Will my Christmas Gifts attract Inheritance Tax?

Will my Christmas Gifts attract Inheritance Tax?

With Christmas fast approaching and the whole family getting in the Christmas spirit, should we be worried about the gift we give attracting Inheritance Tax?

Not a thought that would cross many of our minds during the festive period, but should it?

The tax conscious may well be considering the gifts given, not only during the festive period but, throughout the year to ensure that the recipients won’t be liable to pay Inheritance Tax on such gifts.

So, let’s have a look at what gifts can be given and why some gifts may well attract Inheritance Tax.

Smaller gifts of up to £250 can be given to individuals without attracting any Inheritance Tax and so if your gifts fall into this category and you are not giving more than one gift (or multiple gifts) of more than £250 to any one individual then these will pass free from Inheritance Tax.

As a UK taxpayer you are also entitled to gift £3,000 each tax year without the gift attracting Inheritance Tax. This can be made as a one-off lump sum gift or smaller gifts totalling £3,000.

If you gift more than £3,000 in any tax year (whether as one gift or the total sum of smaller gifts is more than £3,000) then you must live for more than seven years after giving the gift or there may be Inheritance Tax to pay on those gifts. If you do not live for seven years following the gift then the value of the gift/s (above £3,000) will be included within your Estate Valuation and if this exceeds the Nil Rate Band then Inheritance Tax will be payable.

If you do not give away all, or indeed any, of your £3,000 allowance in a tax year then it can be rolled forward to the following tax year BUT this can only be done for the one previous tax year, these cannot be rolled on indefinitely.

Gifts given to family members as a wedding gift, or to help with a wedding, fall outside the rules above. A parent, or step-parent, can gift their child up to £5,000 as a wedding gift, a grandparent can gift up to £2,500 and other relatives can gift up to £1,000. This will not attract any Inheritance Tax regardless of whether the person gifting the money lives for seven years following the gift.

It is also worth noting that any gifts to a Registered Charity are free from tax, including Inheritance Tax.

You may find it useful to check out our article – Inheritance Tax: What can be done to reduce your exposure?

If you would like to have a free chat about your Inheritance Tax liability and planning for the future, please contact us on Info@TotalLegacyCare.co.uk or 01727 865 121

Leah Waller

Got a Question or want to book a FREE Consultation?

Divorce: How does it affect my Will?

Divorce: How does it
affect my Will?

We all know the part “til death do us part” but sometimes, and ever more commonly, marriages end in Divorce – 102,007 in 2017. Some divorces are amicable, some not so much…

After taking all the time (not to mention legal costs!) in agreeing on how money, property & assets are separated, is a Will still valid?

The simple answer is Yes. If you have a valid Will whilst you are still married then divorce does not revoke your Will and so it remains valid.

Marriage on the other hand does invalidate a Will (unless your Will includes your intended marriage).

In some cases, you may not want to change your Will. Your Will, made when you were married, may well state who your assets should pass to and this may not change. However, upon divorce your ex-spouse will be treated as having died at the date that the Decree Absolute is given and so will no longer be Executor, Trustee or Beneficiary under your Will unless contrary provision is made in the Will.

So, what should you do if you do want to change who will inherit your estate, and how easy is it to change?

You can revoke a Will at any time (providing you have capacity to do so) and this is quite simple to do. 

If you make a new Will at any point in your life it will revoke any previous Will that you have made (providing it is done properly). 

So, when should you consider changing your Will? 

You can make a new Will at any time and so it may be worth considering this after separating from a spouse. You do not have to wait for the divorce to be finalised or the Decree Absolute in order to finalise a new Will. 

What if you get remarried? 

It is not uncommon nowadays for individuals to have second or subsequent marriages. 

As mentioned above, when you get married your Will becomes invalid unless your Will states your intended marriage and so it is important to review your Will and make sure it is still in place and does what you want it to. 

Another consideration upon a subsequent marriage is your children. If you have children from a previous marriage then they may not receive any of your Estate if you die without a valid Will in place. Again, it is always best to review your Will on a regular basis to ensure your wishes are carried out. 

If you would like to have a free chat about your existing Will or making a new Will, please contact us on  info@TotalLegacyCare.co.uk or 01727 865 121

Neil Barras-Smith

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Only 55.2% of Lasting Powers of Attorney applied for in September 2018 were registered, WHY?

Only 55.2% of Lasting Powers of Attorney applied for in September 2018 were registered, WHY?

Statistics from the Office of the Public Guardian show that a total of 77,541 applications to register Lasting powers of Attorney were received in September 2018 alone (59,079 paper applications and a further 18,462 online applications) BUT only 55.2% of those were completed and registered by the Office of the Public Guardian.

So, with so many applications (500 more applications in September 2018 compared to August 2018) it is clear that the importance of putting an LPA in place is recognised by many but why are so many applications not registered?

The application forms are lengthy and do not require completion by a professional and so many opt to make the applications themselves to save money.

However, a Certificate Provider is still required to sign each Lasting Power of Attorney to certify that the Donor (the person making the application) understands the power that they are giving in the LPA, have not been forced or pressured into making the LPA, there is no element of fraud in the application and that they have no cause for concern. This certificate provider must be independent and have known you for at least two years or be a doctor or lawyer.

Although much of the form may seem simple and easy to complete, with just over half of applications being completed by the Office of the Public Guardian, what are the most common errors?

We spoke to the Office of the Public Guardian to ask what the most common mistakes were, causing applications to be rejected and found the following:

  • Inconsistency

The form is lengthy and requires the completion of both the Donor’s details and the Attorney’s details (the person being given the power by the Donor) in numerous boxes and inconsistency with this – whether this be incorrect spelling, inconsistent spelling, inconsistent dates of birth or address – this can cause the application to be rejected.

  • Dates

The application forms require signatures and the date that those signatures were completed to be inserted a number of times and the order in which this must take place is strictly stated in the forms. If this strict sequence is not followed, or dates are missing, this can cause the application to be rejected.

  • Outside the box

The signatures throughout the form must remain inside the boxes given and so if the signatures go outside the box, this may cause the application to be rejected.

With an £82 application fee, that is not refunded if the application is rejected, it is important to ensure your application is completed correctly and also ensure the application is in place ready for when you need it. The form being rejected or sent back to be rectified can cause significant delays and this may well have severe consequences.

Lasting Powers of Attorney allow you, the donor, to give power to the person, or people, you trust most, to make decision for you when you are unable to.

Total Legacy Care are able to provide a Certificate Provider when completing your application for a Lasting Power of Attorney.

If you would like to have a free chat about Lasting Powers of Attorney, please contact us on  info@TotalLegacyCare.co.uk or 01727 865 121

Leah Waller

Got a Question or want to book a FREE Consultation?