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

BLOODLINE WILLS

What is a Bloodline Will?

Many of you will have heard about or seen TV advertisements for, so-called Bloodline Wills.

The theme is that you want your estate to go to your immediate family whom you know, with no risk of it being diverted to your daughter’s ex-boyfriends, people whom your children owe money to, future step-parents to a grandchild, and so on. Your grandchildren could be specifically named in your Will but end up with nothing at all. It is even possible that your wishes could be bypassed if you own a buy-to-let property as well as a family home.

There is nothing new about making your directions clear in your Will except that modern cohabiting relationships can create unexpected legal consequences.

You might think your existing Will provides protection for your family assets but it is likely that your grandchildren will only inherit if their mother or father dies before them. Your grandchildren may never benefit from your estate.

Bloodline Trusts

The solution may be placing funds into a specialist Trust whose sole beneficiaries are within your family. These funds can be used at any time for the named persons’ personal benefit but cannot be accessed by outside third parties.

Without such a Trust, you could find that your money wends its way to former partners (married or not) of your sons and daughters, their stepchildren, people who claim money from your descendants and so on.

A thoughtfully drawn up Will is the first step. 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 whom you have never met. Known in Germany as Laughing Heirs whose relationship to the deceased is so distant they suffer no sense of bereavement but are happy to receive an unexpected financial windfall.

Potential care home fees are another area where we can offer advice to protect your assets.

‘Bloodline’ Will Trusts are not for everyone. Annual costs are involved as accounts have to be created and tax returns made. We can help put a Plan together and quote you a Fixed Price for doing it.

Please call Janice now to have a talk about it. Ring 0131 556 4044 or send us a message via our website.

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TRUSTEES. PERSONAL SAVINGS ALLOWANCE EFFECTS?

When changes are made to simplify income tax for individuals there are usually knock-on effects on trusts and estates which do not seem to be fully thought through. The introduction of the Personal Savings Allowance (PSA) of £5,000 per annum for individuals to enable interest to be paid gross without tax deducted at source is such an example.

In theory, the PSA is a welcome simplification but in practice it raises the prospect of lots of small trusts with low income and estates using informal payments having to file a tax return. This is because trustees and personal representatives do not benefit from the PSA yet banks, building societies and National Savings will be paying their interest gross from April 2016.

HMRC have confirmed that for 2016/17 it will not require notification from trustees or personal representatives dealing with estates in administration where the only source of income is savings interest and the tax liability is below £100. HMRC are currently reviewing the situation longer term and will notify customers before 2017/18 tax year as to what the new arrangements might be.

Call Janice on 0131 556 4044 for more advice.

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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.  

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