The risks of late estate planning
December 2018

Imagine you are named as the executor and a beneficiary of your wife’s wealthy aunt.  You learn that she is suffering from terminal cancer and has ‘a very impaired lifespan’.  What do you do?

This is what happened in the case of Nader and others v Revenue & Customs.  The executor/beneficiary, a Dr Nader, decided to consult a leading firm of accountants about inheritance tax (IHT) mitigation options for Miss Dickins (the aunt).

The accountants put forward an offshore trust-based scheme, provided by a third party, which would remove the IHT liability on £1,000,000 of Miss Dickins’ estate.  The scheme was highly complex, involving multiple trusts and short-term loans.  It cost a total of £100,000 in fees and its first stage was triggered on 6 December 2010, three weeks before Miss Dickins’ death.

Dr Nader received grant of probate on 4 July 2011 and a little over a month later the scheme was wound up, with IHT-free payments being made to Miss Dickins’ beneficiaries.  However, subsequently HMRC opened an enquiry into the IHT return and by February 2015 – a little over four years after Miss Dickins’ demise – tax demands were issued to the beneficiaries.

Wind forward another three years and at a First Tier Tribunal (Tax), Dr Nader, together with his fellow beneficiaries, made an appeal against the tax bills they were facing.  In a 51-page judgement, the Tribunal dismissed the scheme as ineffective, and the beneficiaries were also left with the appeal legal costs on top of the bill for IHT plus outstanding interest.

The case is a reminder of the risks, costs and protracted timescales that can be involved in deathbed estate planning.

There are many ways to mitigate the impact of IHT, but the sooner planning starts, the better.  It is all too easy to defer such planning – as with writing a will – but delays can carry a high price.  If you need an advice on IHT planning, please get in touch with us.

 

The content of this publication is for information purposes and should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy.  It does not provide personal advice based on an assessment of your own circumstances.  Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness. Any expressions of opinion are subject to change without notice.

The value of tax reliefs depends on your individual circumstances.

Tax laws can change.

The Financial Conduct Authority does not regulate tax or trust advice, will writing and some forms of estate planning.

Christmas stockings for Emmanuel House
December 2018

Yet again, the team at The RU Group have dug deep to support the Emmanuel House Christmas appeal.

Emmanuel House provide support to homeless, vulnerable or isolated adults in and around the Nottingham area.

Staff filled socks with toiletries and goodies for the charity to distribute amongst homeless and vulnerable people in the local area.

Donations of food and clothing make a significant difference to the work of Emmanuel House.

A massive thank you to everyone who contributed.

State pension sees rise thanks to the triple lock
December 2018

A 2.6% rise in the single tier state pension was announced in the 2018 Budget

The increase to the single tier state pension, and its predecessor the basic state pension, will apply from next April.  Other state pensions, such as the State Earnings Related Pensions Scheme (SERPS), will rise by 2.4%.

The higher increases for the two main pension benefits are the result of the ‘triple lock’, which requires the annual uplift to be greatest of:

  • CPI inflation (2.4% in September 2018);
  • Earnings inflation (2.6% for average weekly earnings to July 2018); and
  • 2.5%.

The increased payment – £4.30 a week for the single tier pension – is often presented as extra money for pensioners.  However, it is doing little more than maintaining the state pension’s buying power against inflation.

Earnings and CPI inflation have been roughly in line with each other for some time, which can be linked to any discussion about the lack of real wage growth.  Had September’s annual inflation figure come in at 2.6%, as expected by many pundits, it would once again have been the triple lock winner, albeit matched by earnings.

Triple lock guarantee

The triple lock is only guaranteed until the end of the current parliament (2022, at the latest) after which its future is in doubt.  There have been many calls for the triple lock to be scrapped, including from the House of Commons Work & Pensions Select Committee.

The problem with the triple lock is its cost, which is greater than a pure link to earnings or a simple price inflation.

To see how expensive providing only inflation proofing is you can look at pension annuity rates.  For a 65-year-old, an RPI-linked annuity costs approximately two thirds more than an annuity which does not increase over time.  While annuities are not as popular these days, that 66% difference is a fair indicator of how much more it costs to build inflation protection into your retirement planning.

If you would like to discuss your retirement plans in light of these developments, please get in touch.

 

The content of this publication is for information purposes and should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy.  It does not provide personal advice based on an assessment of your own circumstances.  Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness. Any expressions of opinion are subject to change without notice.

Past performance is not a reliable indicator of future results. Investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.  In strong market conditions, investments may perform favourably and provide good levels of return.  In contrast, when markets are weak, investment returns may be less favourable and produce negative returns.  Asset classes may perform independently of each other and performance can vary based upon specific market conditions.

 

Seasons greetings from all the team at The RU Group

We’d like to wish all our clients a very merry Christmas and a prosperous New Year.  Cheers!

 

Unmarried couples lack the rights of married couples
December 2018

Two recent events have shone different lights on the government’s view of unmarried couples.

Marriage Rates in England and Wales

As the graph above shows, marriage has been drifting out of fashion for close to 50 years.  There are now over 3.3 million unmarried couples in the UK, of which nearly half have children.

In spite of this major social change, governments have largely maintained sharp legislative distinctions between the married and unmarried.  When they have conflated the two, it is usually to swell the Exchequer’s coffers, for example when applying the high income child benefit charge to unmarried couples with children.

This approach is starting to be challenged in the courts:

  • In October, the Prime Minister announced at the Conservative Party conference that civil partnerships legislation would be extended to cover heterosexual couples.  The announcement came after a June ruling from the Supreme Court that limiting Civil Partnerships only to same sex couples was in breach of the European Convention on Human Rights (ECHR).
  • In a judicial review case in August, the Supreme Court found the government was wrong to deny an unmarried mother her claim for widowed parent’s allowance, again referring to the EHCR in the decision.  The Department for Work and Pension’s response was that the judgement did not affect the eligibility regime for bereavement benefits, which replaced the widowed parent’s allowance for new claimants in April 2017.

If you are one of the 3.3 million unmarried couples, these decisions serve as a reminder that your status is very different from that of a married couple.  Given the DWP’s stance, you could need more life and health protection than if you were married.

You will also potentially require a different approach to estate planning, as transfers on death to your partner, such as your interest in the family home, will not benefit from the inter-spouse inheritance tax exemption.

If you would like advice on how to plan for your family, please get in touch.

 

The Financial Conduct Authority does not regulate tax or trust advice and some forms of estate planning.  

Tax treatment depends on your individual circumstances and may be subject to change in future. All rates of tax and tax reliefs are based upon our current understanding of them but may be subject to change in the future.

The content of this publication is for information purposes and should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy.  It does not provide personal advice based on an assessment of your own circumstances.  Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness. Any expressions of opinion are subject to change without notice.