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Call us at: 0117 952 0698

Blended Families & Succession Planning

Blended families and succession planning

More than 40% of marriages in the UK end in divorce, according to the Office for National Statistics. With many of those divorcees remarrying, ‘blended families’ – bringing together each parent, as well as children from previous relationships – are not uncommon.

As this type of family structure has increased, so too have blended family businesses, with members of the second family invited to take up senior positions within the company. There are many high profile examples of such businesses. Succession planning can be difficult at the best of times, but with the added complexity of a blended family, it can be even more problematic. Nonetheless, the fundamentals of good succession planning still apply.

Start early.

Getting a plan in place as early as possible is always a good move. Try to identify who it is you want to take over when you step down. It may be that restructuring the business, so your responsibilities are picked up by more than one member of the family, is the best move both politically and for the good of the business. It may be useful here to determine separate areas of responsibility for each successor, and have in place formal dispute resolution procedures in case of any issues.

Be sure to speak to them about their own ambitions and how they see their role in the business developing after you step down. Don’t just assume they will want a position of responsibility.

As an alternative, you may feel that the best option for the future of the business is to recruit externally. For example, if you feel that nominating a family successor or successors will cause conflict within the business. You may even want to consider other exit options such as a trade sale or management buy out.

Hands on training.

Once you have worked out who will be taking over, you need to get them ready for the role. That doesn’t just mean the day-to-day tasks of the job, but also the skills they need in order to run the actual business. Will they need specialist training or additional qualifications?

Be open.

It is important to communicate your succession plan to everyone in the business. You’ll need to be able to explain why you have chosen them to succeed you – this can be particularly tricky in a family business, so be prepared. Setting out a clear timetable for the change is a good idea too.

What will you do next?

Stepping down from a business is not easy – it can be very difficult to let go. This process will be made easier if you clearly determine any future role you will have in the business. If you want to truly distance yourself, then you should consider a family management buyout, where the succeeding family members buyout any shareholding you may have.

Make A Free, No Obligation Enquiry Now

To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

Make A Free Enquiry

All enquiries are completely without obligation and we guarantee not to share your data with third parties

Are you a Homeowner? Concerned about Inheritance Tax?

Are you a Homeowner? Concerned about Inheritance Tax?

One of the simplest pieces of advice I give to my homeowner clients, day in and day out, is about holding their properties as tenants in common.

But what does this mean? This article aims to explain the legal terminology of tenants in common in plain English and how it could benefit you.

How tenants in common works;

Most couples own their homes as joint tenants, meaning they both own the whole home. Holding the property as tenants in common means that each own a share of the property, either a percentage or half each. This protects the agreed share for couples who have put unequal deposits into a property. If parents are gifting deposits to their children, it is also a way of easing fears in case of a break-up or death.

In the case of tenants in common, one partner can leave their share of the property on death whilst allowing the other partner to continue living there, passing the remaining share on death. It can also prevent your home being sold in the event you need to go into long term care.

Tax implications;

There is no Inheritance Tax (IHT) for assets left in a Will to their spouse – in other words the surviving partner doesn’t have to pay IHT. After the remaining partner dies, the beneficiaries of their estate, usually the children, do have to pay IHT.

The rising cost of houses means that one property alone can mean the estate is over the IHT threshold. If the house is owned as joint tenants, both own the whole property. If one partner dies, the other automatically becomes the sole owner of the home. In the case of tenants in common each person owns a share of the house, usually split half and half.
Joint owners can split their home in two, therefore benefiting from tenants in common. By doing so, the half belonging to the person who passes away first, would be inherited by the beneficiaries immediately.

Provided the half is worth less than £325,000 – the current IHT threshold, no tax will be due. When the remaining partner dies, their half, inherited by the same children, could be under the threshold which again would mean no IHT is due.

Making it happen

You’ll need to inform Land Registry of the split and also write to each other to specify your intentions of the split.

As providers of wills, lasting powers of attorney and trusts we can take care of all of this on your behalf.

Make A Free, No Obligation Enquiry Now

To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

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All enquiries are completely without obligation and we guarantee not to share your data with third parties

Benefits Of Leaving A Charity Legacy

Benefits Of Leaving A Charity Legacy

Many people like to leave a gift to charity in their Will by way of a legacy which not only benefits the charity but also has tax benefits for the donor.

When an estate is valued at greater at £325,000 or more it becomes liable for Inheritance Tax, which is charged at 40%.

By leaving a gift to charity it is possible to reduce the amount of inheritance tax paid on the chargeable part of the estate.

Bequeathing a specific gift to a charity, such as a certain asset or amount of money, means the financial value of the gift will not be included when calculating the inheritance tax on the estate.

For example, by leaving £10,000 to charity, not only will the charity benefit, the estate will have reduced it’s liability by £10,000 potentially saving £4,000.

If you wish to make a sizable donation to charity through a legacy, by leaving 10% of your ‘net value’ (this will be dependent on circumstances such as being married and gifts made during a lifetime), the amount of tax liable will be reduced from 40% to 36%.

It is also possible to nominate a specific purpose for any legacy you leave by including a wish on how the money should be used. In such cases care should be taken in the drafting. If the purpose of the legacy is too restrictive, the charity may be unable to use the it, meaning they have to apply to the Charity Commission to allow the money to be used for other purposes.

Inheritance Tax calculations and estate planning can be quite complicated and it is recommended that you discuss your circumstances with an expert. They will be able to advise you on potential issues, such as a family member contesting the legacy if they feel they have not been reasonably provided for, particularly if they have been financially dependent on you.

They may also contest on basis that they feel the legacy was written under undue influence or that you were not of sound of mind whilst making the gift. This could leave the gift or even the entire Will being declared invalid.

Make A Free, No Obligation Enquiry Now

To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

Make A Free Enquiry

All enquiries are completely without obligation and we guarantee not to share your data with third parties

Review your Inheritance Tax situation in the New Year

Inheritance Tax (IHT) can be a nasty surprise during the administration of a Will. New Year is the ideal time to check that you’ve done all you can to minimise the burden.

Increasing property prices has had the effect of increasing the amount of Inheritance Tax many people are paying. There are ways of reducing the amount due if you plan in advance.

The IHT threshold

IHT is payable at the rate of 40% of the value of an estate above £325,000, for example on a £400,000 estate, IHT is 40% of £75,000, ie. £30,000. The person who is appointed as executor or administrator of a Will is responsible for valuing the deceased’s estate and calculating the amount of IHT due, then making payment within six months of the date of death to HM Revenue & Customs.

IHT is not payable on money left to a spouse or civil partner or to charity. When the remaining spouse or civil partner dies, the unused IHT allowance of £325,000 is added to their allowance. If some of the allowance has been used, then only the remaining balance is passed on.

Leaving property to a family member

If you leave your primary residence to your children or grandchildren, to include step-children, then a ‘main residence nil-rate band’ is applied. This is £150,000 per person for the tax year 2019/20, rising to £175,000 as from April 2020.

This means that where your main home is gifted to your children or step-children, the total IHT allowance rises to £475,000. Any unused portion of this allowance can be passed on to a spouse or civil partner, meaning they could potentially pass on assets valued at £950,000 free of IHT, rising to £1m in April 2020.

Giving gifts

Some gifts given during your lifetime may also have the effect of reducing the amount of IHT payable. The sum of £3,000 can be given in any tax year and any unused portion of this can be carried forward to the following tax year, although not beyond a single year.

In addition, gifts of up to £250 can be given to anyone and wedding gifts can be given to children in the sum of £5,000, grandchildren of £2,500 or others of £1,000.

Larger gifts are known as potentially exempt transfers and when someone dies within seven years of making them, IHT is payable on a sliding scale.

Setting up a trust

It is possible to leave assets to your loved ones via a trust to reduce IHT payable. Professional advice should be sought to ensure your beneficiaries receive what you want them to have and that your assets are adequately protected by the trust.

Make A Free, No Obligation Enquiry Now

To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

Make A Free Enquiry

All enquiries are completely without obligation and we guarantee not to share your data with third parties

What is the transferable nil rate band in Inheritance Tax and how can you claim it?

When someone dies, the first £325,000 of their estate is exempt from Inheritance Tax (IHT).

If they don’t use all of this allowance, it can be transferred to their spouse’s or civil partner’s estate in due course. This is known as the transferable nil rate band.

This increases the exempt amount for the partner’s estate when they die, meaning they could have a potential IHT threshold of up to £650,000.

The relevant dates

The transfer of the nil rate band can be applied for if the remaining spouse or civil partner died on or after 9 October 2007.

In respect of civil partnerships, the transferable nil rate band can be claimed only if the first partner died on or after 5 December 2005, the date that the Civil Partnership Act became law.

How much nil rate band is transferable?

Where the first spouse or partner to die leaves all of their assets to the remaining spouse or partner, no IHT is payable, so the entire £325,000 can be passed to the remaining spouse, subject to the deduction of any non-exempt gifts made during the previous seven years.

How to apply to transfer the nil rate band

Two forms need to be sent to HM Revenue & Customs (HMRC). The first is the standard IHT form, while the second is the application to transfer the unused allowance. There are two options for this second form.

Form IHT217 Claim to Transfer Unused Nil Rate Bank for Excepted Estates

This form should be used when the estate of the first person to die is an excepted estate, ie. IHT was not payable, for example where the estate is worth less than £325,000 or where the assets are left to charity.

Form IHT402 Claim to Transfer Unused Nil Rate Band

Where some of the £325,000 IHT allowance was used by the estate of the first spouse to die, then only the remaining balance can be transferred to benefit the second estate. Other financial information will need to be included on the form, for example gifts made within the last seven years and pension details.

Both forms need to be signed by the estate Executor or Administrator and sent to HMRC together with the main IHT form, IHT400.

A probate lawyer will be able to work out the correct figures to be included on the form, which isn’t always straightforward, for example in the case of disposal of cash or assets by the deceased prior to their death or where gifts are made to charities, which could potentially reduce IHT liability.

Make A Free, No Obligation Enquiry Now

To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry and we will discuss your current circumstances with you and explain all available options available to you.

Make A Free Enquiry

All enquiries are completely without obligation and we guarantee not to share your data with third parties

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