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A guide to the tax efficient drafting of wills, administration and estate planning
Written by leading lawyers in the field, this popular guide to the tax-efficient drafting of wills, estate planning and administration provides practitioners with help and guidance on everyday estate planning and will drafting and discusses the typical problems and pitfalls that may be encountered in practice. The precedents have been carefully selected to deal in a straightforward fashion with common needs of clients.
The book begins by looking at the essential legal framework of wills, trusts and taxation through a combination of detailed and authoritative commentary, worked examples and expertly drafted precedents. It then examines specific topics including: transferable nil rate band, using IPDIs, provision for children, pilot trusts, gifts, APR and BPR, obtaining the grant, instruments of variation and disclaimer, constituting and administering the will, and tax efficient administration.
This edition has been extensively revised and includes four new chapters:
The authors’ narrative commentary is supplemented by 40 precedents which are included on an accompanying CD-ROM, allowing users to download and adapt each document as necessary.
Authors/Editors are listed in alphabetical order
"an extremely helpful reference book on estate tax planning ... likely to be of great assistance to many private client practitioners who come across the odd tax problem ... the busy practitioner will therefore find helpful precedents ranging from an appropriately brief memorandum of appropriation to a full, 11-page, 15-clause will, accompanied by helpful 'Drafting hints'. Electronic copies of all the precedents are supplied on the accompanying CD-ROM, which is easy and quick to install ... precedents are intuitively arranged by chapter"
"the precedents offer time-saving practical advice and guidance to the busy practitioner and professional adviser ... an essential work of reference ... Each precedent can be downloaded and adapted as appropriate to specific cases"
Phillip Taylor MBE and Elizabeth Taylor of Richmond Green Chambers
"just as relevant and useful for tax advisers as it is for practitioners specialising in the administration of estates and the drafting of wills ... we would say that it is virtually imperative for practitioners charged with the tax-efficient drafting of wills, as well as other aspects of estate planning, to acquire this book ... a solidly reliable and readable work of reference that should be kept readily to hand by every professional involved in this technically challenging and fast changing area of law"
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Phillip Taylor MBE and Elizabeth Taylor of Richmond Green Chambers
"Any book about wills and estates should now be covering the reduced rate of inheritance tax (IHT) if 10 per cent of the net estate is left to charity ...authors Christopher Whitehouse and Professor Lesley King have devoted a whole chapter to the matter ... it is an assured and useful guide ... this book is a veritable mine of useful information and would be a significant addition to any private client library, though. It is accessible for trainees while maintaining a depth of knowledge that makes it invaluable to more senior practitioners. It is well paced and easy to navigate as well as being clear and concise, yet comprehensive"
Tess Goldman, Associate, Harbottle & Lewis
The original idea for this book was to deal with common will drafting and estate administration problems primarily through a consideration of relevant precedents. In the event it has developed into a bigger book than the envisaged (it grew like Topsy) with commentary taking over from precedents. On reflection this process was probably inevitable since it is difficult to launch into a discussion of (say) flexible IPDIs without at least some background information to set it all in context. The precedents can then be tailored to the matters discussed. All of which explains the order of the book with the first section (Chapters 1–3) providing an overview on wills; trusts and the relevant tax provisions. The remaining chapters then explore areas of difficulty (and of opportunity) in the will drafting and administration process.
After years of seemingly incessant change in the UK tax regime, we have reached a point of comparative calm. It appears that under the Coalition Government IHT rates will be frozen until the end of the current Parliament (2014–15); the CGT system has been ‘amended’ (reformed is far too strong a word to use for the slightly grubby compromise cobbled together) and future changes are not envisaged whilst it seems that the 50% additional income tax rate is to remain for the time being.
For the professional adviser, the position entering the second decade of the 21st century is clouded with uncertainty. Will drafting in all but the simplest cases is a technically challenging area yet competition on price makes it difficult to charge a fair rate for the risks involved. Perhaps the recent gush of legislation will prompt a reconsideration. Certainly if prospective clients appreciated the level of cost involved in fighting a case through the courts, they might be rather more willing to pay a realistic amount. It is, however, difficult to see that the opening up of the legal market will do anything to raise standards (indeed that is scarcely a consideration for the ‘policy makers’). Quite the reverse, with the arrival of ‘Tesco law’ likely to herald a drive for ‘rock-bottom’ price with (one suspects) services to match!
And yet, as Jane Austen might, or should, have said ‘a will is a very serious business’ whilst an earlier writer on the human condition surely got it right when he commented:
'Of what does the happy life consist
My dear friend Julius? Here’s a list:
Inherited wealth, no need to earn
Fires that continually burn
And fields that give a fair return.'
Thanks are due to Elouise Dale for dealing with all matters technological.
The law is stated at 1 December 2010.
THE IMPACT OF THE TRANSFERABLE NIL RATE BAND
1. SETTING THE SCENE
4.01 The introduction by the Labour Government of a transferable unused nil rate band between spouses and civil partners as from October 2007 revolutionised the drafting of the traditional family will. In this chapter we will consider the position before this change and then look at the rules introduced in 2007 together with their implications for the will draftsman. Finally, we will review the position of wills made before the change where the testator has now died. Before doing so, there are two background points to consider.
The frozen nil rate band
4.02 The nil rate band has been frozen at £325,000 by FA 2010 until the end of tax year 2014–15. Previously one of the advantages of transferring the nil rate band was that what was available on the survivor’s death was an additional nil rate band of the amount current at the time of the survivor’s death. Accordingly, the benefit of increases in the amount of the nil rate band after the first death was secured. With freezing, however, the amount of the nil rate band will not be rising in line with RPI or rises in property values. Hence, there is an argument for using the nil rate band sooner (ie on the first death) rather than later (on the second death) to ensure that increases in asset values take place outside the estate of the surviving spouse.
Janet died in July 2010 leaving her entire estate to her husband, Alfred. On his death, his estate will be able to claim an additional nil rate band. Included in her estate was an investment property worth £325,000. Alfred died in 2015 when the nil rate band was still £325,000 and the investment property was worth £400,000.
1. At the time of Janet’s death, the investment property fell within her nil rate band but by the time of Alfred’s death its value had increased by £75,000, which increase had not been matched by an equivalent increase in the nil rate band. Accordingly, tax at 40% may be charged on the £75,000 increase (a potential tax bill of £30,000).
Contrast the position if:
2. Janet’s will had put the property into a discretionary trust under which Alfred and her children could benefit. This will exhaust Janet’s nil rate band but on Alfred’s death no IHT will be payable on the property. If desired, the trust can be ended at any time during the 10-year period from Janet’s death without any IHT exit charge being payable and with the benefit of CGT hold-over relief. If it is decided to keep the trust in being, the charge on the 10-year anniversary will be at 6% on the value of the property in excess of the then nil rate band. For instance, if it is then worth £425,000 and the nil rate band remains frozen at £325,000, the tax will be £6,000.
Future legislative changes
4.03 Some fear that in the future the rules allowing an unused nil rate band to be transferred will be repealed.4 That might, of course, leave taxpayers who had died without using up their nil rate band worse off. Whilst it is impossible to predict with accuracy future legislative changes, it is suggested that, out of basic fairness if nothing else, any such change ought to apply only where the first spouse dies after the change, leaving the rules intact if the first spouse had already died.
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