Sophie Lennon, Author at MLP Law

Why should I use mlplaw instead of making a DIY Will?

Why should I use mlplaw instead of making a DIY Will?

Legal Expertise

Our team of solicitors have a wealth of knowledge in Wills, Trusts and Probate law to ensure your Will is legally binding and suits your requirements and circumstances. We can provide valuable advice on estate planning strategies to minimise taxes, protect your assets for your loved ones, and if you have complex personal circumstances, ensure your wishes are met.

Avoiding Risks

If your will is not drafted by a solicitor, there are risks involved. Wills that are not drafted properly can lead to confusion, disputes, and even legal challenges after your passing. By working with a solicitor, you can minimise the risk of errors or ambiguities that could invalidate your will or lead to unintended consequences.

Accounting for Changes in Circumstances

Personal and financial circumstances can change over time, such as marriage, divorce, birth of children, or acquisition of new assets. A professionally drafted Will can prepare for these future changes in circumstances to avoid the cost of having to regularly prepare new Wills.

Peace of Mind

Knowing that your will has been professionally drafted and legally sound can provide peace of mind for you and your loved ones. It can also help alleviate potential stress and conflict among beneficiaries in the future.

What you need to know about Inheritance Tax

In the United Kingdom, Inheritance Tax (IHT) is a significant aspect of estate planning and financial management. Understanding the intricacies of IHT is crucial for individuals to ensure that their loved ones can inherit their assets without facing hefty tax burdens.

Thresholds and Rates

Each individual is entitled to a nil-rate band of £325,000.00, before their estate is subject to Inheritance Tax.

The current rate for Inheritance Tax is 40%.

Residence Nil-Rate Band

Individuals who pass on a residence to their direct descendants can claim a further allowance of £175,000.00 Residence Nil-Rate Band.

Spouses

There is no Inheritance Tax payable upon the first death of a married couple whereby the estate passes to the surviving spouse.

The estate is able to claim any unused Nil-Rate Band or Residence Nil-Rate Band of the spouse who died first and transfer this to the estate of the spouse on second death.

Charity Exemptions

If you leave up to 10% of your estate to charity, you can claim a reduction in the Inheritance Tax rate paid and pay a rate of 36% Inheritance Tax.

Lifetime Gifts

Gifts made during your lifetime may impact the Inheritance Tax payable by your estate. For a gift to be exempt from Inheritance Tax, you must survive for 7 years following the gift.

You do have an annual allowance of £3,000.00 for making gifts, and if unused, can carry over the previous years allowance to bring the total to £6,000.00.

Business Interests and Agricultural Property Relief

Business interests and agricultural property may be 100% or 50% exempt from Inheritance Tax.

Our Advice

We highly recommend you obtain professional legal advice to discuss your assets, and whether your estate will be subject to Inheritance Tax. Your legal advisor will then be able to advise you on the exemptions and reliefs available to you, and recommend steps you can take to minimise Inheritance Tax and protect your assets for your loved ones.

Executor’s Duties: What to Expect During the Probate Process

The passing of a loved one is undoubtedly a challenging time, and for those entrusted with the role of an executor, the responsibilities can be overwhelming. Understanding the duties of an executor during this process is essential for a smooth and efficient administration of the estate.

Locating Assets and Liabilities

The first duty of an executor is to compile a comprehensive list of the deceased’s assets and liabilities. This includes properties, bank accounts, investments, debts, and any other relevant financial information. All companies whom the deceased had an asset or liability with should be notified of the death. Some financial providers may allow the executors to close the deceased person’s account at this stage in the process, however, some assets (including selling a property) will require a Grant of Probate.

Notifying Beneficiaries

Executors have a duty to inform beneficiaries named in the Will about their entitlements. Managing these communications promptly helps prevent disputes and ensures a transparent probate process.

Applying for Probate

Once the assets and liabilities are identified, the executor can then apply for a Grant of Probate from the Probate Registry. A Grant of Probate provides the executor with the authority to manage and distribute the deceased’s estate. The application involves submitting the Will, along with relevant documents, and paying the necessary fees.

If Inheritance Tax (IHT) needs to be paid, the executor will also need to prepare IHT forms to be submitted to HMRC and arrange to pay any tax owed prior to applying for the Grant of Probate.

Dealing with Assets and Liabilities

For assets that require a Grant of Probate to be dealt with, these can now be sold or cashed in. Once the estate has sufficient funds, prior to making any payments to beneficiaries, any outstanding liabilities need to be paid.

Distributing the Estate

Once debts and taxes are settled, the executor can proceed with distributing the remaining assets to the beneficiaries according to the terms outlined in the Will. It’s crucial to adhere strictly to the deceased’s wishes and to keep meticulous records of all transactions during the entire probate process.

Finalizing the Estate

After distributing the estate, the executor is tasked with finalising the probate process. This involves preparing a detailed account of the estate administration, including financial transactions and distributions.

Inheritance Tax Advice for Business Owners

Inheritance Tax Advice for Business Owners

Business Property Relief (BPR) is an important form of tax relief. It allows business owners to claim Inheritance Tax (IHT) relief on business assets they own, including shares in qualifying businesses.

Here we look at the basics of BPR, explain how it works and show how BPR can be used in Inheritance Tax planning.

How does Business Property Relief work?

If you own a business, or an interest in a business, your estate may be entitled to relief from Inheritance Tax.

Inheritance Tax is the tax paid on your estate after you have passed away. Your estate consists of everything you own. Every person in the UK currently has an IHT allowance of £325,000 – this is known as the nil-rate band (NRB). If the value of your estate is higher than this figure, you will need to pay IHT on the excess.

With BPR, qualifying business assets can be exempt from IHT either while you are still alive or upon your death. This form of tax relief reduces the value of a business or business assets in the calculation of your IHT liability.

To receive BPR, you must have owned the business or business assets for at least two years before your death. Therefore, if you pass away shortly after acquiring the asset, your estate will not be eligible for the relief. The exception here is if you inherit the asset from your spouse, who also owned it for less than two years. In this scenario, your period of ownership is added to that of your late spouse. If the combined period of ownership exceeds two years, you will be eligible for BPR relief.

What businesses qualify for Business Property Relief?

Not every business or interest in a business qualifies for Business Property Relief. Typically, BPR is available for:

  • A qualifying trading business or an interest in one
  • Shares in an unlisted qualifying company, including a minority holding
  • Shares in a qualifying company listed on the Alternative Investment Market (AIM) of the London Stock Exchange

Note that if the business mainly deals in securities, stocks, land, or buildings, or in the making or holding of investments, it will not be eligible for Business Property Relief. As such, BPR is not available to buy-to-let investors. Buy-to-let businesses are treated as investment businesses.

How much IHT relief is available?

Relief from IHT is available at either 100% or 50%. This depends on the type of business assets you own.

You can receive 100% IHT relief on:

  • A business or interest in a business
  • Shares in an unlisted company

Meanwhile, you can receive 50% relief on:

  • Shares controlling more than 50% of the voting rights in a listed company
  • Land, buildings, or machinery owned by the deceased and used in a business they were a partner in or controlled
  • Land, buildings, or machinery used in the business and held in a trust that it has the right to benefit from

How to claim BPR relief

Business Property Relief can be claimed by the executor of your will or the administrator of your estate when valuing the estate.

Two forms need to be completed. These include:

  • Form IHT400 (Inheritance Tax account)
  • Schedule IHT413 (Business or partnership interests and assets)

Bear in mind that HMRC assesses BPR when the estate makes a claim after you have died. Entitlement to the relief will depend on your business assets maintaining their BPR-qualifying status such that they qualify at that time.

Using Business Property Relief in Inheritance Tax planning

Business Property Relief can play a key role in Inheritance Tax planning even if you don’t own your own business. Investing in a qualifying business can be an effective way of reducing your IHT bill.

For example, if you are not keen to give away large sums of money during your lifetime in order to reduce your IHT liability, an investment in a BPR-qualifying investment could be another IHT strategy to consider. This strategy can provide you with greater control over your money. Unlike with a gift, you retain ownership of your money.

Another situation where BPR can be effective from an IHT planning point of view is where you would like your wealth to become exempt from IHT quickly. Unlike gifts and trusts, which generally take seven years before they are fully exempt from IHT, BPR-qualifying investments are exempt from IHT after just two years, provided they have been held for at least two years at the time of death.

An investment in a BPR-qualifying business could also be an effective strategy if you want to give the inheritance you plan to leave behind the opportunity to grow. A BPR-qualifying investment usually has the potential to increase in value. However, as with any investment, there are no guarantees.

Risks to consider

There are a number of risks to be aware of with Business Property Relief.

When you invest in a BPR-qualifying asset, your capital is at risk. It is important to understand that many BPR-qualifying assets such as unlisted or AIM-listed businesses are higher-risk investments. These kinds of investments can fall in value and be difficult to sell. You may not get back what you invested.

Another risk to be aware of is that tax rules and reliefs can change. There is no guarantee that companies that qualify today will remain BPR-qualifying assets in the future.

A valuable IHT relief  

Business Property Relief is a powerful form of tax relief that should not be ignored. A valuable IHT planning tool, it can provide relief of up to 100% after you pass away.

As with all areas of taxation, however, Business Property Relief is a complex area. If you are considering using it as part of your estate planning strategy, it is important to discuss this with a solicitor, and to take separate financial advice.

To find out more about how mlplaw can help you with inheritance tax advice for Business Owners, please don’t hesitate to contact us on either wtp@mlplaw.co.uk or 0161 926 1538

Estate Planning Essentials: Protecting your assets for future generations

Estate planning is a vital component of financial management, often overlooked until it becomes a necessity. It is the process of organising and managing your assets, investments, and financial affairs to ensure that your wealth is protected and passed on to your loved ones, according to your wishes, in a way which maximises tax liabilities. Spending some money now on professional fees may save you hundreds of thousands of pounds in the long term.

Make a Will

We cannot stress enough how important it is to obtain legal advice and put a professionally drafted Will in place. A Will ensures your estate is distributed as per your wishes and can include Inheritance Tax planning.

Create Lasting Powers of Attorney

Who can access your bank accounts if you loose capacity? Who will decide where you live if you are unable to make that decision yourself?

These issues can easily be dealt with by creating Lasting Powers of Attorney (LPA), a document in which you appoint people you trust to act in your capacity to make important decisions on your behalf should you loose capacity.

There are two types of LPAs, a Property & Financial Affairs LPA and a Health & Welfare LPA. An LPA allows you to make provisions, in advance of deterioration of health, to ensure that your affairs are properly dealt with by someone you trust.

Inheritance Tax Planning

Inheritance Tax is the highest rate of tax in the UK, charged at 40%.

Every individual is entitled to a Nil Rate Band of £325,000.00 upon their death, meaning Inheritance Tax is only payable on assets over this amount.

But please don’t panic, there are ways to reduce the amount of tax payable:

  • Own your own home! If you own your own home, you can make use of the Residence Nil Rate Band which provides an additional allowance of up to £175,000.00 on top of the £325,000.00.
    *There are some additional requirements to obtain the Residence Nil Rate Band.
  • Get married! If you are married there is no Inheritance Tax payable on first death, and on second death you are able to transfer the unused Nil Rate Band from the first death, which is an additional £325,000.00. You can also transfer an unused Residence Nil Rate Band from first death too, which is a further £175,000.00.
  • Give away your cash! Take advantage of the annual gift exemption, which allows you to gift up to £3,000.00 to your loved ones each year.
  • Invest and trust wisely! Tax efficient investments, pensions, trusts and lifetime settlements can also help protect your wealth.

Care Planning

It’s crucial to think about the cost of care when dealing with your estate planning, which can be significant in some instances. Various options, such as Will Trusts, can be explored to address this issue.

Regular Reviews

We recommend you review your estate planning every 3 to 5 years, or when there is a change in your financial or personal circumstances or those of your loved ones. The law also may change and impact your estate planning, and you may need a professional to advise you on these changes.

Probate Myths vs. Reality: Debunking Common Misconceptions

Probate is often misunderstood, leading to misconceptions that can cause unnecessary stress and confusion.

Myth 1: Probate is always required.

Probate is the legal process of proving a Will and administering the estate of a deceased person. To prove they have authority; the executors will need to apply to the Probate Registry for:

  • Grant of Probate if the deceased person made a Will; or
  • Letters of Administration if the deceased person did not make a Will.

However, this is not always necessary. Assets that are owned jointly, including properties, or cash under the value of £50,000.00 (this varies from bank to bank), will not require probate. Financial providers for which the deceased person had accounts with should confirm whether they will require a Grant of Probate/Letters of Administration to close the account.

 

Myth 2: It’s a speedy process.

 

We wish! In reality, probate can take several months, or even longer, to complete. This timeline largely depends on the complexity of the estate, potential disputes among beneficiaries, and the efficiency of the executor. Executors must gather assets, pay debts, and distribute the estate according to the Will or intestacy laws. Delays can occur if there are disputes, complications, or delays with the Probate Registry.

 

Myth 3: Probate is expensive.

This depends entirely on the deceased person’s estate and the work involved. Probate fees depend on the value of the estate and the overall complexity, which depends on the number of assets/liabilities in the estate and any disputes.

Our legal advisors will review the estate with you and then provide you with an outline of the costs.

It is also important to note that any legal fees incurred during the probate process are payable by the estate and not by you personally.

 

Myth 4: A Will avoids probate.

 

The purpose of a Will is to set out your wishes for what happens to your assets after you die. If a person dies intestate (without making a Will) the process can be more time consuming and costly for their executors. A properly executed will can make the probate process smoother, but it doesn’t eliminate it.

 

 

Myth 5: Executors cannot be held personally liable.

Executors can be personally liable if they mishandle the estate. Executors have a fiduciary duty to act in the best interest of the estate and its beneficiaries. If they fail to perform their duties correctly, they can be held personally responsible for any financial losses incurred by the estate. This is a critical responsibility that requires careful attention to detail and compliance with the law, and why having the professional support of an experienced probate lawyer is so important.

 

Myth 6: Probate is always a source of family disputes.

While family disputes can arise during probate, they are not inevitable. Open communication and proper estate planning can help minimise the potential for conflicts among beneficiaries. In many cases, clear instructions and a professionally prepared Will can reduce the likelihood of disputes. It is essential to keep lines of communication open to address any concerns that may arise during the probate process.

 

 

Myth 7: DIY probate is always the best option.

 

While some individuals choose to handle probate without legal assistance, it’s not always the best choice. Probate can be a complex and legally intricate process, and one mistake can lead to costly delays and complications. Hiring a lawyer experienced in probate matters can ensure that the process is handled correctly and efficiently.

What happens when a Business Owner suddenly dies

When an individual dies, everything they owned at the date of death forms part of their estate. This includes property, cash, investments and business assets. Each type of business is handled differently and there are many things to consider, such as what will happen to the business and in some cases whether the business can continue to operate.

What happens to my business assets?

When a business owner dies, their interest in the business forms part of their estate and will be distributed in accordance with their Will or the rules of Intestacy.  What happens to the business depends on the structure of the business i.e. limited company, sole trader, partnership.

Sole Trader

In the event of the death of a sole trader, the Personal Representatives, as part of Probate and the administration of the estate, are required to take over the business. Their options include selling it as going concern, continuing the business and holding it on trust for the deceased’s beneficiaries if underage, or closing the business down and disposing of the assets.

Under this structure, there is no distinction between the business finances and the personal finances. This means any debts the business had are considered to be personal debts of the Estate. A Will ensures that appropriate executors are appointed and can act immediately to avoid any delay in continuing to run the business.

Limited Company

A limited company is a separate legal entity owned by shareholders, meaning the business and the shareholder’s personal assets are separate.

The deceased’s personal representatives will be responsible for dealing with their shares in accordance with their Will or intestacy. Depending on the circumstances and any separate agreement, the shares can then be sold or transferred to the beneficiaries of the deceased.

The limited company will have rights and restrictions attached to the shares set out in the Articles of Association and any Shareholder Agreement between the shareholders. Either of these documents may contain provisions determining what is to happen in relation to shares owned by a shareholder wo dies.

Partnerships

In the absence of a partnership agreement, if a partner dies, the partnership is dissolved, the assets are realised, the debts are paid and the surplus (if any) is distributed to the surviving partners and the personal representatives of the deceased partner in line with their entitlement. This can be problematic if, on death, the surviving partners want to continue the business.

 

How can MLP Law help?

Inadequate planning for the death of business owner may lead to complications with the business following the sudden death of an owner. Our experienced team can provide you with advice and assistance in administering estates that contain business assets. We can take full responsibility for dealing with the business and provide specialist support and advice. Our experts can provide you with clear succession planning to allow you to control the destination of the business assets and shares, including bespoke Business Trusts.

Our team can advise you on:

  • What happens on death
  • Preparation of Business Wills
  • Bespoke business trusts
  • Cross Option Agreements
  • Review of the companies’ articles
  • Transferring the ownership of the business
  • Winding up a business
  • Sale of a business