Some FAQ's

Here are some Frequently Asked Questions

Bayarmaa Howard. Managing Director
Bayarmaa Howard. Managing Director

Q. My wife and I signed over our house to our four children seven years ago. If either she or I have to go into a care home, will our children be forced to pay anything towards the fees?

The local authority will calculate the amount payable on the capital you have at the time you are taken into care. Your capital will include any buildings, land, shares and savings. If it adds up to more than £23,250 (£22,000 in Wales and £22,750 in Scotland) you will have to contribute towards the cost of your care. However, the local authority has the right to look at any assets you have given away and if it decides this was done to avoid future care fees, it can assess you as if you still owned the capital. If you gave your home to your children for another good reason, or at a time when you were fit and healthy and could not have foreseen the need to move into residential care, it is possible the local authority will not take any action.

WARNING: the seven year rule only applies to estates that under the Nil Rate band (currently £325,000 per person), if the joint estates are in excess of the £650,000 (two nil rate bands) there will still be a charge to inheritance tax on the excess sum at 40%. The seven year rule only applies to inheritance tax and HMRC; the local authority can look back as many years as they want to see what assets the person in care owned and how and why they disposed of them.

If it can be shown that you have deliberately disposed of assets to avoid paying for care fees then the assets can be reclaimed by the authority to pay for any care fees due.

Q We own our home in joint names?

Most couples when they buy their home on a mortgage find they own the property as ‘joint tenants’. The up-side to this is that the property will pass to the survivor by ‘automatic survivorship’ regardless of individual circumstances and need, and irrespective of what each Will may state.

The down-side is that it is impossible to plan for individual deaths, even via a Will, due to this survivorship situation.

This would be particularly important to know in a situation where a couple have been married or in a relationship before and have children of that relationship that they would want to benefit from their share and interest in their property.

To get around this, you need to consider ‘severing’ the joint tenancy (or ownership) to what is called ‘tenants in common’. This will ensure that you both hold your share of the family home in specific shares and as such you can ‘will’ your share to your children or other beneficiaries as you wish. The Will should also contain a simple but effective property trust, commonly called a Protective Property Trust, which guarantees that the survivor will have the security of being able to remain in the property and have full use of it but that the deceased’s share remains in the trust until the trust ends.

Contact the Society or your local Society Member for further information on the Protective Property Trust.

EXECUTORS, TRUSTEES AND GUARDIANS

Q. Can my Beneficiaries be my Executors?

Yes they can if you want them to. Today it is often common that those who will get the estate have a role to play in the organising of the estate before it is given.
What’s the difference between an Executor and a Trustee?
In most estates today, it is common to appoint the Executors as Trustees. The main difference is that trustee is the person responsible for making the decisions that maintain the estate whilst it is held on trust before it is given to the beneficiaries, and the executor is the person that carries out (or executes) the actions and wishes of the Trustees during this time.

Q. Do I have to appoint a Solicitor or Bank as my Trustees?

No; you can appoint anyone you like. It is likely however, that when your estate is going through Probate that you will in some part require some professional assistance. Our advice is to choose people you absolutely trust and ensure that the Will includes a statement that empowers them to employ any professionals that have not already been nominated. The Society and many of our Members do offer probate and executorship services. Contact the Society for details of a probate specialist in your area.

Q. Does it matter if my Executors live abroad?

No, although it is always prudent to have some executors in the country in which you are residing.

Q. How many Executors can I choose?

You can have as many Executors as you like, but the Law only allows a maximum of four to act at the same time.

Q. What does an Executor have to do?

It is difficult to go into great detail here, but the main role of an Executor is to carry out the wishes of the testator’s estate. For more details see our section ‘What Is Probate’.

Q. Should my Guardians be Executors?

It is very common for the guardians to be executors. It normally follows that if you trust someone to take care of your children, then they should have some form of access to the assets of the estate to provide for your children. It should also be mentioned that there are some instances where the Guardian (e.g. a divorced parent) should not be allowed direct access to the assets, but go through an alternative Executor.

GIFTS AND LEGACIES

Q. Do I have to list everything that I own in my Will?

No, Wills are not shopping lists. If you want specific objects, collections or even amounts of money to go to particular people, then yes you should list these. However, what you do not identify in your estate (everything else not listed – whatever it is) is dealt with through distribution of your Residue.

Q. Do Gifts and Legacies have to be under a certain value?

Not at all, a gift can be any value you like (e.g. £10,000 or your house etc.)

Q. Can I gift to charities?
Yes, but we need to know the full Name, address and Registered number of the charity. All gifts to charities are tax free – so they can be used to reduce any Inheritance Tax liability.

Q. Can I set age limits when gifts can be received?

Yes, this is what Trustees are for – to see that the gifts you leave are preserved as best as possible until they should be given at the time or age you have specified.

TAX DATA

Inheritance Tax

£325,000 RATE OF TAX ON BALANCE: Chargeable lifetime transfers – 20% Transfers on or within 7 years of death – 40%

All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable at the rate at death. This may then be reduced by taper relief.

Years before death% of Charge
0 to 3100
3 to 480
4 to 560
5 to 640
6 to 720
Table showing taper relief
  • Main Exemptions
  • Most transfers between husband and wife
  • The first £3000 of lifetime transfers in any tax year (husband and wife each have their own exemption)
  • Gifts of up but not exceeding £250 p.a. to any number of persons
  • Gifts made out of income that form part of normal expenditure and do not reduce the standard of living
  • Gifts in consideration of marriage to bride and/or groom as follows: up to £5000 by a parent, £2500 by a grandparent or £1000 by any other person
  • Gifts to charities whether made during lifetime or on death 
Society of Will Writers Trust
Member of the Society of Will Writers
STEP Member
Member of STEP

Q. My husband and I leave everything to each other in our Wills, but if we die at the same time everything goes to out two small children. My concern is that our joint assets plus life insurance would result in a hefty inheritance tax bill for them. How can we avoid this?

The situation before October 9 2007 meant that  you and your husband having reciprocal Wills (commonly called mirror Wills), which means that when one of you dies, everything you own passes to the other. The first £325,000 of each of your estates, known as the nil-rate band, is free of tax. However, transfers between husband and wife are exempt from IHT, which means that the nil-rate band on first death is wasted. The easiest way to reduce a potential IHT bill is to ensure that both of you use your nil-rate bands by creating a discretionary trust in your Wills. The survivor can be one of the beneficiaries and receive income or capital from the trust. To make this effective, you should each have personal rather than jointly held assets. You should also ensure that any life assurance policies are written into trust for your family. This way the proceeds can bypass your estate.


The situation now with regard for tax mitigation within a Will has changed over the past few years with the introduction of the ‘transferrable nil rate band’. Pre October 9 2007, the nil rate band was an individual allowance, and was lost if you failed to make a Will as any unused portion could not be used by the surviving spouse on their death.

October 2007 saw the introduction of the transferrable nil rate band, so for the first time a on the death of the surviving spouse (or civil partner) their executors could apply any unused portions of their spouses nil rate band towards any tax liability.

The transferrable nil rate band is only available to married couples and couples who have entered into a civil partnership.

THE FAMILY HOME

Q. My daughter and her fiancé bought a bungalow together about a year ago. They split everything down the middle from the mortgage to the outgoings. But he has now made a Will leaving half the bungalow to his daughter from a previous marriage. I have two questions: As her fiancé, can he do this? And once they are married, does his Will, including the gift of his share of the bungalow – become invalid?

You say they split everything down the middle, but you do not say on what basis they co-own the bungalow. In legal terms, are they ‘joint tenants’ or ‘tenants in common’? The difference is crucial. If they are joint tenants, they both own the whole property, not merely an individual share. When one dies the survivor automatically inherits the deceased’s share and becomes the sole owner. So, if they are joint tenants the answer to the first part of the question is, no, he can’t do that. Your daughter’s fiancé cannot make a valid Will leaving half the bungalow to his daughter – or to anyone else, simply because he is a joint tenant. However if they are tenants in common he could make a Will dealing with his own share in the property. As a tenant in common, he owns only that specific share – not necessarily one half – and he can dispose of it in any way he thinks fit. Tenants in common is a much more flexible way of holding property than joint tenants. As to the second question, the subsequent marriage will make the current Will invalid, unless it has been written in expectation or contemplation of marriage.

GUARDIANS

Q. Should my Guardians be Executors?

It is very common for the guardians to be executors. It normally follows that if you trust someone to take care of your children, then they should have some form of access to the assets of the estate to provide for your children. It should also be mentioned that there are some instances where the Guardian (e.g. a divorced parent) should not be allowed direct access to the assets, but go through an alternative Executor.

Q. Who can automatically become a Guardian?

Only a parent of the child or children who has ‘parental responsibility’. This means that unless the father is married to the mother or has ‘obtained’ parental responsibility have a right to appoint Guardians. If you make a Will ‘Parental Responsibility’ can be given through appointment of Guardianship to the birth father.

Q. My partner and I are not married but have two children between us. How can he get parental responsibility?

As was stated above, the mother can name the father in her Will as one way. The other straightforward ways for the natural father to obtain parental responsibility are:

The father marrying the mother;

The father being named on the birth certificate if registered after December 2003;

Completing a Parental Responsibility Agreement for each child in conjunction with the birth mother;

By application to the court

 

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