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Fergusson Law shares their latest news, the latest legal news and provides some legal advice on this blog.

Buy-to-Let investor? Who will inherit your properties?

Do you have a Will? If you die without one, your estate may not be distributed in the way you would have intended, and it might cause real problems for your family.  The issue is of particular concern to buy-to-let investors, who own flats and houses in addition to their family home.

If you do not have a Will in Scotland, your estate is divided according to the rules of intestacy.

After your spouse (probably) gets the family home any other houses and land you own (including your buy-to-let properties), and all the cash remaining may go to relatives (Laughing Heirs) whom you have never met.   

Laughing Heir is taken from the German ‘der lachende Erbe’ referring to heirs whose relationship to the deceased is so distant they suffer no sense of bereavement but are happy to receive an unexpected financial windfall

Download our Information Sheet Intestacy, read this article, No Will leads to family disputes,  or call us now on 0131 556 4044

If there is no Will, and no heirs that can be found, the Scottish Government will get these assets. 

Inheritance Tax. Do you know the 14 year gift rule?

If you make a gift outside of the usual allowable gifts under inheritance tax legislation, you will need to survive seven years for that gift to be free of your estate for inheritance tax purposes. During that seven years the gifts are known as "potentially exempt transfers". This is a valuable potential get-out for families - although it involves careful planning ahead, and there are risks associated with losing control of assets.

But where trusts have been set up, the rules become more complex.  Trusts are frequently used for what financial advisers term "asset protection'; for instance where grandparents ring fence assets for the future use of young grandchildren, or parents ring fence assets for their children so that their children's spouses can't touch them.

If you die within seven years of establishing a trust, the assets in the trust become taxable.  But there's an additional catch. If you die within seven years, other gifts that were made in the previous seven years before the establishment of the trust also form part of the calculation of inheritance tax.

In this way, gifts made up to 14 years before death can attract inheritance tax.

You would not need to be either especially unlucky or wealthy for your estate to be caught in this way.

It underlines the importance of receiving professional legal advice if you are doing anything other than basic inheritance tax planning.   

If you are thinking of setting up a Trust or already have Trusts, as specialist Trust professionals we can provide the information you need to steer clear of the various traps. Call Janice on 0131 556 4044.  

Who is a Scottish Taxpayer? 2015 Update

For the purposes of the Scottish Government’s new Income Tax powers under the Scotland Act 2012, any person who is resident in the UK for Income Tax purposes will be regarded as a Scottish Taxpayer (and therefore subject to the Scottish rates of Income Tax) if he or she meets any one of the following tests:

  1. His or her only or main home, or 'place of residence' , is in Scotland;

  2. He or she has no home in the UK but spends more days of the year in Scotland than in any other part of the UK; or

  3. He or she is an MP, MSP or MEP for a Scottish Constituency.

If a person is not regarded as a Scottish Taxpayer, he or she will pay Income Tax at the UK rates rather than at the Scottish rates.

The Scottish rates of income tax , and higher rate Scottish taxes (SRIT) will apply from 6 April 2016.