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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 | £350,000 |
2011/2012 | £360,000 | 2012/2013 | £371,000 |
Latest News 18/4/2008
Prenuptial agreements
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
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.
Trustees - Court Refuses to correct Tax Error
If trustees act in a way that gives rise to an unintended liability to tax, the situation can be put right by going to court to have the trust deed rectified. Traditionally, all the trustee had to do was to persuade the court that the unexpected tax liability was something which was important and which he had not considered. The court would then order the transaction to be set aside.
There is some evidence that the courts are taking a somewhat tougher stance nowadays when faced with claims for rectification of trust deeds, as a recent case shows. In it, the settlor of a trust created a discretionary trust for the benefit of his children. He did not realise that such a transfer is an immediately chargeable transfer for Inheritance Tax (IHT) purposes, thinking that it was a potentially exempt transfer. An application was made to have the trust deed rectified.
The judge refused, stating that there was no misapprehension about the effect of the trust deed, only its fiscal consequences. The deed as created reflected the settlor’s true intentions. The claim made by the trustees was to create a completely different settlement, not to rectify a mistake in the original settlement.
The Court of Appeal agreed – the settlor had wished to save IHT without giving gifts directly to his children. The trustees could not show the mistake in the deed that required rectification. They could only offer an alternative.
More recently, rectification has been refused in another case in which the only effect of the rectification requested would be that a fiscal advantage would be obtained. In that case the rights of the grantor of the trust and the intended beneficiary would have been completely unaffected by the proposed rectification.
Information provided courtesy Lockharts Solicitors
BUDGET SPECIAL
- Cash ISA limits confirmed to be £3,600 from April 6th
DYW Comment
Pretty dismal with regards to improving the trust regime imposed by the Finance Act 2006.Trustees - Time is Running Out
The Finance Act 2006 introduced big changes in trust taxation in relation to accumulation and maintenance trust and life interests which were in existence at 22 March 2006.
The changes will impact negatively in most cases. Fortunately, a planning door was left open during which time previously made arrangements may be able to be changed.
This closes on 5 April 2008. If you are the trustee of an accumulation and maintenance trust or a life interest, it is imperative that you review the trust settlement and take any necessary action.
Information provided courtesy Lockharts Solicitors
Capital Gains Tax Changes
The government has announced a new "entrepreneurs’ relief" from Capital Gains Tax - a rate of 10% on sales of assets up to £1m. Beyond that value, assets will be taxed at 18%. These changes, together with the withdrawal of taper relief and indexation allowance, will take effect as of 6th April 2008.
Transferable Nil Rate Bands
The Tories put forward a potential election winner in their party conference with the proposal of increasing the inheritance tax nil rate band threshold to £1 million!
The Government have responded quickly to this potential 'threat' by today announcing - and with effect FROM TODAY - the introduction of 'transferable nil rate bands'. This means that married couples and civil partners can enjoy two IHT nil rate band allowances (currently £300,000 each, thus amounting to £600,000) upon the death of the survivor of them.
The transfer will also effect those spouses/civil partners who were previous to today were already widows/widowers/surviving partners.
In effect, the government has now made legal those powers usually set down in a nil rate band discretionary will trust, therefore making this kind of Will now redundant.
How the rules will be implemented remains to be seen over the coming weeks and will be updated here.
