The Risks of Making a DIY Will

Making a will is one of the most important things you can do to prevent strife between your loved ones after your death.

In a recent case, a widow drafted her own will using a shop-bought form, leaving her estate (valued at around £300,000) to her son and daughter equally and appointing them her joint executors.  The widow disliked the legal profession and insisted before her death that lawyers should play no part in the administration of her estate.  However, in the absence of independent advice, the administration had not progressed at all due to the siblings’ inability to see eye to eye and work together.  Almost four years after she died, the siblings fought it out at the High Court and ran up legal costs bills estimated at £40,000.

Criticising their constant bickering, the Court found that there had been a complete breakdown of trust and communication between them.  In the circumstances, the Court took the unusual step of removing both of them as executors of the will.  If the siblings could not agree on their replacements, the Court would appoint independent executors to push forward the administration of their mother’s estate.

Judge slams HMRC’s treatment as ‘Grossly Unfair’

One of the fundamental functions of our legal system is to protect ‘the small man’ against the leviathan of the state.  In one striking case, HMRC was heavily criticised for its grossly unfair treatment of a dyslexic painter and decorator with the mental age of a 12-year-old.

HMRC had estimated the man’s earnings over a six-year period and hit him with tax demands of almost £18,000.  He denied that his earnings had ever reached the tax threshold.

The man had suffered from serious learning disabilities and his life had been struck by various misfortunes, including the end of his marriage, the subsequent death of his wife and a fire at his home.  He had managed to keep on top of his paperwork until his wife left him as the sole carer for their primary-school-age daughter.  The child had written a letter to his local tax office on his behalf but it had been returned unopened.  He had visited the office in person three times, but had been given only limited assistance.

In allowing his appeal, and cancelling the tax demands, the First-tier Tribunal found that he was a credible witness who was entirely lacking in guile.  His treatment by HMRC had been unconscionable, in the sense of grossly unfair, outrageous and completely unreasonable.  His literacy problems should have been obvious to HMRC staff and no consideration had been given, or concessions made, to his particular vulnerability.

Budget 2015: Main IHT Changes

Additional nil rate band

Much has been made of the increase of the inheritance tax allowance to £1m introduced in this year's Budget.  However, on closer inspection, the tax break is not as generous as it first appears.

The increase is due to an "additional" nil rate band over the existing nil rate bank of £325,000 (which has been frozen until April 2021), which can be used if a residence is passed on death to direct descendants.  The additional nil-rate band will not come in until 2017-18, when it will be £100,000.  It will then increase to £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21.  It is reduced for estates with a net value of more than £2m (at the rate of £1 for every £2 over that threshold).

Interestingly, the additional nil rate band will also be available to anyone who downsizes after July 8 2015 and the assets of equivalent value are passed on death to direct descendants.

As with the existing nil rate band, any unused additional nil rate band can be transferred to a surviving spouse or civil partner, which is how the total nil rate band of £1m has been calculated.

Inheritance tax and Non-Domiciles

From April 2017, inheritance tax will be payable on all UK residential property owned by non-domiciled persons (directly or through an offshore structure).

Further, the point at which a non-domiciled person is deemed domiciled for inheritance tax purposes will be brought forward to 15 out of 20 years.  From April 2017, people who were born in the UK to parents who are domiciled here will be treated as UK domiciled while they are in the UK.

Animal Charities Give Way to Human Needs in Will Dispute

Everyone has the right to choose who to benefit in their wills.  However, that right is not unrestricted.  In a case that has lasted almost a decade, a mother who cut her poverty stricken daughter out of her £486,000 estate has had her will effectively re-written by the Court of Appeal.

The mother fell out with her daughter many years before her death when the latter eloped with her teenage boyfriend.  Alongside her will, the mother left specific instructions that any attempt by her daughter to make a claim on her estate should be actively resisted.

The daughter, a mother of five who lived in straitened circumstances, nevertheless launched a claim under the Inheritance (Provision for Family and Dependents) Act 1975.  The claim was defended by her mother’s executors and the three animal charities named in the will.  Initially, the Court found that her mother had failed in her duty to make reasonable provision for her in her will and awarded her £50,000 from the estate.

The daughter appealed the decision.  In upholding the daughter’s appeal, the Court of Appeal found that the judge had under-estimated her reasonable needs.  Her portion of the estate was increased to £164,000 to cover the cost of purchasing her housing association home and to modestly supplement her income from benefits.