Legislation Changes

In April 7, 2016
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There have recently been some legislation changes with regards to the new Residential Nil Rate Band and Probate Fees. Below is a summary of those changes along with some case studies, and what this could mean to you.

Legislation changes mean trust inaction will cost families money

The new Residential Nil Rate Band (RNRB) legislation and the proposed Probate Fees legislation will result in financial penalties being experienced by client families unless trusts are used more consistently.

Some of the exposures in the future are highlighted by three simple case studies.

Case Study One

Single client with £300,000 of net assets and £210,000 life cover for their mortgage.

Under the proposed probate fee changes, the value of the estate would be £510,000 and the executors would be required to pay £4,000 in probate fees as opposed to £300. This does not even take into account any inheritance tax (IHT) considerations.
Case Study Two

Married clients with property of £500,000, £300,000 of investments and husband has four times £75,000 DIS benefits.

Under the proposed probate fee changes, the value of the estate would exceed £1 million on the death of the surviving spouse. The executors would therefore be required to pay £10,000 in probate fees as opposed to £4,000 if the Death in Service (DIS) had been written into trust. Additionally, IHT on some or all of the £300,000 would also be payable.


Case Study Three

Married clients with property of £700,000, £300,000 of investments and husband and wife own £1 million each in the family business that qualifies for Business Relief. The husband dies and on the death of the surviving spouse there will be two negative financial impacts.

Under the proposed probate fee changes, the value of the estate would exceed £2 million and probate fees of £20,000 would be payable. Worse still, because the husband did not direct his share of the family business into a Solidus Business Trust on his death the gross estate of the surviving spouse will be £2.8 million and therefore the new additional RNRB allowance will be completely lost, resulting in unnecessary IHT amounting to £130,000 being paid.
These three simple case studies illustrate the importance of advising clients and keeping clients updated on their estate planning.

We hold regular Estate Planning seminars throughout the year, please see our calendar of events and call the office to book a place!

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