Legal & General also discovered that this assistance was also extended to many aged 35 and over – an amount of £2.14bn being borrowed for this purpose.

And there is no doubt that these amounts have increased over the last 2 years with the pandemic.

Clearly this has been of immense benefit to many who would not have ordinarily been able to purchase a property.

Parents help by:

• acting as a guarantor
• providing cash for a deposit on a home
• purchasing a property

When it comes to money transactions it is always a good idea to have things in writing, especially between family members, as these things can become unnecessarily complicated and painful if things aren’t made clear.

Gift or Loan

If the money is gifted, that is one thing. However, giving a gift with the implication that it is a loan to be repaid is another. It is best to state in writing what seems to be obvious, rather than leave things up to interpretation.

When drawing up a loan agreement we recommend including the following:

• When the loan needs to be repaid
• What happens if either party dies
• The interest rate
• Whether the loan can be repaid early or not
• Plan of action if the recipient defaults on their mortgage

“Hard” or “Soft” Loan

In the family court, even once it has been established as a loan, the “hardness” or “softness” of the loan also comes into it. This can a be tricky to ascertain as there are many deciding factors.

It may be decided that the obligation is a ‘hard’ loan if:

• It is to a finance company
• The terms have the feel of a normal commercial arrangement
• It arose out of a written document
• There is a written demand for payment or threat of litigation
• Enforcement was not delayed
• It is an amount that the creditor is not likely to waive

On the other hand, the obligation may be treated as a ‘soft’ loan if:

• It is with a friend or family member with whom the debtor remains on good terms
• It arose informally, and the terms do not have the feel of a normal commercial arrangement
• There has been no written demand for payment
• Enforcement has been delayed
• It is an amount that the creditor is likely to waive

Once again, whether loan or gift, it is highly recommended to have everything agreed upon in writing. Evidence of a loan shown by a “proof of deposit” is not enough and will most times be interpreted as a gift.

This is especially important in protecting family funds in the event of a child’s marriage being dissolved.

In a divorce

Deciding whether financial contributions are returned to the parents, retained by the person related to them or shared between the divorcing couple depends on the following:

• How the financial assistance was provided
• Whether any formal, legal agreement was drawn up
• The spouse’s needs
• Whether the money was gifted or inherited

However, the BoMaD can safeguard themselves.

One way is for a Declaration of Trust to be drawn up which names the parents and is in favour of the provider of the money, ensuring that the funds would be returned.

Also, if there are enough funds available for both divorcing parties’ needs to be met without using the money provided by the parents, the argument will be stronger for the funds to be “returned to sender”.

Whatever your situation may be, it is always recommended to seek legal advice to ensure protection of financial assistance to a child/grandchild when they are married.

The post The Bank of Mum and Dad – the ins and outs appeared first on Ludlow Lane.

For some it might be that old oak dresser or a recipe book. For others, it might be an odd sense of humour or a glint in the eye.

Many of these things are simply passed along without much thought or control over the matter.

But when it comes to inheriting money, it’s a little more complex. Like with inheritance tax on gifting out of ones estate, for instance.

While there is a tax-free allowance on small monetary gifts, it’s a little different with larger sums of money.

However, although many worry about the inheritance tax that will be imposed on their estates after they pass away, it seems only a very small percentage of estates are billed. According to the HM Revenue and Customs only 1 in 20 estates result in a bill.

How much Inheritance Tax is charged

First off, Inheritance tax is charged at 40 percent of the value of the estate above the ‘nil-rate band’ (NRB) which is a tax-free allowance.

If property is not included in the estate then the NRB is £325,000.

If property is included in the estate which is being inherited by either a child or grandchild, the NRB is £175,000. This is in addition to the £325,000 which means that an amount of £500,000 can be given away tax-free. So anything above that amount will be taxed.

If married or in a civil partnership, the entire estate can be passed on to your partner tax-free, as well as your tax-free allowances. In other words, a couple could give away £1m without being taxed.

One thing to bear in mind though, is that these tax-free benefits begin reducing if your estate is valued at more than £2m. So for every £2 that your estate value exceeds £2m, the £175,000 property allowance decreases by £1.

It’s notable that the NRB is fixed at £325,000 until 2026, however this may increase if you are widowed or a surviving civil partner.

How to Reduce Inheritance Tax

In what ways can you reduce the potential inheritance tax bill?

One way is to leave your home to your spouse or civil partner in your will and no Inheritance tax will be payable.

Or you could donate 10 percent of your estate to a non-profit organisation. This brings the tax rate down from 40 to 36 percent.

Another way is with gift allowances. Each person has a gift allowance of £3,000 per tax year. This can also be carried over once which means you could gift £6,000 in one year.

Then there’s the small gift allowance which allows you to give away unlimited gifts of up to £250 tax-free to a person, as long as they aren’t the same people that are benefiting from your annual gift allowance.

Weddings are also a good opportunity for this type of gifting. To celebrate you can give up to £5,000 to children and £2,500 to grandchildren plus £1,000 to anyone else.

If you plan to gift smaller and even larger amounts over a few years these amounts won’t normally count as part of the estate, as long as you are still living seven years after the gift was made.

Got any Questions?

If you are still wondering about something on this subject that has or hasn’t been mentioned or is unique to your situation, please feel free to get in touch with us.

We’d love to assist you in making the best decision for you and your family.

The post Inheritance Tax – What’s the Deal with it? appeared first on Ludlow Lane.

Inheritance tax is one of those dreaded and despised types of tax. Like someone having hacked a great big chunk out of your wedding cake before you get to cut it.

It can feel unfair. After all, you have paid tax on this money already. Why should you pay again?

Let’s say you’re getting on in years and have saved up a handsome sum of money. With the rise in rent and property prices, you plan to gift this to your grandchildren to give them a little headstart on life.

Will this be taxed?

Well, let’s first answer the question – What is inheritance tax?

What is inheritance tax?

Inheritance tax is a tax on the estate of someone who has died. The estate is all property, belongings and money.

When is inheritance tax not payable?

Inheritance tax is not payable if:

• The value of the estate is below the nil rate band threshold of £325,000
• Everything above that amount is left to a spouse/civil partner/charity/community club

If the value of the estate is more than £325,000 the amount over that could be taxed at the rate of 40%.

However, this can be reduced to 36% if you donate 10% of the estate to charity.

Gifting

When it comes to passing on your home, the tax differs depending on who you give it to.

• If you leave it to your spouse or civil partner when you die, no inheritance tax is payable
• If left to someone else in your will it will count towards the value of the estate
• If left to your children or grandchildren, that nil rate band increases to £500,000. This includes stepchildren, adopted and foster children but not nieces, nephews or siblings

While you are still alive and kicking you can also take advantage of the tax free amount of £3,000 you are allowed to gift per tax year. You are also permitted to carry this over once if you don’t gift one year.

There is also an amount of £250 you can gift to those that have not been beneficiaries of the annual gift allowance. This amount can be gifted an unlimited amount of times so even though it’s a small amount you could whittle away at things pretty quickly this way.

If the wedding bells are ringing for family or friends, this is also an opportunity to gift away those savings. This can be up to £5,000 for children, £2,500 for grandchildren and £1,000 for anyone else.

However, if you die within seven years of making any of these gifts they will be added to your estate. And if the estate then exceeds the nil band rate amount then you may be liable for inheritance tax.

There is such a thing called taper relief though, which means that the percentage of tax charged reduces the longer you survive into that seven year period.

For more detailed information on this and other tips to make sure your assets are put to the best use possible, you will find the links at the end of this article helpful.

The post Will My Gifted Savings Be Taxed? appeared first on Ludlow Lane.

What is the Court of Protection?

In English law, the Court of Protection is a superior court of record created under the Mental Capacity Act 2005. The Court’s origins date all the way back to the 14th century, first becoming known as the Court of Protection in 1947.  It is responsible for overseeing the management of property, financial affairs and personal welfare of people that do not have the mental capacity to handle these matters themselves. This can be for any number of reasons such as old age, injury, dementia, disability or a learning difficulty.

The Court of Protection has the power to decide whether a person is unfit to take care of their own personal welfare – their living situation, who they see and how they are cared for – and financial affairs and determine what the best course of action is to take.

Registration of enduring power of attorney, appointing trustees and making statutory wills are some of the other responsibilities of the Court of Protection.

Appointment of a deputy

A deputy can be appointed to make these decisions on their behalf. This can be a family member, friend or professional that has the right skills, the mental capacity to be your deputy and is 18 years of age or older. However, if there is no one willing or able, a dedicated Court of Protection lawyer can be appointed as deputy to safeguard and protect these interests. The Court usually appoints a deputy if an attorney under a lasting power of attorney has not been appointed by you and a series of decisions has to be made.

Recently there was some criticism of the Court of Protection in connection with the interest rate on funds held with the Court Funds Office being very low. However, it is not a requirement for the funds to be left in Court. They can be withdrawn and invested elsewhere with a better interest rate. This is the responsibility of the appointed deputy.

Perhaps this is just a case of a misunderstanding and the conflict arose out of deputies not realising the wide scope of their role. Or possibly not having had experience in dealing with these matters. Whatever the case, there’s no doubt that these situations can be confusing to deal with. These are sensitive situations and shouldering this heavy responsibility of a family member or dependent can feel overwhelming.

Seek support

The above outlines the importance of seeking specialist legal advice for support in making the best decisions for you and your family.

Are you wondering whether to apply to the Court of Protection? Or whether you are eligible to apply? Or perhaps going through a lengthy application process to be able to handle a loved ones personal welfare and financial affairs for them? Please feel free to get in touch with us for support in these and other related areas.

We’re just a call away!

The post What is the Court of Protection? appeared first on Ludlow Lane.

Grown-up children may have sound practical or financial reasons to stay, including shielding during the pandemic, caring for infirm parents, or being unable to afford a place of their own in an expensive part of the country.

Planning is the key and parents with both adult children living at home and elsewhere therefore need to think about their wills and make arrangements with how the property should be dealt with after their passing or they may risk protracted legal battles between siblings. Once the arrangements have been made in the will it is also best to make the family aware of the plans in advance to avoid the risk of misunderstandings in the future.

Very often grown-up children who have lived at home for much of their adult lives often believe they will either be entitled to continue living there after their parents have gone or be entitled to more from their parents’ estates than their siblings. This can then result in disputes with siblings who are not living at the property who are understandable keen to sell the property to release their inheritance.

How can parents avoid future strife over the family home? 

Have discussions with family members to ensure all understand their intentions with the property.  They need to make a will to record their wishes. Talking things over with all the siblings so they know what the will states means there will be clear instructions once you are gone.

What if you are an adult child living at home? 

There may be occupational rights acquired which may be invoked. If you can discuss a will with your parents and perhaps ask them to include something in the will giving you rights to reside in the home. This can cause conflict with the siblings that don’t live at home but if things are prepared and the parents let the other siblings know their wishes, this could avoid difficult discussions later.

What if your adult sibling is left a life interest in the family home? 

This should be discussed with all family members to avoid conflict.  If a life interest is bequeathed and other family members are unhappy, the Will can be challenged in certain circumstances.

The post How to Avoid Adult Siblings Falling Out Over the Family Home. appeared first on Ludlow Lane.

It’s safe to say most sectors in the legal industry have struggled to avoid delays during the Coronavirus outbreak but the probate sector has had to work tremendously hard to keep up with the influx of probate applications received as a result of the increase of deaths over the past year due to the pandemic.

However, after an effective start to the year probate grants being received have now beaten the number of applications received. This may have been helped by the application for a grant of probate being moved to an online system allowing firms to easily send the form directly to HM Courts and Tribunals Service without the worry of postal delays.

Firms applying via the online service are waiting merely four weeks which can reduce to up to one week if there are no missing documents or errors. Although those applying using paper forms can expect to receive grants within eight weeks.

Source – https://www.lawgazette.co.uk/news/probate-delays-falling-despite-pandemic-says-hmcts/5107267.article

The post Pandemic Vs Probate appeared first on Ludlow Lane.