With the two year anniversary of the introduction of the Residential Nil Rate Band (“RNRB”) fast approaching, along with a further increase in the allowance, we take another look at how the RNRB can help to reduce your Inheritance Tax liability.
Most people have a standard Inheritance Tax allowance of £325,000. For spouses and civil partners, this can double up to £650,000. If the value of your assets is below that threshold, then your estate shouldn’t have to pay Inheritance Tax on your death. Otherwise, the tax is charged at 40% on the part of your estate which is over the threshold.
Trusts are used for many different purposes but have often been treated with suspicion by legislators and HM Revenue & Customs. In reality, they are most often used to protect those who are most vulnerable in society and should be treated as such.
The age of legal capacity in Scotland is 16 years old. Nonetheless, many parents may consider this age to be too young for children to handle financial matters on their own. Miller Hendry are regularly involved with assisting clients in setting up Lifetime Trusts or including appropriate Trust provisions within their Wills so that assets are managed on behalf of people who cannot, or should not, own assets themselves.
After taking part in the most recent Will Aid campaign, Miller Hendry raised £10,390 for nine of the UK’s best loved charities – SCIAF (Scotland), ActionAid, Age UK, British Red Cross, Christian Aid, NSPCC, Save the Children, Sightsavers and Trocaire (N. Ireland).
Since 1988, Will Aid has enabled the legal profession to raise over £20 million for good causes. The Will Aid charities all work with the most vulnerable people in the UK and around the world - such a massive sum will have improved countless lives!
With current low interest rates 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?
Donnie MacLeod, a Partner in our Crieff office advises, “Often clients wish to take money out of their property by way of an equity release loan. This 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.”
As dementia rates continue to rise in our elderly population, adults in Scotland are urged to make a Power of Attorney and get their affairs in order. Alzheimer Scotland reports approximately 90,000 adults in Scotland have dementia, and this is expected to rise over the coming years. It is increasingly important for our ageing population to make plans for their future care should they lose capacity or become unable to manage their financial and welfare affairs.
A 2014 Supreme Court judgement, the “Cheshire West” case, decided that someone is deprived of their liberty if they are both 'under continuous supervision and control and not free to leave'. The legal repercussions of this case are still being felt and, having recognised the need for reform, the Scottish Government are currently working on a paper to clarify the position in Scotland.
The Cheshire West case clarified the definition of the term “deprivation of liberty” and set out the circumstances in which procedures should be put in place to protect society’s most vulnerable people. The case centered around a 39-year-old man who did not have the mental capacity to make decisions about his own welfare. He had a number of medical conditions, including cerebral palsy and Down’s syndrome.
With care home fees in Scotland ever on the rise, averaging over £700 per week (May 2018), it is important for people to think about how they are likely to meet these costs in future.
Samera Ali, a Solicitor in the firm’s Perth office, advised, “In order to figure out how you will pay your care fees, you should know what type of assets you own and their value. With the majority of elderly clients owning their own homes, many are likely to be considered ‘self-funding’ when being assessed for Local Authority funding.”
A dedicated team of walkers from Miller Hendry recently completed a special charity trek in memory of two former colleagues who passed away.
The 13-strong group of partners and staff walked 14 miles from Cargill near Blairgowrie to the legal and estate agency’s Perth office on Friday, August 24, 2018.
The trek was organised to raise money for Breast Cancer Research and Aplastic Anaemia Trust in memory of two much-loved former colleagues, Brenda Pilling and Ruth Kerr. Brenda passed away in 2016 and Ruth earlier this year in February.
In recent years, following the tragic death of a young Black Watch soldier, a case regarding disputed funeral wishes reached the headlines. In addition, we have seen a number of changes in the law covering burials and cremations in Scotland.
A soldier serving in the Black Watch passed away in 2011 and his mother and wife could not agree on the terms of his funeral. The soldier had expressed a wish to his mother that he would like to be buried near his grandfather. He subsequently expressed a wish to his wife to be buried beside her late brother. The soldier appointed his mother as his executor, giving her the responsibility of administering his estate with everything passing to his wife. The Will did not include funeral arrangements.
Losing the ability to make our own financial and welfare decisions can be an uncomfortable thought; however, sadly, for some people this is the reality of life. More and more clients are becoming aware of the importance of granting a Power of Attorney.
What is a Power of Attorney?
A Power of Attorney is a formal document authorising 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 a degenerative illness such as dementia, they are also extremely important where an individual becomes mentally incapable due to an accident or illness.
In late 2017, a retired English judge Denzil Lush made highly publicised remarks about the risks of granting an English Power of Attorney. Mr Lush commented that he would never grant a lasting Power of Attorney (LPA) over his financial affairs, because of the risk of abuse. He estimated that one in eight English LPAs were misused by Attorneys, to the detriment of the donor’s financial affairs.
Mr Lush’s remarks resulted in significant press coverage and a large number of calls from anxious members of the public to their solicitors or to the Office of the Public Guardian. Scotland’s Public Guardian, Sandra MacDonald, issued a statement reassuring the public on the safe use of Scottish Powers of Attorney.
Ms McDonald confirmed that there are a number of differences between Scottish and English Powers of Attorney. One key difference is that Scotland requires an assessment of the capacity of the person granting the Power of Attorney before the document is granted. A lawyer or doctor has to certify that the granter is aware of what a Power of Attorney is, what powers they are granting to whom, and that they are satisfied that the granter is not being pressured to grant the document. Ms McDonald commented, “This capacity assessment is a critical safeguard”.
All title deeds regarding ownership of land in Scotland must be registered with Registers of Scotland in Edinburgh. Currently, there are two registers. The Register of Sasines began in the 17th century and was the first land register in the world. A map based Land Register commenced in 1981 and is progressively replacing the Sasine Register.
Over 35 years later, many properties are still on the Sasine Register. The Scottish Parliament recently introduced legislation to speed up the process and set a target to complete the Land Register by 2024.
Properties on the Land Register have the benefit of having clearly defined property boundaries based on the Ordnance Survey Map, single Title Sheets disclosing title conditions, rights and securities (e.g. mortgages) and a state backed warranty of the information on the Title Sheet. The legal process to sell or transfer a property on the Land Register is also much simpler.
The Government has recently carried out research to gain information on how much people with business and agricultural interests know about the Inheritance Tax (IHT) reliefs available to them.
The research found that, for the vast majority, their key focus is to keep these sort of assets within their families. IHT planning is not at the forefront of their minds. That said, there is the possibility that the Government may change the reliefs available, or may scrap them altogether. It therefore makes sense to check the various reliefs available and take action at the earliest opportunity.
The two reliefs in question are Agricultural Property Relief (APR) and Business Property Relief (BPR). For those who are aware of these reliefs, there is a common misconception that if you own agricultural land and/or a business, then the reliefs will be fully available at a rate of 100%. This is not always the case.
Brisbane Supreme Court, Australia recently decided that an unsent text message detailing how a man wished for his estate to be divided was a valid Will. Could this be a turning point leading to digital Wills being accepted in Scotland?
In the Australian case, the individual composed a text message addressed to his brother, but the message was never sent. The message contained information regarding the individual’s bank accounts and wished for “all that I have” to go to his brother and his nephew, followed by the words “my Will”. Typically, for a Will to be valid in Queensland, the Will must be written and signed by two witnesses. Nevertheless, the text message was held to sufficiently show the deceased’s intention for it to be used as his Will.
After taking part in the most recent Will Aid campaign, Miller Hendry raised £4645 for nine of the UK’s best loved charities – SCIAF (Scotland), ActionAid, Age UK, British Red Cross, Christian Aid, NSPCC, Save the Children, Sightsavers and Trocaire (N. Ireland).
Anthony McVeigh, from the Scottish Catholic International Aid Fund (SCIAF),visited the firm to present partners and staff with a certificate to thank them for their support. The firm has taken part in Will Aid every year since 1996 and, in that time, has raised an impressive £79,503.
Inheritance tax (IHT) paid by UK families has topped £5bn a year for the first time in history.
People often assume that IHT only applies to the very rich, but a record number of middle-class families are affected as a result of soaring house prices and stamp duty discouraging elderly people from downsizing.
According to the most up-to-date figures provided by HM Revenue & Customs (HMRC), the amount of money paid in Inheritance Tax (IHT) by UK families has risen by almost 70% over the last five years (2012-2017).
The figures show that in 2011/12, HMRC collected £2.9bn and this increased to £4.8bn for the 2016/17 tax year. The statistics also show a sharp peak in IHT receipts at the beginning of this tax year, with an increase compared to the same period last year of 34%.
Succession for unmarried couples has come under the spotlight after a recent landmark decision by the UK Supreme Court which considered the pension entitlement of a cohabitee.
Miss Brewster cohabited with her partner, Mr McLellan, for 10 years before his sudden death in December 2009 at the age of 43. Miss Brewster raised a claim against Mr McLellan’s employer as she was denied the right to receive his occupational pension because she was not his wife and there was no nomination form nominating her to receive it. Miss Brewster argued that the rule discriminated against unmarried couples. The Supreme Court ruled unanimously in her favour, awarding her right to receive Mr McLellan’s pension.
A recent English case has highlighted the importance of taking professional advice when preparing your Will.
Raymond White was diagnosed with terminal cancer in 2010. Shortly before his death, he instructed a firm of solicitors to draw up a Will for him, which left the bulk of his estate to his daughter from a previous marriage. His second wife raised a court action challenging it, claiming that at the time the Will was made Mr White was suffering from the side effects of palliative drugs and did not understand the document he was signing.
Former Chancellor George Osborne's introduction of a 3 per cent Stamp Duty (Land and Buildings Transaction Tax in Scotland) surcharge on second properties from April 2016 caused a dramatic fall in HMRC’s revenues from the tax, according to property specialists London Central Portfolio. They estimated that the loss to the Exchequer was GBP500 million in just six months.
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”.
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.
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.
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.
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.
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.
Proving that where there’s a will there’s an opportunity for charity, Tayside based solicitors and estate agents, Miller Hendry is celebrating a successful collaboration with the campaign Will Aid.
Miller Hendry raised £6925 through the 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
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.”
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