The new Personal Savings Allowance has now been with us for a number of months. Many people may not even be aware of it and for the majority of people, its presence will have only a minor impact, if at all, in that they will receive slightly more savings interest than before. This is because the requirement for banks and building societies to deduct tax at source was also removed on 6th April 2016 and all such interest in now paid gross. From that date, a savings allowance of £1,000 for basic rate taxpayers, or £500 for higher rate taxpayers, was introduced.

Lesley Rance, a tax specialist in our Perth office comments: “Individuals who, to date, have reclaimed the tax suffered on this interest will no longer have to submit a repayment claim to HMRC to have this refunded. Basic and higher rate taxpayers will be able to earn the aforementioned sums tax free and it will only be where these limits are exceeded that the amounts have to be declared to HMRC”.

However, the allowance does not apply to additional rate taxpayers i.e. those whose income is above £150,000 on which they pay tax at 45%. This means they now have a source of untaxed income and they will have an obligation to inform HMRC.

At the moment, formal guidance is a bit thin on the ground but it is fair to assume that, if the individual in question is already within Self Assessment it will simply be a matter of including the interest as normal in the relevant section of the tax return and the tax liability will be calculated in the usual way.

However, for savers who do not submit tax returns, there is a possibility that they may now have to. This is unfortunate seeing as, over the last decade or so, HM Revenue & Customs have worked to reduce the number of taxpayers who annually submit tax returns under Self Assessment, particularly those whose tax affairs were relatively straightforward or where tax could be collected at source, either by direct deduction from interest or through PAYE. The new rules which were supposedly brought in to make matters simpler for many savers may have the opposite effect on wealthier savers. Of course, it is by no means certain that those savers will have to submit a tax return. HMRC might revert to their historic practice of including an adjustment in the individual’s PAYE coding notice so that extra tax is deducted from employment or pension income, to cover the tax due on the interest.

Lesley added: “If you have any concerns as to how the new Personal Savings Allowance might affect you, we would suggest you discuss matters with our tax specialist”.

Recent media reports have highlighted the fact that increasing numbers of applications for Guardianships in Scotland are putting strain on the specialist social workers who deal with the applications and oversee the guardians.

Ernie Boath, a Partner in our Dundee office commented: “The appointment of a welfare or financial guardian is a procedure under the Adults with Incapacity (Scotland) Act 2000, which allows a third party to apply to be able to look after the affairs of an individual who has lost the capacity to do so themselves. That loss of capacity might be as a result of illness, such as Parkinson’s Disease, stroke or dementia, or as a result of a serious accident, which affects one’s ability to care for themselves and look after their own financial affairs.”

An investigation by the Mental Welfare Commission discovered that in many of the cases they examined, it was clear that local authorities were struggling to carry out the appropriate supervisory visits, or to carry out the initial checks during the application process.

Guardianships are vital to allow family or close friends, or for that matter professional advisors, to step in and look after the affairs of an individual when they are no longer able to do so themselves. It is becoming more widely understood that even very close family members, such as a spouse or child, cannot simply take over the personal or financial affairs of an adult. The number of new guardianship applications granted last year (2,657) is almost double the number that were granted in 2010 (1,336).

With Scotland’s elderly population continuing to grow, it seems likely that the number of guardianship applications will also increase, and as a result, the burden on mental health officers and the Sheriff Court system, is only going to rise.

One way to avoid the need for a guardianship application, however, is by putting a Power of Attorney in place before capacity is lost. This is generally much cheaper and quicker than guardianship and it also has the advantage of the person appointed to look after your affairs being someone of your choosing and in whom you have complete trust. That is because it is you who appoints an attorney to look after your affairs, unlike a guardianship where the guardian applies to have themselves appointed. You can appoint either a single person or a number of people jointly to look after your affairs and they can have responsibility for your financial/business affairs, your welfare, or both.

Ernie added: “The process of granting a Power of Attorney is relatively straightforward and the Private Client Team at Miller Hendry are routinely recommending that all our clients give serious consideration to getting this document prepared sooner rather than later”.

1. “I’m married, it will all go to my wife” – this is not the case. If a couple are married and a spouse dies without leaving a Will, the surviving spouse does not automatically inherit the whole estate.

Aileen Scott, an Associate solicitor in our Perth office writes: “The surviving spouse has a prior right to an amount of assets in the estate, then a legal right to a share of cash in the estate along with any children of the deceased. The remaining estate then passes to children, if there are no children then to parents and siblings of the deceased. Only if there are no children, no parents and/or siblings does a spouse inherit all of the estate. To ensure the bulk of your assets on your death pass to your surviving spouse a Will should be granted in their favour”.

2. “We’ve lived together as man and wife for years, he’ll get everything when I go” – definitely not what the law states. The law is not particularly kind to those couples who choose to cohabit – the surviving cohabitee does not automatically inherit their late partner’s estate if he or she has not made a Will in their favour.

There is a common misunderstanding that a couple will establish a “common law marriage” or a “marriage by cohabitation with habit and repute” after living together for a period of time and eventually have the same rights in law as a married couple do. Common law marriage does not exist in Scottish law and no rights will ever be established regardless of the length of time a couple live together. Cohabiting couples need to have a Will in place to ensure the surviving cohabitee inherits their estate, otherwise their estate will pass to family members.

3. “My next of kin will sort everything out for me” – the person you consider to be your next of kin does not have any legal recognition or rights in Scottish law.

Your next of kin is normally defined as being the closest living relative by marriage or blood. It is likely to be your spouse/civil partner, although traditionally it is the eldest son. Your next of kin cannot automatically administer your estate on your death. To do this the person you consider to be your next of kin requires to be one of a group of people who has a right to apply to the Court to be appointed your Executor. This can be avoided and you can ensure the person you trust and would expect to administer your estate does so by granting a Will naming them as Executor to your estate.

Aileen adds: “Making a Will is an essential part of later life planning. It appoints a person or persons you trust to administer the terms of your Will and directs who will receive your estate when you pass away. A Will lets you safeguard the important things in your life for the people you love. A properly drafted Will can avoid complications and disputes after you die. It allows you to specify who inherits your money, property, possessions, personal mementos or charitable donations.”

If you do not leave a Will, the law of intestate succession (the law that dictates where your assets will go if you do not choose to leave a Will) may leave out those you wish to benefit the most.

With the current low interest rate continuing to erode income and savings, we have had a noticeable increase in enquiries from clients asking us: Should we release the capital tied up in our property?
This is by way of an equity release loan and usually takes the form of a lifetime mortgage for those aged 55 or over. The loan is then secured against their home and the loan and interest are usually repaid from the proceeds of the eventual sale.
An equity release loan, if done properly, is a way of paying for an upgrade or extension to a property, for example. But there are things to be aware of when tapping into your property’s equity:

  • Be careful as the interest charges can mount up over time and interest rates can vary significantly.
  • The compounding effect of the interest can increase the amount due to be repaid substantially, although one way of reducing the interest burden is by making monthly interest payments.
  • If you decided to move house again in the future and your house value hasn’t continued to rise, you may find that having to repay the equity release loan on a sale has an impact on your future purchasing power.
  • Another important factor to consider is the repayment fees as these vary significantly between lenders.
  • You also need to be aware of whether or not taking out an equity release loan affects your entitlement to means tested benefits.
  • Although equity release isn’t right for everyone’s financial situation, judging by the increase in queries on this issue at our office, it’s something that clients are giving serious consideration to.

The first significant reform of the law relating to succession to a person’s estate on death in more than 50 years came into force on 4 March 2016 through the Succession (Scotland) Act 2016.

Donnie MacLeod an Associate in the firm’s Perth office commented: “Many of the provisions have yet to come into effect but the new Act is intended to clarify the law of succession and make it fairer.” The main provisions are as follows:-

• To exclude an ex-spouse or civil partner from inheriting or being appointed as Trustee, Executor or Guardian under a Will which was made before a divorce or dissolution (there is an exception where the deceased’s Will explicitly states otherwise). Under the existing law, a Will which made provision for a spouse to benefit was still valid following the breakdown of a relationship by divorce or dissolution and this led to some unintended and undesirable outcomes if no steps were taken to update a Will. This change brings Scotland more into line with the position elsewhere in the UK.

• To provide that in a Will which includes a special destination ie property passing automatically to a former spouse on death, such a special destination will be revoked on divorce. This applies not only to houses and land but also bank accounts and investments held in joint names.

• To modify the survivorship rule to state that where both spouses die in the same accident, neither is treated as surviving the other.

• To provide that a court, under certain conditions, can rectify a Will that does not reflect the deceased’s intentions.

• To remove the requirement for Executors to obtain a Bond of Caution i.e. an insurance policy, where an estate is not contentious and small.

• To provide that where a beneficiary who is a direct descendant of the deceased and is due to receive a bequest under their Will dies between the Will being made and receiving that bequest, the beneficiary’s children would take whatever the beneficiary would have taken. This is not to apply if it is clear from the Will that the deceased intended otherwise.

There is to be further consultation on the law of succession which will deal with a variety of matters including estates where no valid Will has been left, the entitlement of co-habitants and protection from disinheritance. Donnie added: “These are major changes to the laws of succession and we will need to consider with our clients how these changes will impact on their individual circumstances.”

We hope that we will always be able to deal with our own financial affairs and make decisions regarding our welfare, and never have to reply on another individual to make decisions for us; however, sadly, this isn’t always the case. More and more clients are becoming aware of the importance of granting a Power of Attorney.
A Power of Attorney is a formal document authorizing someone you trust to act on your behalf. It can only be granted when you have full mental capacity therefore it is crucial that the document be prepared as early as possible. Many people believe that Powers of Attorney are only required for the elderly.

While the urgency to grant a Power of Attorney may be due to the onset of any degenerative illnesses such as dementia, they are also extremely important where an individual becomes mentally incapable due to an accident or illness.

In Scots law there are two types of Powers of Attorney:

Continuing – This covers financial and business affairs and can be brought into operation at any time, i.e. before you loss capacity with your consent.

Welfare – This covers personal affairs and can only be brought into operation once capacity is lost.

What happens for those who have left it too late to grant a Power of Attorney?

Leann Brown a Senior Solicitor in our Dundee office confirmed: “If a client has lost capacity (which can be confirmed by a doctor), and ongoing financial and welfare decisions need to be made for them, a Guardian will need to be appointed through the Court. This is a time consuming and costly process, and best avoided at the outset by putting a Power of Attorney in place.“

Living in a care home can be expensive. Some people are able to pay their own care fees, others may need help. To figure out how you will pay your care fees, you should know what type of assets you own and their value. This along with knowledge of the eligibility criteria means that you can plan for your future timeously.

If you need to go into care, the council will usually carry out a ‘needs assessment’. If you are over 65, the council will pay £171 per weeks towards personal care needs and an additional £78 per week towards nursing care needs in a care home (from April 2015). If you take the former, you lose your entitlement to Attendance Allowance or the care component of the Disability Living Allowance.

After the needs assessment, a ‘financial assessment’ will usually be carried out to ascertain what, if any contribution you may receive towards your accommodation costs. If you have savings or capital of less than £16,250, you will not have to use any of this money towards you care home fees.

If your savings and capital are worth between £16,250 and £25,250 and you are eligible for personal and or nursing care payments, your council will contribute towards the accommodation costs of your care home fees. You will however have to pay a ‘tariff income’ charge of £1 for every £250 between £16,250 and £26,250 in savings you have.

If you have savings and capital worth over £26,250, you will have to pay all your care home fees until your savings and capital reduce to the limit discussed above.

Rachel Alexander a Senior Solicitor based in the firm’s Dundee office commented: “ Trying to work out what you are entitled to can be very complicated. It is important to know that you will be assessed as an individual and the council does not have the right to ask your spouse, civil partner or partner to give details about their income or savings. “
She added: “Savings and capital means bank and building society accounts, national savings accounts, premium bonds, stocks and shares and property. Any joint property will be divided into equal shares unless you can show that it was held in unequal shares. Savings and capital that are ignored are the surrender value of life insurance polices, money held in a personal injury trust and personal possessions.”

If you live with someone, the value of that property (if it’s in your name) will not be counted as capital. The value of your home is ignored if a relative or family member who lives with you is incapacitated, under the age of 16 and you are responsible for them or if they are aged 60 or over. They will also ignore the value of property if someone has given up their own property to move in with you to care for you. If you own properties other than your main home, their value will be taken into account.

The system for funding care is complex. You may be able to retain ownership of your property by speaking to us before the issue becomes urgent. This will allow us to explain your options and you to take the most appropriate planning steps.

Proving that where there’s a will there’s an opportunity for charity, Tayside based solicitors and estate agents Miller Hendry is celebrating a highly successful collaboration with the campaign Will Aid – one that ranks the firm among the top fundraisers in Scotland.

Miller Hendry raised £6925 through the month-long annual Will Aid drive, which asks solicitors to waive their usual fees and have clients make a donation to Will Aid instead. The donations are then divided among nine Will Aid charities, which include Save the Children, Christian Aid and British Red Cross. During the 2015 campaign, Miller Hendry’s staff in Dundee, Perth and Crieff wrote more than 50 wills.

The money raised through the latest Will Aid campaign, which is held every November, puts Miller Hendry fourth highest in Scotland in terms of donations and 23rd highest in the UK. In total, Miller Hendry has collected £74,613 and run 13 campaigns for Will Aid.

Solicitors’ firm turns wills into charity effort

Presenting a certificate to staff at Miller Hendry’s offices in Perth, Katy Williamson, Community Legacy Manager with British Red Cross, said:

“We would like to thank Miller Hendry and all the people who made their will during Will Aid last year. The time donated by solicitors and the generous donations from everyone who made a will are already helping to save and transform lives around the world.

“It is so important to have a will to ensure your wishes and loved ones and taken care of. Will Aid also gives people the opportunity to leave legacy gifts, and we are extremely grateful to everyone who chose to include the Red Cross in their will, making a promise that help will always be there when someone needs it in future. Whether it’s responding to the recent flooding here in the UK or to the continuing humanitarian disaster in Syria, the donations and legacies from Will Aid mean we can continue to help people in crisis whoever and wherever they are in the world.”

Caroline Fraser, an associate with Miller Hendry in Dundee who specialises in the preparation of wills, said:

“We pride ourselves on giving back regularly to our local community, and in this case we have spread our charitable net even wider, donating almost £7000 to some top nationwide charities. We’re proud of our staff for not only winning a spot as one of the top four donors in Scotland, but for raising awareness about the need to write a will. The more people realise how important a will is, and that having one prevents a lot of unnecessary legal complications, the better.”