Inheritance Tax 
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Legal Updates
Welcome to DYW Legal Updates page. Continuously updated online legal information dealing with the latest legal news relating to Wills, Trusts, Taxation and Probate.
| Nil Rate Band Allowance | |||
2007/2008 | £300,000 | 2008/2009 | £312,000 |
2009/2010 | £325,000 | 2010/2011 | £325,000 |
2011/2012 | £325,000 | 2012/2013 | £325,000 |
Latest News 2/07/2010
Trusts & wills vulnerable to new CGT rate warn Law Society
The Capital Gains Tax (CGT) increase announced in this week’s budget will mean trustees and personal representatives administering the estates of the deceased could feel the full brunt of the rise as gains made will be at risk of exposure to the new higher rate, warns the Law Society.
The new rate of 28 percent will charge any gains made while the estate is being administered, and also gains for the duration of a trust.
Will trusts, created by parents of young children or vulnerable adults, are particularly exposed to the new regime, says the Law Society.
Law Society President Robert Heslett says:
"Many hardworking families will often look to create a protective tax regime for their children in the event that they are orphaned at a young age by leaving assets in trust until the children are old enough to manage the assets without the guiding hand of their parents."
"There is a real danger of trust assets being eroded through a combination of income tax at 50 per cent, CGT at 28 per cent and the impact of the changes to the inheritance regime introduced in 2006."
"Personal representatives, trustees and anyone else appointed to set up a trust and settle assets within it should urgently seek advice from their solicitor to ensure that arrangements are structured as tax efficiently as possible for the benefit of these vulnerable beneficiaries in the light of these new developments."
Law Society Press Release 24/6/2010
Coalition Government's Emergency Budget Update - 22/06/2010
The most pertinent changes introduced by the new Budget are:
- Inheritance tax threshold frozen at the 2010 rate of £325,000 until the 2014/2015 tax year.
- Capital gains tax threshold increased from 18% to 28% for higher and additional rate tax payers.
Changes to Trust Law - 05/05/2010
Because of numerous problems with trust law (which is based both on common law and the Perpetuities and Accumulations Act 1964), the Government has, after a long consultation process, introduced new legislation in the form of the Perpetuities and Accumulations Act 2009, which is scheduled to become law later this year. The principle behind the rule against perpetuities is to prevent the control of assets being effectively in the hands of those long deceased.
The new Act will govern all trusts made after it receives Royal Assent.
Changes being introduced include:
- a single maximum perpetuity period of 125 years (which may be somewhat shorter than is possible under the present system);
- the perpetuity period will not apply to commercial interests, but only those future interests held on trust;
- the abolition of common law periods of perpetuity;
- the right for existing trustees to use a perpetuity period of 100 years if they choose (the current rule is ‘a life in being plus 80 years’); and
- pension schemes established under trust will be exempt.
The new rules may have implications, in particular, for trusts established under wills.
26/02/2010
New article added to the
Articles & Advice
section relating to Capital Gains Tax and Gifting.
Bad Tax Scheme - HMRC Puts Tax Avoiders on Notice! - 29/9/2009
New article added to the Articles & Advice section detailing HMRC's new approach to tackle and target tax avoidance.
Transferable Nil-Rate Band: Incompletely Constituted NRB Discretionary Will Trust
New article added to the Articles & Advice discussing a common issue with inheritance tax and Discretionary Will Trusts.
Court of Appeal rules on the validity of Prenuptial Agreements - 17/7/2009
New article added to the Articles & Advice section on the Court of Appeal ruling on the relevance of Prenuptial agreements.
IHT 'Bargain' Ineffective - 15/7/2009
New article added to the Articles & Advice section illustrating the precarious nature of certain IHT planning techniques.
Trustees' Responsibilities - 3/7/2009
New article added to the Articles & Advice section stressing caution on the responsibilities and duties of acting as trustees of an estate
New Lasting Power of Attorney Forms to be introduced October 2009 - 20/6/2009
The new lasting power of attorney forms follow on from the consultation ‘Reviewing the Mental Capacity Act (MCA) 2005: forms, supervision and fees’ to which the Government published its response in March 2009. There will also be a new fees structure.
The Office of the Public Guardian (OPG) has redesigned the forms to:
- be more streamlined with no tick boxes,
- be written in plainer English and,
- include completion guidance notes in the margins of the forms.
The postal address for the OPG has changed and since 5 May 2009 OPG customers should send ALL post to the following address:
Office of the Public Guardian PO Box 15118 Birmingham B16 6GXHMRC Guidance on Transferable Nil-Rate Band
What should have been a simple process has been fraught with complexity. HMRC have thus released guidance notes* to assist representatives. Two points are of particular note:
- The claim to transfer the part of the unused IHT allowance must be made no later than 24 months after the the end of the month the second death occurred, although HMRC does have discretion to extend this.
- With civil partners, a transfer can only be made if the first death occurred after 5th December 2005 (the date on which the Civil Partnership Act 2004 came into force).
* = Opens in a new window. If using a pop-up blocker hold down CTRL + click the link at the same time to open.
Change in Intestacy Laws - 8/10/2008
From 1st February 2009 there will be changes to the intestacy laws which have been in place for over 15 years. The main changes are:
- Surviving spouses or civil partners where there are no children of the relationship will receive the first £450,000 of the estate in contrast to the current £200,000.
- Where there are children from the relationship, the surviving spouse/civil partner will be entitled to the first £250,000 in contrast to the current £125,000, as well as life interest in the resulting statutory trust of one half of the remainder of the estate.
Whilst the proposals are welcome, there are still pitfalls by allowing the government to control the disposition of one's estate. Therefore, making a Will is ALWAYS the more preferable option.
Transitional Serial Interest Trusts deadline - 24/9/2008
5 October 2008 marks the end of the period in which transitional serial interests (TSIs) can be created other than on death. After this date, TSIs can no longer be created. The important issue is that succeeding life interests created during the life of a life tenant of a trust will generally be chargeable lifetime transfers for Inheritance Tax (IHT). Immediate action is required if wanting to take advantage.
Pre-nuptial Criteria - 23/9/2008
Whilst pre-nuptial agreements remain a bit of a 'grey area' within the law, more and more people are coming to use and rely on them and the judge in a leading case set down a number of criteria which would assist the courts in deciding whether the pre-nup was enforceable or not. These include:
- Does the spouse being asked to sign the pre-nup understand it?
- Have they been properly advised as to its terms?
- Was pressure exerted by their spouse to make them sign?
- Was there full disclosure of the relevant assets?
- Was pressure exerted by anyone else to make them sign?
- Was the agreement signed willingly?
- Did one spouse exploit a dominant position?
- Was the agreement entered into in the knowledge that there would be a child?
- Has any unforeseen circumstance arisen which would make enforcing the pre-nup unjust?
- Does the order preclude the payment of any periodical payment for maintenance of the spouse and if so, would it be unjust to hold the parties to that agreement?
- Are there grounds for believing that upholding the agreement would be unjust?
New Bill for Cohabiting Couples - 18/9/2008
Family lawyers group 'Resolution' launched a "Living Together" campaign which has resulted in a new Bill being introduced this autumn to give enhanced rights to cohabiting couples in an attempt to remedy the financial hardship many people - ranging from carers, siblings, partners - experience as a result of the current law.
The Bill would apply only to people living in the same household for a minimum period of time in which the parties have provided a financial or other commitment to each other.
Couples could choose to "opt out" of the scheme using a cohabitation agreement provided legal advice is sought by both parties to protect the vulnerable
Prenuptial agreements - 18/4/2008
Prenuptial agreements are likely to become binding and enforceable following a divorce case in which the judge gave strong weight to such an agreement between the couple.
The Court of Appeal ruled in December 2007 in Crossley v Crossley that it is possible to short circuit normal Court procedures when a financial claim in a divorce appears to be hopeless and there is a prenuptial agreement. Lord Justice Thorpe's judgment outlined the view that prenups are growing in importance in a fraught area of law.
The courts are not obliged to enforce such agreements although in recent times they have been moving towards acceptance of them.
Mark Harper who acted for the successful husband, said:
"We are delighted with this decision - it is a very significant step forward for prenuptial agreements. The Court of Appeal has shown that when a prenuptial agreement exists, the English Courts can take a pragmatic approach and short-circuit normal Court procedures, saving time, money and emotional distress for all those involved. This will give anyone facing a dubious financial claim on divorce hope that it will be assessed at the earliest opportunity, and not involve a lengthy, arduous and expensive court process."
Rights Cohabiting Couples put on Hold - 18/4/2008
Proposals to give cohabiting couples the same rights as married couples or civil partners have been put on hold.
The move comes after two years of research by the Law Commission into the consequences for cohabiting couples when their relationship ends which resulted in the paper 'Cohabitation: the financial consequences of relationship'.
It said couples should not have the same rights as married couples or civil partners but recommended financial remedies that would match the economic impact of the cohabiting couple’s contributions to the relationship where there were either children or the couple had been together for more than two years.
But Justice Minister, Bridget Prentice, said that no further action would be taken until the Scottish Executive completes its research into the impact of the Family Law (Scotland) Act 2006, which brought similar provisions into effect last year.
She says: "The decision has been reached because of the need for the government to obtain accurate estimates of the financial impact of any new legislation and the likelihood that we can obtain a view of financial impact by drawing on the Scottish experience of similar law reform."
The Commission also recommended that couples could opt out of any proposed scheme by drawing up a Cohabitation Agreement and making their own arrangements for what would happen to their assets in the event of separation.
