Wills, Trusts & Probate Archives - 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.

Why a £59 Facebook Will Isn’t the Answer

“You are too expensive – I can get a Will for £59 on Facebook.”

Perceptions needs to change. A will should not be cheap – you do not want it to be cheap. 

This is a document that dictates who the guardians of your children are and who cares for them if you are not here.  Think about that.  This is a document that deals with every single item that you own. Think about that.   

Your house, your car, your jewellery, your investments, your money in the bank, your shares in the business… EVERYTHING. Think about what they mean to you and how hard you have worked to achieve them.  Do you still want your Will to be cheap?

Every family is different, every situation is different and what each person needs in their will is different – it is bespoke to you, your family and your personal situation. 

Your Will is an investment. The upfront expense saves cost and heartache later.  

Inheritance tax efficient save hundreds of thousands of pounds, care home fee efficient will save hundreds of thousands of pounds, trust wills protect your entire wealth.  

Cheap usually means it’s prepared by someone who isn’t legally qualified, is not regulated, cannot advise on tax, sells you things you do not need or that do not work and is not insured.  

So what are you paying for? 

Bespoke advice tailored to you which includes inheritance tax advice and advice on mitigating this.  Business property and agricultural property advice and advice on mitigating exposure.  Advice and assistance on income tax, capital gains tax, ensuring property is owned in the correct way so it goes exactly where you want when you are not here.  Making sure your business goes exactly where you want when you are not here.  Protecting you estate from attack from third parties.  You are dealing with experienced qualified insured lawyers who understand you and your family inside out.  

To book an appointment, contact the team via wtp@mlplaw.co.uk or for further information visit https://www.mlplaw.co.uk/wills/

 

Why would I? I’m only 20

I watched a film last night called ‘The Beekeeper’, which is a typical Jason Statham action/thriller but a good escape from reality in our downtime of being “sensible lawyers.” The essence of the plot is that when his good-natured boss commits suicide after losing all her own money plus that of her charities to a massive scam, he sets out on a vengeance campaign against the scammers.

The 20-year-old owner of the scamming operation is threatened by Statham, who delivers the following line before administering “justice”: “So I hope you have your estate planning in order,” to which the scammer replies, “Why would I? I’m only 20.” I laughed out loud at these lines while my partner just looked at me like I was crazy. Why is that funny?

We are trying to instill in clients and potential clients all the time the importance of estate planning: making a will, putting your powers of attorney in order, tax planning, pensions, savings, life assurance, all the hard work you put into your career, property improvements, caring for your family—you need to make sure this is all protected. Yes, things change, and so does the plan.

Speak to an expert here, and we can start you on your estate planning journey.

Case Study: How Legal Guidance Could Have Made a Difference

One of our new instructions this week led me to think again and highlight the importance of taking legal advice when you are not 100% sure what to do or that you are doing the right thing.

I met with two new clients this week—a mother and daughter. The mother’s husband had died some years ago, and at the time both parties had mirror wills, had done a severance of tenancy, and created life interest trusts in their wills, essentially ring fencing their ½ share in the total marital estate, enabling the surviving spouse to use the income, interest, and property until her death, at which point the estate passes to the two children. So far, so good—all pretty standard stuff and what you would expect to see. However, it’s never that simple, is it?

Since dad’s death, the family has fallen out with the son, and he subsequently died.

First question: do the deceased son’s children now take their father’s share of the estate? The family does not want this to happen, as they are also estranged from the grandchildren.

We look at the construction of the will and interpret it for the family. Answer: Yes, they do. This is not what the family wants to hear, but it is important to know the correct legal position and what you are dealing with.

Second question (from me): where are the trust assets?

Answer: in trust.

Question (me): Where exactly?

In an account with xxx

Ok, how much is in there?

£200k (should be £300)

Ok, how is that made up from the assets you declared at probate (done in person without legal representation)?

It then comes to light during the conversation that the estate assets have not been invested correctly, which would leave the executors and trustees open to a claim from the ultimate beneficiaries.

This is highlighted, and the clients are told what “homework” we need from them to bring back so that all this can be corrected properly before either the life tenant (mother) dies or the trustees decide to appropriate the trust assets to the beneficiaries to eliminate any claim.

The main takeaway from this meeting was that this could all have been amended to the family’s benefit; had they taken legal advice within 2 years of death, the estate could have been varied to ensure the grandchildren were not beneficiaries of the estate. The clients did not take advice and were not aware of this.

It also highlights the importance of keeping good records and ensuring that you do, in fact, understand how estates are devolved in the legal document.

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.

Challenges in Probate: Defending a contested Will

The legal process of administering an estate after someone passes away, can often become a complex and emotionally charged undertaking, particularly when faced with contested wills. The challenges that arise during these disputes can test the boundaries of family relationships and legal frameworks. In this article, we explore some of the common challenges encountered in probate and offer insights into effectively defending contested wills.

  1. Undue Influence and lack of capacity: A frequent challenge in defending contested wills is the allegation of undue influence or the claim that the deceased lacked the mental capacity to make rational decisions. Family members or interested parties may argue that the deceased was coerced into altering their will, or that they were not of sound mind when the will was created. Establishing the mental capacity of the testator at the time of drafting the will becomes crucial in such cases.
  2. Ambiguous wording and interpretation: Ambiguities in the language of a will can lead to disputes among beneficiaries. Vague or unclear terms may give rise to differing interpretations, causing family members to contest the distribution of assets. Resolving these issues often requires a careful examination of the testator’s intentions, considering the context and potential external influences.
  3. Family dynamics and disputes: Inheritance disputes often expose underlying family tensions and rivalries. Sibling rivalries, blended family dynamics, or disputes arising from unequal distribution of assets can complicate the probate process. Mediation or legal intervention may be necessary to guide through these familial challenges and find equitable resolutions.
  4. Forgery and fraud claims: Individuals may allege that the will is fraudulent or that signatures were forged. Proving or disproving such claims involves forensic analysis and careful examination of the authenticity of documents. Adequate documentation and witnesses become pivotal in defending against accusations of forgery or fraud.
  5. Executor’s role and conduct: The actions of the executor play a crucial role in the probate process. Challenges may arise if beneficiaries perceive the executor as acting against the testator’s wishes or in a manner that lacks transparency. Clear communication, adherence to legal obligations, and ethical conduct are essential for executors to successfully defend the probate process.

Defending contested wills in probate requires a delicate balance of legal expertise, empathy, and understanding of complex family dynamics. As these challenges can lead to emotional strain and protracted legal battles, seeking professional advice early in the process is often key. By addressing the issues of undue influence, ambiguous wording, family disputes, potential fraud, and executor conduct, individuals involved in probate can work towards a fair and just resolution, preserving the intent of the deceased and minimizing conflict.

Seeking Legal Advice

Our team understands the sensitive nature of probate and emotional challenges that can arise during such times. We are committed to guiding you through each step of the process, providing clarity. Whether you are an executor trying to fulfil your responsibilities or a beneficiary seeking to defend your rights, out team can provide comprehensive support and guide you through the process, working towards a resolution.

Probate Administration and Trust Administration – pros and cons

Clients often ask if they should transfer part of their estate into a trust in lifetime, to avoid the need for a grant of probate upon death. This can be a useful strategy for various reasons, but there are also administrative and accessibility issues to consider before doing so.

Currently, the wait time for a grant of probate is a minimum of 16 weeks from submission of the application to the Probate Registry and can be much longer if a paper application is required rather than an online submission. This can cause inconvenience and distress for families when assets cannot be accessed until probate has been granted – causing financial problems for a surviving spouse or either beneficiaries. Additionally, if a house in an estate is to be sold, the delay in receiving the grant of probate can cause the sale to become very protracted and even for a buyer to withdraw due to the delay.

If, however, a client has transferred assets into a trust during their lifetime, then a grant of probate is not required for those assets to be distributed to the named beneficiary(ies) and can therefore save a great deal of time and expense in having to apply for probate.

An individual can transfer assets up to the value of the nil rate band (currently £325,000) into a lifetime trust. If a transfer exceeds this sum, then a lifetime inheritance tax charge of 20% is levied upon the value of assets in excess of the nil rate band. This of course is 50% less than the death rate value of inheritance tax at 40% and so although is a tax levied in a lifetime, does reduce the death rate by half.

Once assets are transferred into the trust, they are transferred into the legal names of the trustees. The person who set up the trust (the settlor) can be a trustee but there are potential adverse tax implications if the settlor is also to be a beneficiary and advice should be taken on this point. The trust deed would name the potential beneficiaries – for example, the children and grandchildren of the settlor.  There are potential benefits in protecting assets from care home fees by transferring them into trust, but again, this is a wide topic and outside the scope of this introductory blog. Always seek professional advice when planning for care.

There are different types of trust explored in other blogs by mlplaw, such as discretionary trusts and life interest trusts. The broad position is that once assets have been transferred into a trust, and you are not longer ‘retaining a benefit’ from those assets then they are regarding as being ‘outside’ of your estate for inheritance tax purposes, and those assets will not require a grant of probate to be dealt with upon your death.

If you have transferred your home into a trust, then upon death a grant of probate would not be required to sell the property, however, the value of the property may still be regarded by HMRC for inheritance tax purposes as being in your estate, as you have continued to live in the property therefore ‘retained a benefit’ from this. There are ways to avoid this trap however which advice should be taken on.

A further consideration with transferring assets into trust is that you may no longer be able to have use or easy access to them, so if you are likely to require access to those assets in future, by transferring them into trust, you ‘lose control’ of disposal of those assets as they are then legally owned by the trustees.

Therefore, although there are advantages of transferring assets into trust, for tax planning and possible care home fee protection reasons and to avoid the need to obtain probate, there are serious considerations to be taken into account and professional advice should always be sought.

Here at mlplaw we are experts on trust and probate matters and advise extensively upon estate planning to ensure the best outcome for tax effectiveness, and care home fees planning whilst ensuring that a client has access to all the assets they need for a long and comfortable retirement. Please call Doris Raggatt, Legal Director on 0161 926 1538 or dorisr@mlplaw.co.uk for a 30-minute free advice appointment.

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.

The rules of intestacy – What happens if you die without a Will?

A Will is one of the most important documents you will ever write and allows you to decide what happens to your money, property and possessions after your death.  Failing to make a Will can cause chaos and disruption to your family or dependents and in the absence of a Will there is no guarantee that your money and property will pass in accordance with your wishes. An up-to-date Will provides you with the security that your wishes are complied with and provides your family and friends ease of dealing with your estate following death.

This article will discuss what happens if you die without a Will and explains who will inherit from your estate.

What happens if you die without a Will?

In England and Wales, if you die without writing a Will, your estate will be distributed in accordance with the intestacy rules as contained in the Administration of Estates Act 1925. In the absence of the Will, you are classed as dying intestate.

The rules are complex and can change depending on your individual circumstances when you die. This means that your estate may not pass in accordance with your instructions and can cause great problems following death.

Who would inherit under the rules of intestacy?

The beneficiaries will vary depending on your surviving relatives and we have provided an overview of the provisions below and the order which applies.

  1. Married couples or civil partners:
  • If the deceased died leaving a spouse or civil partner at the time of their death, that person will inherit everything.
  • If there is a spouse or civil partner, together with children, grandchildren or great grandchildren, then the spouse or civil partner will only receive the first £322,000 plus half of the remaining balance of the estate and the personal possessions. The other half of the remaining balance of your estate will go to your children.
  1. Children:

If there is no surviving spouse or civil partner, the children of the deceased will inherit the entire estate, and if more than one in equal shares.  Adopted children have the right to inherit under the rules of intestacy.

Stepchildren will not receive anything under the rules of intestacy unless they have been legally adopted.

  1. Parents:

If you die without leaving a spouse/civil partner or children, and your parents survive you, then they will inherit the estate and if more than one, in equal shares.

  1. Siblings:

If none of the above survive you, your brothers and sisters will inherit in equal shares. If a sibling has predeceased you, their children will inherit the share that they would have received.

  1. Half-siblings:

If none of the above survive you, your half-brothers and half-sisters will inherit in equal shares. If a half-sibling has predeceased you, their children will inherit the share that they would have received.

  1. Grandparents:

If none of the above survive you, and your grandparents have survived you, they will inherit the estate in equal shares.

  1. Aunties and uncles:

If your grandparents predecease you, any Aunties and Uncles that you have in both your maternal and paternal lines, will inherit in equal shares. If an Auntie or Uncle has predeceased you, their share will pass to any children that they have.

  1. Half-Aunties and Half-Uncles:

Provided that all the above have predeceased you, then any half Aunties or Uncles will inherit in equal shares. Again, if any have predeceased you, their share will pass to any children they leave.

  1. The Crown:

If there are no surviving relatives, as set out above, your estate will pass to the Crown. This is known as bon vacantia.

Who cannot inherit?

The intestacy rules enforce a fixed order of beneficiaries in an estate and there are certain people who have no right to inherit where someone dies without leaving a Will:

  • Unmarried partners or cohabitees
  • Relations by marriage
  • Close friends
  • Carers

Seeking Legal Advice

A Will is such an important part of planning for your future and it is the simplest way to protect your estate from passing in accordance with the intestacy rules. It is also important to review any existing Wills to ensure that they are valid and up to date with any changes in circumstances.

A Will provides you with peace of mind and security that your wishes are complied with and that you have simplified the process for your loved ones. Our specialist team are experts and able to take you through the process, tailoring the service specifically to your needs and advise on all suitable areas.

The Importance of a Will in Simplifying the Probate Process

The importance of having a Will in place cannot be overstated. In other blog articles, my colleagues have discussed the importance of a Will and the various reasons why it is crucial to have one in place to ensure your wishes are carried out by your chosen executors and that any individuals you do/do not wish to benefit have been fully considered. There are also the tax and asset protection implications that having a professionally drafted Will in place will provide.

However, an additional reason to have a Will in place is when it comes to after your death and the process of obtaining a Grant of probate for your estate by your executors. Sometimes a client will say to me ‘Do I need a Will if the intestacy provisions will have the same effect as a Will to my wishes?’. This would for example be in the case where a client who was single (with no spouse or partner or a widow(er)) and was leaving their estate to their children in equal shares. In this instance, not having a Will would mean that under intestacy (not having a Will), the children would all be entitled to act as administrators of the estate and beneficiaries in equal shares.

Well, a major reason is the current severe delays at the Probate Registry, which unfortunately show no sign of abating. Having a Will in place usually means that the online probate application service may be used. If you do not have a Will, with only a couple of exceptions, then your case will not be able to be dealt with via the online service, and an ‘old fashioned’ paper application needs to be made for probate. Paper applications are submitted to the Newcastle Probate Registry only (rather than for dispersal to any of the other registries around England and Wales as happens with the online applications). Consequently, the delay for paper applications is closer to 6 months or more, rather than the 16 weeks that we are currently advised that online applications will take.

In my recent, professional experience, cases that would have been dealt with much sooner and more easily, with less delay and expense to the estate could all have been solved if the deceased had had a Will in place – even a simple Will that may have reflected the position on intestacy. Thousands of pounds in costs and weeks of delay may be averted for your family after your death if you have put in place a Will before you die.

A professionally drafted Will provides you with the peace of mind and assurance that your wishes have been confirmed for your executors to carry out and that probate will be dealt with on a much simpler and more streamlined basis than if you do not have a Will in place.

Additionally, if you hold assets abroad such as a holiday home in Spain, then having a Will in place for each jurisdiction where you hold assets will also massively simplify the administration of your estate post-death and again, will save your executors and family thousands in fees and months in delay if you have a Will for each country where you hold assets. Again, the Will does not need to be complex necessarily, and your Spanish Will may reflect exactly the same wishes as your English Will. The importance of having both documents comes after death and in the probate process, which is speeded up considerably by having separate wills in place.

The reasons for having a Will in place are many and varied. As a senior solicitor within the Wills, Trusts and Probate Team at mlplaw, for any advice or questions regarding this blog or wills and probate in general, please do contact me for a free 30-minute consultation on 0161 926 1538 or dorisr@mlplaw.co.uk and I would be pleased to assist.

Understanding Probate costs and how to reduce them

Dealing with the probate process can feel overwhelming, especially when managing financial matters and expenses. There are various costs associated with obtaining probate and handling estate administration, and this article explores these costs and strategies to lessen their impact.

What costs are usually involved?

  1. Application fee:

In obtaining a grant of representation (probate) there is an application fee, which is payable to HM Courts and Tribunal services, upon application.  The grant gives you the legal authority to administer a deceased’s estate.

At present, there is an application fee if the estate is valued over £5,000. The application fee is currently £273. There is no fee for estates worth £5,000 or less.

 

  1. Inheritance tax:

When dealing with an estate, it is important to ascertain whether it will be subject to inheritance tax. This will depend on the value of the deceased’s estate and who the estate is being left to.

There are different reliefs and exemptions available for estates. The rate of tax on death is 40% and becomes chargeable on assets over the available nil rate band (currently £325,000).

Seeking professional help can determine the tax liability and any potential reliefs or exemptions that may be applicable.

 

  1. Professional valuations:

An important part of the estate administration is valuing the deceased’s assets and liabilities. It is important to obtain accurate information as the value of the estate may impact probate fees and inheritance tax calculations.

As such, it may be necessary to instruct professionals to carry out valuations to ensure that the process is accurate and compliant. This could include property valuations from estate agents or surveyors, valuations of business assets and personal belongings.

 

  1. Disbursements:

There are several expenses which are associated with probate and estate administration, including bankruptcy searches, bank transfer fees, legal statutory notices, trust registration, identification searches and much more.

These expenses are often associated with an estate and are required to ensure that the personal representative has completed their responsibilities as best as possible. Failure to comply with certain requirements and procedures, could result in personal liability for an executor or personal representative.

 

  1. Solicitor fees:

If you instruct a solicitor or legal representative to assist you on behalf of the estate, they will charge a fee for their services. Their costs will vary depending on the complexities of the estate.

 

Mitigating costs and probate

Even though a grant is required in some circumstances, irrespective of whether the deceased left a will, there are numerous options available to you to help your beneficiaries and reduce costs.

 

  1. Prepare a Will

A will is a vital part of planning for probate and your estate. With proper advice and guidance, you can review the likely costs involved in your estate and plan for these accordingly.

Providing your executors with clear instructions ensures that there are no uncertainties following your death and prevent hidden costs from arising. As part of your Will review, your solicitor will be able to provide advice and guidance on how best to prepare and mitigate costs including inheritance tax planning.

 

  1. Inheritance tax planning

As mentioned, seeking professional advice on estate planning can significantly reduce the tax liability on death. Much of estate planning involves lifetime transfers and utilising exemptions and reliefs available to benefit from lower tax liabilities. When considering ways to reduce the value of your estate, you could consider:

  • Gifts from the estate
  • Gifting assets into a lifetime settlement/trust
  • Tax friendly investments
  • Life policies

 

How can mlplaw help?

To assist with a transparent probate process and gain an understanding of the costs involved, it is important to seek professional assistance. At mlplaw our specialists can advise you on the process and provide clear and concise advice for you and your family.

By offering estate planning suggestions and discussing the costs with you, you will be able to reduce the difficulties faced by your loved ones, following your death.

Our specialists offer a full range of estate administration services, guiding you through the process and ensuring that your wishes are carried out.

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