IHT Gift with reservation of benefit issues

Saving IHT on death by making a gift and surviving it by 7 years is standard IHT planning approved by statute. However, under Finance Act 1986 s102, when there is a reservation of benefit in gifted property at the date of death, for IHT purposes that property is treated as property to which the donor was entitled at death and is brought into charge regardless of how long the donor has survived the gift.

So, for example, if a parent (‘P’) gives their home to their children but continues to live there without paying a regularly reviewed market rent, the value of the house  on P’s death will be chargeable to IHT but, for Capital Gains Tax (‘CGT’) purposes, when the children sell the house, they’ll pay CGT on the increase in value of the house from the date of the gift and not just on the increase in value since P’s death.

And there is more bad news in that for example

  • the gifted property remains an asset of the gift recipient so if s/he dies shortly after P there could be a further IHT charge with no possibility of double charges relief;
  • on P’s death, on a reservation of benefit asset,  the liability to pay IHT falls in the first place on the gift recipient and only on P’s estate after 12 months if the gift recipient has not by then paid the IHT due;
  • there is no safe harbour period after which P can enjoy a benefit in the gifted property. The legislation says if ‘at any time in the relevant period the property is not enjoyed to the entire exclusion or virtually to the entire exclusion of the donor and of any benefit to him by contract or otherwise’ it is a gift with reservation and in P’s estate on P’s death. ‘Relevant period’ for these purposes is defined as meaning ‘a period ending on the date of the donor’s death and beginning 7 years before that date or, if it is later, on the date of the gift.’ (s102 Finance Act 1986). The test looks back 7 years from the date of P’s death to determine if there has been a reservation of benefit enjoyed by P in any asset s/he has given away post 18th March 1986. Merely surviving 7 years from the gift does not avoid a gift with reservation problem; and
  • under the guidance to local authorities on how to   interpret and apply the regulations allowing them to charge P for residential care, the gift is likely to be regarded as a deliberate deprivation of assets with the result that the value of the asset gifted is still assessable in working out P’s contribution to care costs.

If P ceases their reservation of benefit within 7 years of P’s death, P is deemed on that date to make an IHT potentially exempt transfer thus commencing the ‘normal’ IHT 7-year clock.

As a general rule, transfers between spouses are outside the IHT gift with reservation rules. This is not, however, the case where a UK domiciled spouse makes a gift to their foreign domiciled spouse of e.g., shares and the gift recipient for example pays dividends from the shares into a joint bank account with the donor.

There are some statutory let outs/reliefs from the gift with reservation legislation. These include

  • P paying the asset owner full consideration in the context of land and/or chattels where P has ‘enjoyment’ of the land or chattel; and
  • ‘sharing arrangements’ where
  • the donor disposes by way of gift on or after 9th March 1999 of an undivided share of an interest in land;
  • the donor and gift recipient together occupy the land; and
  • the donor does not receive any benefit other than a negligible one, which is provided by or at the expense of the donee for some reason connected with the gift. In practice the donor can pay all the running costs of the ‘shared’ house but the donee cannot.

If you have a second home in the UK and adult children and they genuinely share your second home with you on a regular basis, and there is very little likelihood they will go and live abroad/otherwise cease in fact to co-occupy it with you during your lifetime, the sharing arrangement ‘let out’ may be an attractive avenue to consider in the context of IHT planning.

If you want to discuss this or anything else raised in this note with us, please contact Robert Schon. His email is rschon@streathers.co.uk and his direct dial is 020 7267 5010

Tax is Architecture

For 16 years I have been a sole practitioner in Swains Lane with the aim of providing a City quality of tax service to my community. It is with great pleasure I am writing to say that with effect from 1st April 2021 I have joined Streathers Highgate LLP as a consultant. I can still be found at 6 Swains Lane and can still be reached on 020 7267 5010 or by email at either robert@robertschon.com or rschon@streathers.co.uk

Tax is architecture. It is often the tax analysis that influences the way something is structured.

Tax is the one area of practice where law and accounting firms meet. Law firms offer tax advice because the best place for tax planning is during the drafting of the contract e.g. the lasting power of attorney finance example below. Accountants are often involved only with tax compliance and reporting: after the event disclosure.

Tax law has ‘blessed’ and ‘non-blessed’ routes. By this I mean those who draft our tax laws deliberately create paths which allow people to arrange their affairs in a way which attract less tax. For example, if you want to share assets with a long term partner, the law encourages you to get married or have a civil partnership in order to do this without paying Inheritance or Capital Gains Tax.

In my time as a sole practitioner the clients whose stories have upset me most are those who tried to mitigate the impact of Inheritance Tax by transferring part of their family home to their children in the hope they would survive the gift by 7 years. Given that for most people their home is their most valuable asset, HMRC has effective legislation to prevent such gifts achieving their objective even if the donor survives the gift by 7 years.

If the client wants to tax plan and involve their home (or second home) there are however 2 ‘blessed routes’. One is for the recipient to pay the donor a market rent until the donor dies/the property is sold. The second is if the donor and gift recipient ‘occupy’ the property together until the donor dies/the property is sold.

A similar area is gifts for tax planning purposes made by an attorney under a lasting power. This means the donor of the lasting power (‘P’) has (i) lost capacity; (ii) has surplus assets in excess of those reasonably needed to fund P’s care; and (iii) P’s attorney(s) wish to try and reduce P’s Inheritance Tax estate by making lifetime gifts. The Court of Protection (‘CoP’) has held that unless P has indicated in P’s lifetime an appetite/interest in tax planning/mitigation it isn’t the job of the CoP to sanction gifts with a tax mitigation purpose. If however in the lasting power finance P has indicated a wish that the CoP look favourably at an application by his attorney(s) to make  such gifts the CoP can and will authorise them.

I think I am a rare breed. This is due to the way today (and for the last 20+ years) solicitors who specialise in tax law are trained. Law firm tax advisory work is dominantly a City speciality and training. Almost all these firms have shed their private client groups because for private clients professional costs are not tax deductible and the VAT is irrecoverable. In addition the firm has a conflict of interest if it acts for the controlling family/the founder/the family trusts and the ex-family owned now quoted PLC.

When I trained and worked in the City (1977-2005) we were schooled in both private client and corporate tax with an overlay of how our tax law applies to cross border money flows and investments owned by UK tax resident taxpayers. From 1990-2005 I was an owning corporate tax partner in a large City law firm.

My strength locally has been this familiarity with our tax system as it applies to individuals and other taxpayers including where there is a foreign element. It is a great pleasure to bring this expertise to Streathers; a firm I have known and worked with for a number of years. Should you want to get in touch my contact details are shown.

Robert Schon

Consultant to Streathers Highgate LLP

Tel no: 020 7267 5010

Email: rschon@streathers.co.uk; or robert@robertschon.com

Headline UK tax issues for people thinking of becoming UK tax resident

Our tax year runs from 6th April to 5th April. For every individual it is necessary to determine their UK tax residence status to 5th April.

The general rule is that if an individual is UK tax resident for the year ended 5th April, they are liable to UK income tax and capital gains tax (‘CGT’) on their worldwide income and gains for that year whether or not enjoyed or remitted here. Further, the general rule is a UK tax resident individual to 5th April is fully within the scope of all of our tax anti-avoidance legislation including as it applies offshore the UK. 

In addition to determining an individual’s tax residence status to 5th April, it is also necessary to determine their domicile status as at the same date. If they are UK tax resident but not UK tax domiciled on 5th April, their exposure to UK tax on their foreign source income and gains to 5th April which are not ‘remitted’ here can be kept outside of UK tax until remitted.

There are 3 types of domicile:
– domicile of dependency;
– domicile of origin; and
– domicile of choice.

It is a reasonable assumption that most new immigrants are not UK domiciled when they first move here. Being a non domiciliary allows you to elect to HMRC to (in my words) put up a wall to 5th April and keep all your non UK source income and gains for the year to 5th April outside of UK income tax/CGT unless ‘remitted here’. This is called the remittance basis of taxation.

Those eligible to claim the remittance basis need to be aware
that (i) there is a wide definition of ‘remitted’ including via a ‘relevant person’; and (ii) we have ‘ordering’ rules that govern the order in which we treat withdrawals from a non UK bank account as being withdrawn. In effect the most UK tax expensive money is deemed accessed first (e.g. sums taxable as income) before capital gains or the cost of the asset sold. These rules are called the mixed bank account rules.

A UK tax resident to 5th April who is an electing ‘non dom’ needs to know they can’t avoid having a taxable UK remittance to 5th April by e.g. giving wealth abroad to a defined group of people including a non UK company that then brings the otherwise taxable sum to the UK e.g. to make an investment.

There is a UK tax cost to elect to 5th April to HMRC  to be taxed on the remittance basis. Every individual who makes the election is taxable in the UK from their first pound of taxable income or gains to 5th April. There is no access to a zero rate of tax.

In addition, as described below, there can be a tangible cost to making a ‘non dom’ election to 5th April.

Years UK resident                                              Remittance basis charge
UK tax resident 7 of the preceding
9 tax years                                                                            £30,000

UK tax resident for at least 12 of the preceding
14 tax years                                                                           £60,000

UK tax resident for 15 or more of the preceding  
20 tax years                                                               Ineligible to claim

A key tax planning point for non domiciliaries thinking of moving here is that if they realise non UK gains prior to 5th April in the year they plan to move here and prior to said 5th April they place such realised funds in a segregated wholly clean (never been used before) non UK account into which nothing further is ever added, this is a ‘clean capital’ account and funds from it can be remitted here free of any UK tax charge even once Person X is UK tax resident. 

Issues to watch out for if X is planning to become UK tax resident for the first time in the year ending 5th April include inadvertently making
– His/her non-UK private company UK tax resident; and/or
– His/her offshore trust UK tax resident.

If you have any questions, please get in touch.

Summary of recommendations made by The Office of Tax Simplification to HM Treasury as regards changes to the UK Capital Gains Tax regime

Rates and boundaries

1. If the government considers the simplification priority is to reduce distortions to behaviour, it should either:

  • consider more closely aligning Capital Gains Tax rates with Income Tax rates, or
  • consider addressing boundary issues as between Capital Gains Tax and Income Tax

2. If the government considers more closely aligning Capital Gains Tax and Income Tax rates it should also:

  • consider reintroducing a form of relief for inflationary gains,
  • consider the interactions with the tax position of companies, and
  • consider allowing a more flexible use of capital losses

3.  If there remains a disparity between Capital Gains Tax and Income Tax rates and the government wishes the simplification priority is to make tax liabilities easier to understand and predict, it should consider reducing the number of Capital Gains Tax rates and the extent to which liabilities depend on the level of a taxpayer’s income.

4.  If the government considers addressing Capital Gains Tax and Income Tax boundary issues, it should:

  • consider whether employees and owner-managers’ rewards from personal labour (as distinct from capital investment) are treated consistently and, in particular
  • consider taxing more of the share-based rewards arising from employment, and of the accumulated retained earnings in smaller companies, at Income Tax rates.

The Annual Exempt Amount

5. If the government’s policy is that the Annual Exempt Amount is intended mainly to operate as an administrative de minimis, it should consider reducing its level.

6. If the government does reduce the Annual Exempt Amount, it should do so in conjunction with:

  • considering reforming the current chattels exemption by introducing a broader exemption for personal effects, with only specific categories of assets being taxable,
  • formalising the administrative arrangements for the real time capital gains service, and linking up these returns to the Personal Tax Account, and  
  • exploring requiring investment managers and others to report Capital Gains Tax information to taxpayers and HMRC, to make tax compliance easier for individuals.

Capital transfers

7. Where a relief or exemption from Inheritance Tax applies, the government should consider removing the capital gains uplift on death, and instead provide that the recipient is treated as acquiring the assets at the historic base cost of the person who has died.

8. In addition, the government should consider removing the Capital Gains uplift on death more widely, and instead provide that the person inheriting the asset is treated as acquiring the assets at the historic base cost of the person who has died.

9. If the government does remove the capital gains uplift on death more widely, it should:

  • consider a rebasing of all assets, perhaps to the year 2000, and
  • consider extending Gift Holdover Relief to a broader range of assets.

Business reliefs

10. The government should consider replacing Business Asset Disposal Relief with a relief more focused on retirement.

11. The government should abolish Investors’ Relief.

Robert Schon

UK tax issues to be aware of for professionals helping people move to the UK

Our tax year runs from 6th April to 5th April.

For every individual it is necessary to determine the following for the year ended 5th April
– their domicile; and
– their tax residence status
And from this their liability to UK income tax and capital gains tax to 5th April.

There are 3 types of domicile:
– domicile of dependency;
– domicile of origin;
– domicile of choice
It is a reasonable assumption that most new immigrants are not UK domiciled when they first move to the UK.

If you are UK tax resident to 5th April, why is being domiciled outside the UK beneficial from a UK income tax and CGT standpoint? It effectively allows you to elect to put up a wall to 5th April and keep all your non UK source income and gains for the year outside of UK income tax/CGT unless ‘remitted here’. This is called the remittance basis of taxation (‘RB’).
NB clients need to be aware
– that there is a wide definition of ‘remitted’ including via a ‘relevant person’; and
– of our ‘mixed’ bank account rules.

Clients,  UK tax resident to 5th April and electing ‘non doms’,  need to know they can’t avoid having a taxable UK remittance to 5th April by e.g. giving wealth abroad to a defined group of people including a non UK company they are involved with and that person bringing the otherwise taxable sum to the UK. They also need to know that if they remit funds here from an offshore bank account that has monies from many different sources in it e.g. salary; dividends; chargeable gains and gifts that HMRC has a statutory regime that taxes the remittance to the UK as if the most tax expensive sum has been brought here first.What does it cost to make a remittance basis election?

Years UK resident             Remittance basis charge
UK tax resident less than 7 of the preceding
9 tax years                        £30,000

UK tax resident for at least 12 of the preceding
14 tax years                      £60,000

UK tax resident for 15 or more of the preceding  
20 tax years                      Ineligible to claim RB

How do these rules apply e.g. to a Tier 1 Investor visa or a business visa applicant who wants to bring prior earned offshore income/gains to the UK to help buy a home here?

In order to apply our statutory residence test introduced by the Finance act 2015, one must determine X’s residence status to 5th April

Our self assessment system of taxation imposes on the taxpayer the obligation to self assesses their UK tax status and UK tax liability to 5th April and report it to HMRC.

Double tax treaties are a bilateral contract between e.g. the UK and a named 3rd country. It may be for the year of arrival (or departure) X is a tax resident of their country of departure and not their new ‘home’. This needs to be considered; assessed and if relevant claimed on a case by case basis. All double tax treaties have a residence tie breaker clause.

Issues to watch out for if X becomes UK tax resident for the first time in the year ending 5th April include inadvertently making
– His/her non-UK private company UK tax resident; and/or
– His/her offshore trust UK tax resident

Robert Schon

COVID-19 travel restrictions risk to tax residency

There is a risk that Covid travel restrictions might make non UK tax resident companies or trusts UK tax resident.

I recently attended a Zoom meeting of UK tax lawyers involved with international tax issues. One agenda item concerned UK tax resident directors of non UK tax resident companies where because of COVID-19 UK tax resident directors are not travelling abroad to attend in person board meetings. 

The concern tabled is that hitherto non UK tax resident companies might become UK tax resident for their current accounting period ending on e.g. 31st December exposing such companies (amongst other things) to UK corporation tax on their world wide income and gains to 31st December 2020. 

UK case law has held that the test of company residence is ‘where the central management and control actually abides’ (see Lord Loreburn in De Beers Consolidated Mines v Howe (5 TC 198). In broad terms this concept of central management and control is directed at the highest level of control of the business of a company. It is distinguished from the place where the main operations of the business are to be found. Successive decisions have 

–        emphasised that the place of central management and control for the accounting period is wholly a question of fact; and

–        attached importance to the place where the company’s board of directors meet insofar as those meetings constitute the medium through which central management and control is exercised. 

The location of board meetings, although important in the normal case, is not necessarily conclusive. Lord Radcliffe in Unit Construction pointed out [(1959 38 TC 712 at p738)] that the site of the meetings of the directors’ board has not been chosen at ‘the test’ of company residence. In some cases, for example, central management and control is exercised by a single individual. This may happen when a chair or managing director exercises powers formally conferred by the company’s Articles and the other board members are little more than ciphers, or by reason of a dominant shareholding or for some other reason. In those cases, the residence of the company is where the controlling individual exercises his/her powers. 

HMRC has not issued any guidance that covers non UK tax resident companies that might inadvertently become UK tax resident. If you think anything written here might have relevance to you/a company you are involved with please get in touch. I have a lot of experience of working in this area and am confident I can assist. 

Similar (but different) issues arise for hitherto non UK tax resident trusts that may become UK tax resident to 5th April because trustee meetings are de facto taking place here and not abroad. If you are a trustee of such a trust please get in touch.

Robert Schon


The Ministry of Justice Guidance on legal practitioners in the key worker category include Solicitors acting in connection with the execution of wills. We are continuing our usual practice of arranging meetings albeit now online or by telephone appointment.

Writing a will is a combination of thinking about what you want to happen after your death given your circumstances and how tax impacts your thinking/assets.

The key points to cover in thinking about a will are first to identify your assets and then:

  • Who you name as executors? Their job is to wind up your estate and settle your debts including Inheritance Tax due to HMRC. Beneficiaries can act as executors;
  • If you have minor children; who will be their guardians on the death of the 2nd parent?
  • If you want to detail any funeral wishes (e.g. burial or cremation) and if you would like a religious service?
  • Details of any gifts of money to be made on your death or gifts of personal possessions;
  • Details of any gifts to charity to be made upon your death; and
  • Details of the person or persons you wish to receive your residuary estate being those assets remaining in your estate after all taxes, debts, legacies and administration expenses and if more than one the order of priority amongst those persons e.g. to my spouse/civil partner if s/he survives me; otherwise to my children equally and if any have predeceased me their share to their children at 18 otherwise all to my surviving child/children and if none to charity.

If you think I might be able to help, please get in touch.


There have been a number of programmes and articles recently on the inequalities of lockdown and where the burden of repaying UK government debt should fall. I think it inevitable in the foreseeable future that our Inheritance Tax (IHT)/gift tax regime is going to change and the tax cost of making gifts increase. If you can afford to make lifetime gifts as part of your estate planning, I would encourage you to move this up your agenda.

As a tax and estate planning solicitor working in this community, I see my role to try and communicate issues that I think those who read these inserts might find interesting and should have on their radar.

I think we presently have a generous IHT regime for making gifts. So long as you can afford to give away, you can give away unlimited wealth free of IHT and make no IHT return to HMRC provided the transfer is by an individual by way of gift

  • To another individual; on condition that
  • The recipient takes possession and enjoyment of the property at the date of the gift or 7 years before the donor’s death if later; and
  • After the date of the gift, the property is enjoyed to the entire exclusion or virtually to the entire exclusion of the donor including at any time in the 7 years before the death of the donor.

Similarly generous rules apply when creating a trust for someone who is ‘disabled’.

A charge to Capital Gains Tax (CGT) on the donor can inhibit the making of lifetime gifts. Where the asset gifted is something other than cash, as a general rule the donor is deemed to receive consideration equal to the market value of the asset disposed of and CGT is due on the disposal.

In certain limited cases this charge to CGT can be ‘held over’ meaning the gift recipient takes the asset at the donor’s CGT base cost. This result can usually be achieved where:

  • The gift or transfer is of business assets to an individual or a trust; or
  • Where the transfer is a ‘chargeable transfer’ for IHT purposes e.g. a lifetime transfer into a trust.

If you think I can help-please get in touch.

CGT Mitigation and Spouses

This note is relevant to couples who are

  • married or in a civil partnership; and
  • each has a will saying ‘all to the other’;
  • where it is likely that one partner in particular (x) will predecease the other; and
  • both are tax resident (and the recipient is domiciled) in the UK; and
  • they own assets with substantial unrealised gains on which Capital Gains Tax (‘CGT’) would be due if sold.

In these circumstances if the spouse who is likely to survive

  • transfers all their investments that have inbuilt capital gains to their spouse who is likely to die first; so
  • s/he dies possessed of all assets with inbuilt capital gains owned by the couple; and
  • by their will all such assets are inherited by their surviving spouse;
  • s/he will inherit them at a restated CGT base cost equal to the market value of each asset on x’s date of death.

This planning is described further below. What follows comes from material published by the body set up by HMRC to decide if tax planning is or is not ‘acceptable’.

Gifts between spouses

This example is intended to show standard tax planning on gifts between spouses.


This example considers the CGT position on an arrangement involving a gift of shares between spouses, followed by the death of the spouse receiving the gift.

The facts 

In January 2012 Mr and Mrs Jones are told that Mrs Jones is terminally ill. In February Mr Jones gives his shares in an investment company, which are standing at a significant gain, to his wife. Under the terms of her Will as drafted at the date of the gift he will inherit those shares when she dies. Mrs Jones has full capacity at the time of the gift.

Mrs Jones dies in June and the shares pass to Mr Jones under the terms of her Will. Mrs Jones has not executed a new Will since the gift. 

The relevant tax provisions

Sections 58, 62(1)(b) and 62(4)(a) Taxation of Chargeable Gains Act 1992 (‘TCGA’)

The taxpayer’s tax analysis

The gift of the shares is a transfer between a husband and wife who are living together. This transaction is treated, by s58 TCGA as taking place for such consideration as will give rise to neither a gain nor a loss. 

All the assets of the deceased which pass to his or her personal representatives are deemed to have been acquired by them, at market value, at the date of death under s62(1)(b)TCGA. When beneficial ownership of any asset of the estate passes from the personal representatives to a beneficiary, S62(4)(a) TCGA provides that no chargeable gain shall accrue to the personal representatives.

In summary, there is no chargeable gain on the gift of shares by Mr Jones to Mrs Jones and Mr Jones re-acquires the shares at market value at the date of his wife’s death. In effect, the gain that has accrued during the earlier ownership of shares by Mr Jones has disappeared. 

What is the analysis under the tax general anti abuse rule

The main purpose of the arrangement is to obtain a tax advantage. The gift of shares was made by Mr Jones in the hope of washing out the gains on the understanding that his wife would leave them back to him.  

Are the substantive results of the arrangements consistent with any principles on which the relevant tax provisions are based (whether express or implied) and the policy objectives of those provisions?

Yes. The principle of s58 TCGA  is to allow assets to be transferred between spouses and between civil partners on the basis of no gain/no loss. 

Assets passing on death to personal representatives are treated as taking place at market value and no gain is charged when the assets are passed to the beneficiaries.

Do the means of achieving the substantive tax results involve one or more contrived or abnormal steps?

The means of achieving the tax results depend upon the gift, the death of Mrs Jones and her choosing to leave the shares to Mr Jones in her Will. There are no abnormal or contrived steps here; the transactions are normal arrangements between spouses or civil partners. 

Are the arrangements intended to exploit any shortcomings in the relevant tax provisions?


Do the tax arrangements accord with established practice and has HMRC indicated its acceptance of that practice?

Yes. HMRC sets out in its instruction manuals how these transactions are to be treated for Capital Gains Tax purposes. 


These arrangements can be regarded as a reasonable course of action in relation to the tax provisions having regard to all the circumstances. The general anti abuse rule would not apply.

An alternative arrangement – What if the facts were the same as those above but the gift of shares was made on the day of Mrs Jones’ death?

HMRC’s view is that so long as Mrs Jones was in full capacity at the time of the gift the analysis would be the same and that the general anti abuse rule would not apply. This assumes of course that the gift was validly completed prior to death. 


The ability to plan in this way is potentially very valuable to clients. Other taxes such as Stamp Duty, Stamp Duty Land Tax and Inheritance Tax need to be considered. If you think I can help, please get in touch.

Writing a will – leave your affairs tidily

About 50% of my practice is helping clients with their estate planning. This invariably concludes with their writing a will. In addition, it may involve lifetime gifts (perhaps into trust) and writing a finance and/or health lasting power and perhaps a living will. Sometimes it requires liaising with lawyers offshore if the client has a foreign citizenship and/or if s/he owns assets outside the UK.

Putting these pieces of paper in place in a way that works for the client and his/her heirs is something s/he cannot delegate. It is for this reason I describe the exercise as a communication of love. I want in this note to explain this sentiment and give some examples.

Writing a will is like playing a what if game. Let us assume the client is married/in a civil partnership and has children. A typical scenario is on the client’s death their will provides:

  1. All to my surviving spouse/civil partner;
  2. If s/he has died – all to my children in equal shares at [18];
  3. If a child predeceases their surviving parent and has children who survive the 2nd parent to die (‘X’); the dead child’s share goes equally to his/her children on their attaining [18];
  4. If no children/grandchildren survive X, their estate passes to … ; and
  5. If no named beneficiary is alive to inherit X’s estate, it passes to one or more named charities.

Prior to anyone inheriting the deceased’s assets, their financial affairs need to be brought to a conclusion. This is the job of the executor(s). If the deceased was an owner manager of a business it may be different executors need to be appointed to ‘manage’ the business for the estate to those executors appointed to manage the other assets of the deceased.  This is particularly true if the deceased was an owner of a regulated business such as a solicitor.

Should the client have children below the age of 18 additional matters need to be addressed. These include:

  • who the client appoints as guardian(s) for his/her children should both parents die prematurely; and
  • thinking how in these circumstances the guardian(s) can be compensated for the inevitable disruption in their life.

The assets of the deceased can be used for the education, maintenance and welfare of the deceased’s children. They cannot (unless other steps are taken) be used e.g. to pay for a loft conversion at the home of the guardian(s) to accommodate the deceased’s children.

A question I ask clients is if they care if their surviving spouse/civil partner re-marries and potentially leaves assets inherited from the deceased to persons other than their children. In my experience the older the client the less relaxed they are.

The Inheritance Tax Act 1984 (‘IHT’) covers this scenario by saying that the IHT spouse exemption is available where assets are left on trust to a surviving spouse for life and on their death whatever remains by way of capital is to pass e.g. to the children of the first spouse/civil partner to die.

This structure has advantages when it comes to assessing the capital of the surviving spouse available to meet care costs as the assets in the will trust are presently left out of account in calculating the available assets of the surviving spouse/civil partner.

I wrote a will for a client (‘C’) who had children from a prior marriage. C chose to put in place such a life interest trust for the surviving spouse (‘S’.) After C’s death, S found it undignified that the trustees included one or more of C’s children. The issue being if S wanted any capital from the trust (in addition to its income) the trustees needed to agree. Today – especially in a second marriage scenario – if clients want such a will trust structure I explore with them their leaving their surviving spouse/civil partner some capital outright so their need to access the trust for capital is reduced.

The difference between a will and a lasting power of attorney (‘LPA’) finance

The contrast is that a will has no affect during the lifetime of the person who wrote it and a finance LPA has no affect after death.

A finance LPA allows the donor to

  • nominate who s/he wants to manage their financial affairs if the donor ceases to have capacity; and is
  • much cheaper and easier to put in place than the family needing to apply to the court for a deputy to be appointed to perform the same function if no finance LPA exists and x has ceased to have capacity.

A health LPA allows you to appoint who you want to liaise with ‘authority’ on issues concerning your care; medical wellbeing and receipt or not of life sustaining treatment.

I sincerely believe that doing the required thinking to put in place the pieces of paper I describe above, so they truly work when the time comes for you and your family/nearest and dearest, is only a job you can do. I do my best to make it an exercise you enjoy and complete feeling ‘it fits-it works’.

If you think I can be of help-please get in touch.

Robert Schon