Regulations 2014, which came into force on 10 December 2014, civil partners are now able to convert their civil partnership into a marriage.

The regulations state that the conversion of a civil partnership into a marriage will not revoke an existing will, does not affect any disposition in an existing will, and also allows references to a civil partner to be read as referring to a spouse.

With this in mind, the change from a civil partnership to a marriage will not revoke their existing wills.

In this instance, however, we would generally recommend that clients have their Wills reviewed every 3-5 years to ensure that they remain up-to-date.

Why do I need to review or change my Will regularly?

If you have a major life event change that alters your personal circumstances you should have your Will reviewed to make sure that it is still valid.

Major life changes include buying a new house, acquiring significant sums of money, buying or selling a business, having children, getting married or becoming separated or divorced.

Many contentious probate issues are caused by people passing away with an old or out-of-date Will.

Anything that causes ambiguity can lead to issues, so keeping your Will up-to-date is very important, especially if you have any problematic family relationships or significant wealth.

However, please be aware that ‘significant wealth’ can apply to anyone who owns their own home in London these days, so don’t make the mistake of thinking it doesn’t apply to you!

If you have any questions or are unsure whether your Will needs updating, don’t just leave it to chance. Make an appointment to have your Will reviewed by one of our inheritance specialists today!

Image credit: torbakhopper

Keeping calm and carrying on

Here in the UK we are becoming accustomed to living amidst chaos. A weak Prime Minister presides over a government at war with itself; businesses are confused and uncertain about the shape of Brexit; a flatlining economy is holding back wages and investment. For most of us, the only thing we can do is wait it out, keep calm and carry on.

The houses of Parliament

We say this because a sense of disorientation caused by feeling that events are happening beyond your control is precisely what we aim to protect you from. And while there is little we can do about the present state of the country, we can help to put you and your family in a secure position should and accident or illness suddenly strike.

When something really terrible happens to a member of your family, that feeling of being ‘out of control’ kicks in almost immediately. However, if you have prepared for such an event by making a Will and creating a Lasting Power of Attorney you will have a huge burden of responsibility taken away from you at the most frightening of times.

Why do people really make a Will?

The real reason many people make a Will is not to divide up their property between family members. It is to prevent their family from having to go through a drawn out bureaucratic nightmare of a process at a time when they are least suited to do so.

When you die and there is no Will in place, you are what is called ‘Intestate’ and your estate must pass through the Courts under our intestacy laws. This makes the whole process much more complicated and burdensome. It will cost your family more money, take them much longer to access funds and remove control over important issues such as property ownership and even guardianship of children.

As you can see, making a Will is about creating a protective barrier for your family during one of the most difficult times of their lives.

Lasting Powers of Attorney

An LPA can be equally useful in shielding your family from stress. This is a legal document that appoints a trusted person to act on your behalf if you lose the capacity to do so.

Having an LPA means that your spouse, partner or friend could access your bank account to pay bills and manage your financial affairs. It gives them the authority to make decisions about your medical treatment, sell property and decide where you live.

Without one families can become trapped in limbo, unable to take action when it is needed most.

So in these uncertain times, when you feel that you have no control over events around you, you can focus on the areas where you can make a difference, by taking control and ensuring that your affairs are being managed efficiently.

If you would like to find out how we can help you manage your family affairs, get in touch with us on 020 8340 3102 and we’ll explain how you can update your existing Will.

Image by: H Lawford

Remember A Charity in Your Will Week!

From 11-17 September, we are calling on everyone to remember a charity in their will.
Remember a charity in your will week

As part of the campaign to ‘Have Your Say on the World You Want to Pass On’ we are asking everyone to think about the impact you can have by leaving a legacy to your charity of choice.

The campaign will be kicking off in London with a roadshow that takes in iconic venues from the 1960s in five of the UK’s biggest cities.

It’ll travel from London to Bournemouth, Norwich, Liverpool and Edinburgh, spending a day in each city.

Charities and supporters will be invited to record their vision for future generations and share it on social media using #HaveYourSay.

Strangely, while 75% of us donate to charity, only 6% of us actually remember to leave something in our Will.

Remember a Charity Week

Remember that a legacy doesn’t have to be a large sum of cash. Hillman Legal clients leave all sorts of things, from shares to paintings to jewellery and antiques. It all helps, so have a think about what you might like to leave.

If you would like to find out how we can help you make a legacy in your Will, get in touch with us on 020 8340 3102 and we’ll explain how you can update your existing Will.

Many UK Charities depend of legacies to survive, so make sure you give something back at the end of your life by supporting your favourite charity.

Writing a Will online; what could go wrong?

On the face of it writing a Will online seems like a quick and convenient option. But as this post will show you, there are some serious pitfalls that you should be aware of before making this decision.

Wills & Probate expert, Rebekah Hillman of Hillman Legal Partnerships, gives you her rundown of some of the things that could potentially go awry.

Free online Wills companies

We all need a Will at some stage of our lives. For many of us this begins when we buy our first property or start a family.

At this point death always seems like a long way off and not something we want to sit down and seriously consider.

So it is unsurprising that some people opt for some of the quickest, easiest and often cheapest options out there; from buying a DIY will kit in WH Smiths to completing a simple online form.

This is entirely their choice. However there are some serious pitfalls out there if you take this route, so make sure you familiarize yourselves with these first:

1: No expert to advise you

You may have decided that we are a nation that’s ‘had enough of experts’ but when it comes to things like your children’s inheritance, and their potential guardianship, you may wish to err on the side of caution.

There are a big range of legal options for you to consider. Having a Wills & Probate expert on hand to guide you through this decision making process could save your family much money and heartache in the future.

2: No notes are kept if the Will is challenged

This is one of the most dangerous aspects of going the DIY route. Any complicated family situation could give rise to a lengthy, expensive and potentially devastating court case.

If you write a will and someone contests it, the first thing their lawyer will do is ask about the circumstances of the instruction taking. They are specifically interested in whether it was a lawyer that wrote the will.

They will want to know:

• What state of mind the client was in when the Will was made
• What questions were asked
• Was the Will signing supervised

Many lawyers will build an entire case on the fact no advice was given, or around a lack of guidance during the signing of the Will. There’s also potential to question whether you had full mental capacity when you made the Will.

3. No trust options are provided

Trusts are a vital way of having a say in what happens to your money after you die. For example, you could leave your half of the property in a trust for your children. Then, should your partner remarry and die without a Will, your children will definitely receive your half of the property, rather than your partner’s new spouse.

Alternatively you can insert Trusts to deal with vulnerable adults, business interests, and even specify at what age your children should inherit the entirety of your estate, if you think 18 might be too young.

4: No related matters discussed such as LPAs and Funeral Plans

Having a professional consultation also gives you the opportunity to think through other options and make sure you have all the bases covered.

For example, a Lasting Power of Attorney (LPA) gives a trusted friend or partner permission to act on your behalf, should you lose capacity.

This would allow them to pay bills, sell property, and make big decisions for you. These can be produced at the same time as your Will to make sure you have complete cover and peace of mind.

Summary

As you can see, inheritance is not a simple matter, just ask any Charles Dickens character! Whilst filling out a form online could be a convenient and quick option, it could come back to bite you further down the line.

Make sure you seek professional advice and weigh up all your options first. The consequences of getting this wrong could affect your family for generations to come.

Let’s go crazy! What’s happening over Prince’s estate could happen to you

In a year of pretty unhappy events, Princes death stood out as one of the saddest of 2016. For anyone who grew up in the 80s and 90s his music served as a backing track to our lives. Yet his death highlights just how difficult it is when people die before their time without leaving a Will in place.

A Prince Memorial

Like many healthy and active people in their 50s, Prince never got around to making a Will. With no children and no immediate family to think about he was far too busy keeping up with his legendary work schedule to think about tedious matters like estate planning.

His untimely death means that his estate is now being decided by US intestacy laws. And with $300 million at stake, and a raft of extended family members coming forward to stake their claim, it’s no surprise that the people who are likely to benefit the most from this sorry episode will be an army of lawyers.

When you die ‘intestate’ – with no Will – there are no clear instructions left for the probate executors to administer your property, assets and possessions as you would have liked. This means that, here in the UK at least, this entire process is decided by the Courts.

The problem comes when there is a lot to be gained and relative decide to challenge the process. Of course, here in London and the Home Counties, there’s no need to be an international rock legend for this to be worthwhile. In many cases you simply need to own your own property for certain relatives to raise their heads.

Ultimately the courts will decide who gets what based on very strict criteria. Yet even then the process takes much, much longer and becomes far more acrimonious that it would have been if a simple Will had been left behind.

In the US it looks like the lawyers are going to make a huge profit from Prince’s estate as around eight potential heirs begin to fight over his wealth in the courts. We very much doubt that this is what Prince, or indeed anyone, would want to see.

So don’t allow your family to become embroiled in bitter feuds and disputes over your money should the unexpected happen. Get a Will today and make sure you keep it updated to reflect any significant life changes that may occur.

To find out more contact the Hillman Legal Team today and book an appointment. You may not have penned Purple Rain but you’ve worked hard and built up what you have. Make sure it goes to people you love and not into a litigation solicitors bank account.

Call us on:

0800 29 88 66 1

We will help you keep all of your affairs up-to-date, allowing you to rest assures that if the worst comes, you will at least have known that you did the very best for your family and loved ones.

Image by Eric (kindly used under the Creative Commons License)

Is your Will up-to-date? The essential checklist

Too many people die believing that their affairs are in order, only for their families to discover after they’ve gone that their Will was actually out of date.

Inheritance Tax Hillman Legal

A Will is a living breathing document, and for it to be accurate at the time of death it has to be kept up to date to reflect any life changes that may have occurred since the last revision was made.

If you don’t do this you run the risk of the Will being challenged by a disgruntled family member. In the worst cases it evens runs the risk of the deceased being declared ‘intestate’.

When you die ‘intestate’ (without a legally recognised Will) your estate becomes applicable to UK Intestacy laws.

This means that big decisions such as where your money goes and what happens to your children are decided by the Courts, rather than according to your wishes.

It’s also a much lengthier, stressful and more expensive process.

To avoid this all-too-common pitfall, make sure you keep your Will updated to reflect any major life changes. It doesn’t necessarily mean that you’ll need to write a whole new Will, and can often involve just a few simple amendments to your existing Will.

What’s classed as a major life change?

Here are some the events that should trigger a warning signal in your brain that it’s time to update your Will.

• A new addition to the family
• Buying or selling property
• Getting divorced
• Getting married
• Starting or buying a new business
• Inheriting property or significant assets
• Your partner remarrying or having children with someone else
• The value of your existing property increasing above the IHT threshold
• Becoming wealthier
• Losing touch or falling out with an Executor

What do I do next?

Getting these changes amended to your Will is often a simple process. In the first instance you should contact our office or the local consultant that came to see you. We can then advise you on the best course action, depending on your individual circumstances.

Remember that too often people put these things off, even though they may have had the best of intentions. But once it’s too late there is nothing that can be done to reverse the situation. So don’t let that person be you.

Call us on:

0800 29 88 66 1

We will help you keep all of your affairs up-to-date, allowing you to rest assures that if the worst comes, you will at least have known that you did the very best for your family and loved ones.