Case Study: Tony and Diane’s Story
How Tony and Diane secured an Inheritance-Tax-free legacy for their daughter and planned a secure retirement for themselves.
Tony and Diane are a married couple in their sixties, with a daughter who is living at home after university and is working full time. After a long and successful career of his own, Tony was about to join Diane in retirement, and they were both thinking hard about the future.
Tony and Diane’s estate
Over the years, Tony and Diane had created a healthy buy-to-let portfolio of residential properties. Between their comfortable family home and their buy-to-let properties, they enjoyed equity of over £1,000,000.
In addition, they had built up savings and shares of £440,000, and held a total of £470,000 in their pension funds.
They had made Traditional Mirror Wills in the past, leaving everything to each other on the first of their deaths, and to their daughter once they had both passed away. Their Wills were out of date, and their overall Estate Plan was no longer fit for its intended purpose. They had made no plans to safeguard themselves against the consequences of mental incapacity, and their estate plan in its present form was exposing them to an Inheritance Tax liability of up to £325,000.
Tony and Di wanted to ensure financial security for each other for the rest of their lives, whichever of them might pass away first.
They were also keen to achieve the maximum potential inheritance for their daughter.
They wanted to reduce, or hopefully eliminate, the impact of Inheritance Tax on their daughter’s inheritance.
They were conscious that their daughter’s inheritance would one day make her a very well-off woman, and that this might make her vulnerable to exploitation if she married an unscrupulous spouse. They were anxious to protect her from this risk.
Having managed their financial affairs skillfully throughout their married lives, they wanted to make sure that control of their finances remained firmly within their family, even if they lost mental capacity due to ill-health in later life.
They also wanted the same level of control to extend to any major personal decisions about their care and welfare in later life, should one or both of them become disabled in the future.
Solving their inheritance Tax problem
Tony and Diane decided to gift three of their buy to let properties to their daughter, to reduce the size of their estate, and thereby reduce their Inheritance Tax liability.
However, they didn’t want to expose those properties to potential rights that might be acquired by a son-in-law if their daughter should marry in the future. So, instead of a transfer into their daughter’s absolute ownership, they transferred the properties into a Family Trust. This was done by executing a Family Trust Deed, with Di and Tony as Trustees, and their daughter and any grandchildren and subsequent generations as beneficiaries.
To make sure the properties were well outside their estate for Inheritance Tax purposes, they made sure to divest themselves of any entitlement to the properties, or the rents generated from them. As Trustees, they could continue to manage the properties and make sure they were properly looked after, but they retained no other entitlement whatsoever.
They were only able to create a Family Trust in respect of the properties because all three were mortgage-free. Had there been mortgages in place, the mortgage companies would probably have objected to the arrangement. Even if the mortgage companies had considered to the arrangement a liability for Stamp Duty could have arisen. So, the absence of mortgages was key to their decision to create the Family Trust.
They were also fortunate that the properties had not increased in value since they were purchased, otherwise they would have been liable for Capital Gains Tax.
However, transferring the three properties into the Family Trust wasn’t enough to eliminate the Inheritance Tax liability altogether, so they worked with their financial advisor to reinvest their savings in vehicles exempt from Inheritance Tax, including Enterprise Investment Schemes and bonds.
This left them with an Inheritance-Tax-liable estate consisting of their home plus £600,000, which they could leave to each other and their daughter in their Wills without incurring Inheritance Tax.
Updating their Wills
When updating their Wills, they opted to upgrade from Traditional Mirror Wills to much more robust Family Trust Wills.
First, they left their respective halves of their family home to their daughter absolutely, but made sure that their daughter wouldn’t receive this absolute gift until they had both died. For the interval between the first and second of their deaths, they included provisions to ensure that the survivor of them would be able to carry on living at the family home undisturbed. They did this by including a Right of Occupation of the family home for each other.
This triggered the new Residence Nil Rate Band, which was introduced on 5th April 2017. The Residence Nil Rate Band gave them an extra allowance for Inheritance Tax, starting at £200,000 between them and rising to £350,000 between them by April 2020.
The rest of their assets were left in a Family Trust for the benefit of each other, their daughter and subsequent generations of their family. This gave the survivor of them, then their daughter and subsequent generations, the benefit and use of the legacy they were leaving behind, whilst protecting that legacy from anyone outside their immediate bloodline.
Their daughter’s inheritance, having been placed within a Family Trust, was divorce-proof, and could also be passed down to her own children at the end of her life without incurring any further Inheritance Tax.
Planning forward in case of Incapacity
To retain control of their financial affairs within their close family circle if either of them were to lose mental capacity, they made Lasting Powers of Attorney for Property and Financial Affairs, appointing each other their daughter as Attorneys who could intervene on their behalf in the event of incapacity.
To reserve important decision-making powers about their care and welfare in later life or in case of illness, they made Lasting Powers of Attorney for Health and Welfare. Again, they appointed each other and their daughter as Attorneys. This reduced the risk of future interference from outside professionals, like social workers and doctors, to a minimum.
Their Lasting Powers of Attorney for Health and Welfare were reinforced by Living Wills, specifying that, if they were ever unable to communicate their wishes to medical professionals, their comfort and dignity would always be the main priority.
By investing just over £3000, they eliminated a potential £325,000 tax lability, secured their estate for each other and their daughter, and retained an iron control on both their financial affairs and important personal decisions about their health and welfare in later life.
Tony and Di’s estate was larger and more complex than average, which justified investing in a robust set of measures. However, the level of protection, and the budget, can be adjusted down to suit smaller estates and more most budgets. It’s a matter of deciding on an approach that’s proportionate, not only to the assets that require protection, but also to the budget in mind.
Every family is unique, so for help with identifying what protective measures are right for your family and your assets, just get in touch, for complimentary in-depth personal consultation followed by clear written advice on which to base your decisions.
Brexit Turmoil Delivers Reprieve for Bereaved Families
At last, a tiny bright spot amongst the relentless Brexit related misery.Read more...
£110,000 for seven years of care
A court has awarded £110,000 to a granddaughter who provided devoted live-in care for her grandmother for seven years.Read more...
What to Do When a Loved One Passes Away
When you lose someone, the last thing you want is to think about the practicalities, but there are some essential steps you must take to safeguard the estate and ensure that it is passed down as smoothly as possible.Read more...
Estate Planning Essentials for Same-Sex Couples
How to avoid the four most common estate planning pitfalls that can affect same-sex couples.Read more...
D’Oh! Five Ways to Seriously Mess Up Your Estate Plan
If financial security and peace of mind for your nearest and dearest is your priority, it’s essential that you maintain a valid and up to date estate plan.Read more...
Talking About Estate Planning with your Parents
Have your Mum & Dad made their estate plan yet? Should you be concerned?Read more...
What About Your Digital legacy?
How to plan for what will happen to all your online accounts after you’ve gone.Read more...
Don’t let your business get clobbered!
It’s your responsibility to safeguard your business. Here’s how to do it in three easy steps.Read more...
Cost of Care Rises by 10% in Just One Year
The cost of a place in a care home is rising at its fastest rate ever, while pension incomes have little hope of keeping pace.Read more...
Hats off to the “Parentsioners”!
Look around, and you’ll notice you're surrounded by people who quietly go about their daily business of achieving seemingly impossible feats of hard work and organisation. You might be looking at just such a person in the mirror.Read more...
Contested Will Saga Ends in Prison Sentence
A retired window cleaner, who was left £280,000 in the will of a customer, was jailed for failing to hand back the money when ordered.Read more...
Will Inheritance Tax be Simplified?
The Office for Tax Simplification is reviewing the complex Inheritance Tax system. Does this mean there will there be less tax to pay?Read more...
Daughters try to block father’s marriage
Court of Protection forced to decide whether daughters can lawfully block their father’s marriage to his partner of 20 years.Read more...
Three Brothers in Court Battle Over their Mother’s Legacy
The three Heath brothers have already incurred £50,000 in court costs because they didn't have the awkward family conversation about inheritance.Read more...
We Need to Talk About Inheritance
With inherited wealth set to double in the next 20 years, it’s time to get over the awkwardness and have the conversation now.Read more...
Inheritance Tax Bonanza for HMRC
A 23% spike in Inheritance Tax receipts is being blamed on frozen allowances, rising house prices and more aggressive tax collection.Read more...
Dementia Tax – Some Good News?
Cautious optimism as Health Secretary vows to bring forward plans to make paying for care fairer.Read more...
The Tragic Case of “Mr Y”
52-year-old "Mr Y" is being kept alive in a coma while the Official Solicitor defends legal principles.Read more...
Can the Government be Trusted on the Dementia Tax?
Little has been said about the cost of care since the 2017 Dementia Tax controversy. But the few hints dropped by the government have both insulted and threatened parents of adult children.Read more...
Power of Attorney Refunds Available
If you paid £110 to register your Lasting Power of Attorney between 1st April 2013 and 31st March 2017, you are entitled to a refund of up to £54.Read more...
Case Study: Jim and Jean’s Story
Jim and Jean have two grown-up children with complex disabilities. Here’s how their estate plan met their needs.Read more...
The £50million Final Salary Pension Transfer Boom
Here’s why so many savers are moving away from their final salary pension schemes? And why your pension capital should be a key consideration in your estate plan.Read more...
Just how risky are Lasting Powers of Attorney?
An invaluable tool? Or a passport to financial abuse?Read more...
Case Study: Guy and Steve Safeguard their BusinessRead more...
Sheila Kitzinger’s Good Death
Sheila Kitzinger, a passionate advocate for the rights of expectant mothers, pioneered the use of birth plans. And she brought the same control and empowerment to planning her own final days.Read more...
We’re Not Getting Any Older
Life expectancy at age 64 has all but ground to halt, due to the austerity years and a surge in dementia. What can you do for yourself while we wait for a cure?Read more...
Lynda Bellingham’s Sons Betrayed, as Feared
The late Lynda Bellingham’s lack of a proper estate plan risked leaving her sons with nothing – now her widower has done exactly what she least wanted him to do.Read more...
Probate: What’s it all about?
If you are dealing for the first time with the estate of someone who has died, you must quickly get to grips with some probably unfamiliar concepts. This is a short introduction to the issues you may have to deal with.Read more...
Redefining old age?
Seismic demographic changes mean we must re-think what it means to be “old”, says one of the UK’s leading social scientists.Read more...
Case Study: Ray & Joyce
How this retired couple made sure most of their main asset would be inherited by their children – and not the council.Read more...
Business Property Relief
If you are a business owner, it’s likely that your business is one of your main assets. You may want to pass your business to the next generation as a going concern, or you may want your dependants to benefit from the value of the business after you’ve gone.Read more...
Seven Inheritance Tax Tips for Buy to Let Investors
If you’ve invested in buy-to-let, you’ve probably done so with the intention of creating a steady income for yourself, together with capital to hand on to the next generation when you’re gone. But unfortunately, wealth tied up in residential lettings often comes with a significant Inheritance Tax burden.Read more...
The Residence Nil Rate Band
A guide to making the most of the new Inheritance Tax allowance.Read more...
Case Study: Tony and Diane’s Story
How Tony and Diane secured an Inheritance-Tax-free legacy for their daughter and planned a secure retirement for themselves.Read more...
What’s all this fuss about The Dementia Tax?
It’s odd that there has been so much vociferous debate about “the dementia tax”, as if this is an outrageous new concept proposed by a rapacious government. The truth is that people with dementia have been robbed of their legacy for decades to pay for their care.Read more...
Separating Elderly Couples in Care is Inhumane
It's scary that Social Care leaders actually had to be told at a recent conference that separating elderly couples in care is inhumane.Read more...
Inheritance Tax Planning with Enterprise Investment Schemes
Not keen on the government gate-crashing your funeral to demand yet more tax? An Enterprise Investment Scheme may be a useful addition to your estate planning toolkit.Read more...
Sons’ Inheritance Blown on Legal Fees
Two brothers have wasted their entire inheritance on a doomed court battle to contest their late father’s will.Read more...
Helping your Parents to Cope
The Guardian newspaper recently published a helpful group discussion, in which readers shared their own experiences of what has worked for them in offering a helping hand when a parent is finding it all too much.Read more...
The Supreme Court’s Decision in Heather Ilott’s case.
The 2015 Court of Appeal Decision in Heather Ilott’s case has been overturned. The Court of Appeal’s 2015 award of £163,000 has been reduced to £50,000.Read more...
Charitable Legacies - a Win-Win
Leaving a charitable legacy in your Will makes you feel good AND gets you an Inheritance Tax discount – what’s not to love?Read more...
Our friend died without saying she’d left us £110k
The rate at which estates go unclaimed has risen two and a half times in the last five years, according to government figures recently released.Read more...
Who gets the kids if something happens to us?
It’s a horrible thought, isn’t it? Nobody wants to imagine their beloved child being orphaned, but thinking about the unthinkable, and making proper plans, is a vital parental responsibility.Read more...
Is Your Child’s Inheritance Divorce-Proof?
Doreen Crowther may lose her house because her inheritance wasn't divorce-proofed.Read more...
Planning for the Cost of Care
Will poor health in later life put your home at risk?Read more...
Status Quo Rocker Rick Parfitt Disinherited his Wife
The late Status Quo star Rick Parfitt disinherited his wife in the final days before he died, it has emerged. But all is not as it seems.Read more...
My Health Scare - and why I’m so glad I made an Estate Plan
My New Year was overshadowed by a major health scare – but my estate plan assured me that, whatever might happen, my clients and loved ones are protectedRead more...
Your New Year’s Resolution?
If you haven't made your will yet, you risk leaving a mess behind for the people you love.Read more...
George Michael’s Estate Plan
Much missed pop legend provides for his sisters, god-children and favourite charities in his WillRead more...
Our 2017 Continuing Professional Development Programme
Our 2017 Estate Planning Training Programme for Accountants and Financial Services ProfessionalsRead more...
How a £2000 Inheritance Transformed 40,000 lives
Vashti Seth started a charity with a legacy from her dadRead more...
The £72million House Heist
Councils’ £72million raid on older people’s houses to pay for careRead more...
Royle Family’s Caroline Aherne Accidentally Left Her Mum with a £71,000 Inheritance Tax Bill
Inheritance Tax stress for Caroline Aherne's bereaved MumRead more...
“Get a Job!”: Disinherited Daughter’s Court Battle Ends in Humiliation
Danielle Ames loses her fight with her stepmother for a share in her late father’s fortuneRead more...
Danae Brook’s Story: A Blended Family Blighted by Intestacy
How Danae’s husband’s intestacy left this blended family in chaos.Read more...
The Truth about Deliberate Deprivation of Capital
Thinking about making a significant gift to your children? Worried that the council might snatch back the gift if you later go into a care home? Here’s what you need to know.Read more...
Disinherited Daughter v Stepmother
Disinherited Danielle Ames in Court Battle with her Stepmother over her "Idolised" Late Father's FortuneRead more...
Is the Traditional Marriage an Endangered Species?
In a major cultural shift, married couples are now in the minority as most couples choose to cohabit. Is this the beginning of the end for traditional marriage?Read more...
Video Blog - Inheritance Tax and You
Will my estate be affected by Inheritance Tax?Read more...
The Hurt and Rejection of Daisy Goodwin
It's every parent's responsibility to talk to their children about the legacy they might leaveRead more...
Trusts to Manage Inheritance Tax – One Rule for The Duke of Westminster and One for the Rest of Us?
The toxic urban myth that Inheritance Tax is for "the little people".Read more...
Toby Wales’s Story
The power of wills to transform lives for the better.Read more...
Heartache and Chaos from a Lost Will
Alison Shields tells of the distressing consequences of her father's lost will.Read more...
Father’s fear of making a will left his young daughter penniless
How Katy Young was accidentally disinherited by her father's fear of making a will.Read more...
Property tycoon sued beyond the grave.
Ex-civil partner of deceased millionairess in court bid for larger settlementRead more...
Stepfamilies & Blended Families Estate and Legacy Planning
A video guide for people who have stepfamilies or blended familiesRead more...
Frugal Bachelor Leaves Surprise Legacy of £1.5million to his Local Hospital
Heartwarming Generosity of Peter GibbonsRead more...
Case Study - How Dervla’s Inheritance Tax Planning Saved £120k
In today’s climate, “fail to plan” means “plan to pay lots of Inheritance Tax”Read more...
Video Blog - Estate Planning Tips for Business Owners
A Video Guide to Keeping your Business ResilientRead more...
Angela Rippon – a Happy Singleton Putting her Affairs in Order
In advance of the BBC documentary "The Truth About Dementia", Angela Rippon shares her concerns.Read more...
“Do Not Resuscitate” – Could this Happen to You Without your Consent?
The NHS knows that it's happening - and why it's happening - but won't be doing anything about it anytime soon. Here's how to protect yourself and your family.Read more...
The 8 Vital Questions You Should Answer Before You Make a Will or Estate Plan
How to choose an estate plan that's fit for purpose and within your budgetRead more...
Estate Planning Tips for Happy Singletons
This is an estate planning guide for single people - what you, as a happy singleton, can do to plan a secure future and a meaningful legacy.Read more...
Oxo Mum’s Family Torn Asunder by a Badly Made Will
How poor estate planning has left the late Loose Women star’s sons powerless – and possibly penniless.Read more...
Case Study - Bill and Anne, Buy to Let Investors
How we helped a couple ensure a secure future for theselves, their family and their buy to let portfolioRead more...
Estate Planning Considerations for Buy to Let Investors
This is the first in a two-part series that looks at the estate planning concerns of buy to let investors - and some of the many available solutions.Read more...
Come Live with Me and Be my Love ....
Five practical tips for living together securelyRead more...
Colin and Eleanor’s Story - Peace of Mind for Four Generations
This is the story of Colin and Eleanor, great-grandparents who wanted the peace of mind of knowing their assets were protected for the four generations of their family, and that their own personal wishes were respected no matter whatRead more...
Soaring Probate Fees - a Stealth Tax
The Ministry of Justice has announced a fee scale that increases the cost of probate by up to 130 times the present fee. Here are some ways of managing the cost of leaving a legacy for your family, so their inheritance is maximised.Read more...
Joy Williams’ Legal Battle - And Her Lessons for Couples Living Together
Joy Williams has won an exhausting, four-year court battle to save her home – but it could all have been avoidedRead more...
How a £90 Will Cost a Daughter Half a House
Ebenezer Aregbesola used a low-cost will-writing service to prepare his will - consequently a crucial loophole was missed, which robbed his daughter of her inheritance.Read more...
Making Your Child’s Inheritance Divorce-Proof
Marriage isn't always forever - is there a way to protect your child's inheritance from the consequences of a divorce?Read more...
How A Blunder Over Geography Led to a High Court Battle Over a Scientist’s Will.
A High Court battle between The Royal Society and an eminent scientist's family centred on the meaning of the phrase "United Kingdom".Read more...
Twice the Maternal love, but Twice the Inheritance Tax Burden
The Utley family have shared in the national press their heart-warming story of sisterly devotion, and their worries about the way a wholly unexpected turn of events has placed them in a dilemma they’re unsure how to solve. Here are some potential solutions.Read more...
Guest Blog - Building a Secure Future with ISA’s
This guest blog is brought to you by Neil Ridpath, an Independent Financial Advisor with Neil J Ridpath Wealth Management Limited. A fundamental part of planning for yours and your family’s financial security is making the most of your assets. Here, Neil tells us about Individual Savings Accounts, and why they are such a useful tool for getting the best return form your hard-earned savings.Read more...
Standing Up for the “Mustn’t Grumble” Generation.
Recent reports suggest that older people are getting a raw deal in many aspects of life, because they generally don't like to complain. How can we make sure older people receive the great service they deserve?Read more...
Seize the Day! Overcoming Procrastination about Protecting your Legacy
How to overcome the impulse to put off important decision, like protecting your legacy.Read more...
Self employed? Here’s how to safeguard your business and your family
If you're self-employed, your business can be your greatest asset and your greatest responsibility - here's how to keep it safe. come what mayRead more...
“Inheritance Tax is too toxic to save”, says The Fabian Society
The Nation is almost unanimously opposed to Inheritance Tax - but abolition is unlikely so we must fight back in other ways.Read more...
Advance Care Planning - Staring Into the Abyss or Taking Back Control?
Considering an Advance Directive takes some courage - but brings peace of mind for you and your family.Read more...
Don’t Mind the Council Inheriting your House? Then Go Ahead and Make Basic Mirror Wills
The potential price of making simple mirror wills.Read more...
Why leaving your estate to your other half can be a terrible mistake
The risks in making straightforward Mirror Wills.Read more...
The Sad Story of Mr and Mrs Henein - Husband Left Homeless by Lack of Proper Planning
Why it's so important to talk to each other about the future.Read more...
Back to Basics - Why Make a Will?
Why you should make a will, and why it should be up to date.Read more...
Disinheritance and the Law - Part 2
Does being disinherited affect your claim to your parents estate? (Part 2)Read more...
Disinheritance and the Law - Part 1
Does being disinherited affect your claim to your parents estate? (Part 1)Read more...
How to Protect Your Child From Losing Their Inheritance
How to protect your child from losing their inheritance.Read more...
Estate Planning for Stepfamilies and Blended Families
Estate Planning for Stepfamilies and Blended FamiliesRead more...
Subscribe for Updates & Information
"Gina listened and completely understood my problem. She was sympathetic and reassuring whilst being realistic."