Intestacy problems on the rise

Intestacy problems on the rise

The BBC reported yesterday that according to Citizens Advice, the number of enquiries it receives about intestacy problems has more than doubled over the last five years.

Despite attempting to drive home the message that dying without a will can cause immense stress and financial pressure on those left behind, Citizens Advice still received 3,747 intestacy enquiries last year, compared to 1,522 in 2011.

These figures appear to contradict the findings of a survey carried out by YouGov last year, which indicated that 38 percent of people in England and Wales had made out a will – a rise of three percent from the previous year.

Failing to make out a will does not only mean that the funds from an estate may not be distributed in the way that the deceased would wish.  It also means that any charities could potentially miss out on vital income.  Also, effective estate planning will not have taken place and so the next of kin could lose thousands of pounds unnecessarily, by way of inheritance tax.

The BBC report for example, cites the case of a man who left around £700,000 but no will.  His cousin administered the estate but this process took around two years and £240,000 was given to the tax man.  The rest was split among 17 people, a number of whom had never even met the deceased.

Interestingly, the number of enquiries received from executors of a will also rose last year to 11,137 from 8,160 in 2011.  This shows how estates are becoming increasingly more complex, making the role of executor more difficult, particularly for those who attempt to distribute an estate without taking specialist advice from a probate expert.

“Government increasing taxes on death” says probate expert

"Government increasing taxes on death" says probate expert

probate Government increasing taxes on death says probate expert

Government proposals to alter fixed rate probate fees to a banding system has been called "inheritance tax by the back door" by probate specialist, Tony Crocker of IWC.

The fixed fee for probate applications rose recently – a move, said the government, which was deemed necessary to fund additional administrative work carried out by the Probate Service.

These new proposals however, which are out for consultation until 1 April, would see probate fees being charged on estates valued in excess of £50,000 according to a banding system.  Fees would then start at £300 for estates valued between £50,001 and £300,000; up to £20,000 for estates valued above £2 million.

YM EstateValue Government increasing taxes on death says probate expert

Currently, estates under £5000 are not subject to probate legislation and the government plans to raise this threshold to £50,000, meaning that according to its figures, over half of estates would pay no probate fee at all.

IWC questions the validity of this view however, with the average London house price now standing at over £500,000.  It is these house prices, the company claims, which will cause problems for executors faced with paying money up front for probate fees, funeral fees and inheritance tax at 40% – and not enough money in the deceased's bank account to cover them.  These executors will be forced to offer up the remaining funds themselves or, as the government suggests, to take out a short term bank loan, until the property sells and they can recoup the funds – which of course will attract interest rates and affect their credit rating.

Although packaged as a move to assist those dealing with smaller estates, IWC's Tony Crocker says that, in its bid to raise £250 million for the Exchequer, the government is actually "giving with one hand and taking with the other".

For anyone who suspects that their next of kin may find themselves struggling financially with these new proposed changes, they may be able to avoid probate altogether, by placing their property into trust, now.

In our next blog post, we'll outline how trusts can be a means of avoiding probate, how to create a trust and what happens to it after your death.

#iwcprobate #bereaved #probate

Confused by inheritance tax?

Confused by inheritance tax?

Many of us are confused by the issue of inheritance tax – how it’s calculated for example, when and how we pay it.  Sadly, perhaps because it can be such a complicated subject, it is often overlooked.  This lack of planning can have devastating consequences on the financial circumstances of beneficiaries however, with the difference between inheritance tax payable on a planned estate as opposed to unplanned, often reaching thousands of pounds.

A recent survey revealed that 81% of people are irked by the idea of so much of their hard earned cash going direct to the tax man in the event of their death, yet three in ten of us expect our loved ones to be saddled with an inheritance tax bill, whilst another four in ten aren’t sure or don’t understand the process.  So what can you do about it?

First of all, what you need to know is that when you die, everything you own (including property, shares and savings) will be valued and totalled.  If this amount comes to over £325,000 (or £650,000 if you had a spouse who died before you), then under normal circumstances, 40% of everything above this amount will need to be paid under inheritance tax rules.  After you’ve gone, it will be up to your executors to pay this amount – before they receive a penny from your estate.  If they don’t pay up within six months, interest can be added to the amount due, resulting in an immense financial headache.

So how can you reduce this whopping 40%?  Well, there are a number of ways but they need to be examined right now, whilst you’re still alive.  These can take the form of gifting (giving specific amounts of money to your loved ones from now on, to reduce the value of your savings when you die for example) or tax relief, which may be applied in certain circumstances, such as within farming families or businesses.

The message is this – if someone were to relieve you of thousands of pounds right now, whilst you’re still alive, you’d be rightly furious and perhaps feel as though you’d been robbed.  So why allow the tax man to do it after you’ve gone? Think about what could be facing your loved ones and act now.

#iwcprobate #bereaved #probate

How much money can be released without probate?

How much money can be released without probate?

It is up to the executors of a will to handle the financial dealings of the deceased person.  Often, this means they have to apply for probate in order to begin to settle their estate.

On being provided with the death certificate; banks, building societies and other financial institutions will automatically freeze the deceased’s accounts until probate has been granted – a process which can often take months or even years, depending on the value and complexity of the estate.

This can obviously cause problems when the undertaker needs to be paid and the inheritance tax bill settled, all before the funds in their entirety are released.

Until recently, banks allowed executors to access a certain amount of money from the late person’s estate, so that at least part of these bills could be paid. This amount usually ranged between £15,000 and £20,000, dependent on the institution.  In recent weeks however, some of the more well-known banks have agreed to raise this limit, to allow more funds to be accessed which in turn, may help loved ones who are left with a financial burden.

Lloyds Bank has raised its limit from £25,000 to £50,000, whilst RBS has raised its limit from £15,000 to £25,000.

Whilst this may seem a great deal of money however, families are increasingly feeling the pinch when it comes to laying their loved ones to rest.  With the average funeral now costing around £7000, growing numbers are turning to loans and other forms of credit, to pay the undertaker.  It makes sense therefore, for adults to consider paying into a funeral plan whilst they still can, to ease the financial strain when they’ve gone.

#iwcprobate #bereaved #probate

Common problems for executors

Common problems for executors

Last month, SunLife released details of its report "Cost of Dying", which uncovered some startling statistics about the common problems faced by executors today.

Overall, the report showed that the cost of dying has risen to around £8,427, an increase of 10% over the last year.  38% of those who responded said that they had been forced to pay an associated bill from their own funds – almost a quarter paying an outstanding energy bill for the deceased and 23% spending over £100 on travel expenses.  Unfortunately, if as an executor you find yourself in the same position, there is no guarantee that any money you pay out of your own pocket, will be refunded once the deceased's estate is settled.

The role of executor can often prove time consuming.  Almost a third of executors who responded to the survey, said that they had to take at least five days off work during the probate process, to sort out administrative tasks.

Customer care it seems, is lacking in financial institutions, when it comes to administering an estate.  Almost one in five of those surveyed, expressed that they had received poor service from such companies, which had left them feeling distressed.  27% said that they had found it difficult to get in contact with the right person and 48% felt that staff should be trained to offer a more sympathetic service to bereaved individuals.

#iwcprobate #probate #bereaved

Storage of wills

Storage of wills

When choosing a will writer, it's always advisable that you ask about storage of wills.

A will writing firm will usually offer to keep drafted wills in storage indefinitely, so that when the time comes for executors to seek out the details, the deceased's express wishes can be supplied to them without any problem.

Sadly, as with any industry, there are unscrupulous firms out there who may well go out of business before the wills are retrieved.  What happens then?

Firstly, you should always do your research to ensure that the will writing firm you choose is well established and has an excellent reputation.  Secondly, it should be a member of an organisation such as The Society of Will Writers.  This self-regulating body offers a degree of protection, so that if one of its members acts unprofessionally, leaving a customer high and dry, the Society would at least pick up the pieces and rectify the situation.

Be wary of simply choosing the first will writing company that appears at the top of your online search.  Ensure that its website includes valid testimonials and that it offers exceptional customer service.  It's never wise to automatically choose the cheapest firm, either. Use your head and seek out the most reputable will writing services in the country – you could save time, money and anxiety in the long term.

Will Prince Harry inherit more than William?

Will Prince Harry inherit more than William?

It's a busy time for the Royal family at the moment, with news of a new baby for Kate and Wills, whilst Prince Harry is set to receive his inheritance from his late mother, the Princess of Wales, later this month.

Before her untimely death, Diana ensured the ongoing financial stability for her sons, by setting up an 80 year trust fund for them, worth several million pounds.  Initially, the boys were to be given legal access to this trust from the age of 25 but this was later amended by the executors of her will to age 30.

William has of course already been given access to the fund but with Harry being younger, he will also receive several years' additional interest on the purported remaining £10 million held in the trust.  In the past, he has already received £2 million from the estate of the Queen Mother and of course, he has his £40,000 salary from the army – no doubt leading to an impressive bank account for a 30 year old!

No one could have foreseen the death of Diana, but she was sensible enough to understand that it is a parent's responsibility to ensure that their children will be provided for, in years to come.

When setting up a trust for children, it pays to consider the realistic age when it can be accessed.  This of course becomes more important, the greater the amount held in trust.  Where once, significant birthdays such as 18 and 21 were commonly used, we are now seeing 30 becoming the norm.  For further advice on setting up a child's trust fund, contact the IWC team.

Be careful of digital legacies

Be careful of digital legacies

Much is being made of digital legacies in the press once again, now that they are officially recognised by The Law Society protocol.  However, much confusion still reigns among the general public, with regard to what can actually be included within a digital legacy.

The whole point of a digital legacy is to leave specific instructions for your executors, for what to do with social media accounts and online bank accounts, as well as material including music and photographs.  Prepare a list now, detailing any online bank accounts or savings accounts, social media accounts and films, photos or music stored online.  In this way, your executors will be able to access everything much faster and easier, distributing assets and content in the way in which you requested.

It is NOT recommended that you store information regarding passwords and PIN numbers – particularly if they are needed to access sensitive financial information such as online bank accounts. Indeed, should the executor tap into any of your accounts using these details, they will then become liable for prosecution under the Computer Misuse Act 1990.

What I would like to emphasise however, is that although a person who is now deceased may have purchased online copies of songs, films or artwork, they did not purchase the copyright.  This means that copyright still belongs to the artist and that it cannot therefore be sold to anyone else.

Online material and accounts may now form part of our everyday life, but this does not mean that they can be treated in the same way as any  physical assets which the deceased person leaves behind.

Patrick Moore leaves inheritance for friends’ sons

Patrick Moore leaves inheritance for friends' sons

The UK's best-loved astronomer, Sir Patrick Moore, has left the bulk of his inheritance to a number of his friends' sons, it has been revealed.

The "Sky At Night" presenter, who died in 2012 aged 89, never married nor had any children.  However, he forged strong bonds with the sons of a number of friends who died at a relatively early age.  It is to these four men that he left the majority of his inheritance, valued at over £420,000.

Caring to the end, in his will, drafted in 2010, Sir Moore asked that this body be offered for medical research.  His executors, which include Queen guitarist Brian May, are to find a suitable home for his two beloved cats, using money from the estate, to ensure their wellbeing for the remainder of their lives.

Renowned for being fun loving and generous, the presenter also stipulated in his will that gifts valued at almost £16,000 should be given to specified friends and that £500 be set aside for a "farewell party" at his cottage.

It is these small details, which nevertheless mean so much to people, that are invaluable when included in a will, ensuring that everything takes place as you want it to, after your death.

Inheritance tax forms abolished

Inheritance tax forms abolished

In the Autumn statement, the chancellor revealed on behalf of HMRC, that paper-based inheritance tax forms are to be abolished within the next three years.

As we all know, the current system of probate can sometimes be a very slow and laborious process, depending on the complexity of the estate.  On average probate can take several months to process, which can cause significant stress and even financial difficulties for executors and beneficiaries.

It is thought by HMRC that by allowing executors to apply for probate and submit inheritance tax valuations online, this will free up more staff, who can then help to move the rest of the probate process along more smoothly.  In turn, this, it is hoped, will significantly reduce the amount of time it takes to grant probate.

Personally, I feel that this step, which seems such a simple solution to the rest of us, will make a huge difference to a process which, it may be argued, has become somewhat antiquated and often more complicated than it needs to be.  I look forward to seeing this online system implemented, and examining any changes in processing time.

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