Will your estate be shared out exactly as you want it to be?

Planning your finances in advance should help you to ensure that when you die everything you own goes where you want it to. Making a will is the first step in ensuring that your estate is shared out exactly as you want it to be.

Leaving your assets

If you leave everything to your husband, wife or civil partner, in this instance there usually won’t be any Inheritance Tax to pay because a husband, wife or civil partner counts as an ‘exempt beneficiary.’ But bear in mind that their estate will be worth more when they die, so more Inheritance Tax may have to be paid then.

New rules could mean up to double the Inheritance Tax allowance is available

New rules mean that the survivor of a marriage or civil partnership can benefit from up to double the Inheritance Tax allowance £650,000 for 2009/10 tax year, increasing to £700,000 by 2010/11, in addition to the entitlement to the full spouse relief.

Protecting wealth from a potential liability

Inheritance Tax is the tax that is paid on your ‘estate,’ chargeable at a current rate of 40 per cent. Broadly speaking this is a tax on everything you own at the time of your death, less what you owe. It’s also sometimes payable on assets you may have given away during your lifetime. Assets include property, possessions, money and investments. One thing is certain, careful planning is required to protect your wealth form a potential Inheritance Tax liability.

Providing homebuilders with greater clarity

The Home Builders Federation (HBF) commented recently that the announcement by the government on zero carbon homes is necessary in providing homebuilders with greater clarity on the definition of zero carbon.

Protecting against the unexpected

Once you take out any kind of mortgage, it’s very important that you make all the repayments in full, and on time. If you fail to do so you could lose your home and it could also affect your credit rating.

Prediction for the number of mortgage possessions lowered

Data form the Council of Mortgage Lenders (CML) confirms that lenders are showing forbearance to borrowers who fall into arrears, and that a range of government schemes is also providing help. They have also lowered their prediction for the number of mortgage possessions this year from 75,000 to 65,000.

Lenders welcome the decision to introduce an interim regime

Firms offering sale-and-leaseback have only until the end of July to submit applications for interim authorisation from the FSA. If they fail to do so, they will be unable to offer sale-and-leaseback during the period of interim regulation of the market, lasting until the end of June next year. Firms that want to offer sale-and-leaseback and are already authorised by the FSA for other activities still have to apply for an interim variation of permission.

The Housing Minister John Healey has announced a proposed change to the law to guarantee at least two months’ notice for tenants if they are required to leave their home because a lender has taken possession of the property.

We believe, however, that it is important to distinguish between cases where the tenancy is recognised by the lender (because the landlord has a buy-to-let mortgage) and instances where a tenancy is not recognised and probably not even known to the lender. This can occur if the borrower has a residential mortgage but is letting out the property to a tenant without the consent of the lender and in breach of the terms of the mortgage.

1 in 40 people in the UK inherit an average of £17,500 each year. The total after tax is £31 billion.

The average estate leaves £90,000 net of tax and the average amount received by each individual is £17,500. This suggests that, on average, people share out their bequests between five people. Some 10 per cent of beneficiaries receive £50,000 or more. A further 30 per cent receive £10,000 or more, enough to make a down-payment on a home or pay off a sizeable amount of a mortgage.

Making the most of different solutions

Decreasing term assurance
Decreasing term assurance can be arranged to cover a potential Inheritance Tax liability and used as a Gift Inter Vivos policy. This is a type of decreasing term plan that actually reduces at the same rate as the chargeable Inheritance Tax on an estate as a result of a Potentially Exempt Transfer (PET).

Who will handle your affairs?

The ‘personal representative’ (the person nominated to handle the affairs of the deceased person) arranges to pay any Inheritance Tax that is due. You usually nominate the personal representative in your will (you can nominate more than one), in which case they are known as the ‘executor.’ If you die without leaving a will a court can nominate the personal representative, in which case they are known as the ‘administrator.’

Making sure the gift is not a gift for Inheritance Tax purposes

A gift with reservation is a gift which is not fully given away. Where gifts with reservation were made on or after 18 March 1986, you can include the assets as part of your estate but there is no 7 year limit as there is for outright gifts. A gift may begin as a gift with reservation but some time later the reservation may cease.

What will you choose?

There are plenty of interest rate options available to the homebuyer when taking out or switching mortgages and this is often the area that causes the most confusion, all of which have their advantages and disadvantages depending on your circumstances. It can be confusing understanding all the features of the different products and knowing which one to choose.