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To value an estate, when administering it, there are two sets of values that you need to consider; the gross and net values for Inheritance Tax (IHT) purposes and the gross and net values for Probate purposes. Depending on how the deceased’s assets are owned, and whether there are any lifetime gifts to consider, these values may be the same or different, sometimes significantly.

Gross and net values for IHT

These are the values that the IHT calculation will be based upon and determine how much tax is paid, if any. This calculation will include the value of all of the assets that are held in the deceased’s sole name as well as a proportion (usually half, but not necessarily) of any jointly owned assets.

The calculation will also include the value of any gifts that were made by the deceased in the seven years before their death, after deducting any applicable exemptions such as annual or small gift exemptions.

The value of the gross estate for IHT purposes will also include the value of some trusts that the deceased had the benefit of during their lifetime to the date of their death (or any interest that they disposed of in the seven years before their death).

Once the values of all of the sole assets, the share of any joint assets, and any applicable gifts and trusts has been established, this is added up and the total is known as the gross estate for IHT.

From the gross estate, you can then deduct any liabilities (or share of liabilities from joint assets) that the deceased may have had at the date of death. This will include things such as outstanding credit card balances, mortgages on properties, and outstanding care fees.

When you have established the extent of the liabilities, this figure is deducted from the gross estate to give the net estate for IHT purposes, which will then enable you to calculate whether any IHT is due from the estate. This may also result in IHT being paid by any trusts that have been taken into consideration.

Gross and net values for Probate purposes

These totals differ from gross and net values for IHT as they do not include any joint assets, gifts or trusts. This is because joint assets do not pass in accordance with the deceased’s will or the intestacy rules but by survivorship (i.e. to the surviving joint owner). Gifts and trusts are not owned by the deceased at the date of their death and so also do not follow the deceased’s will or the intestacy rules.

Therefore, to value the gross estate for Probate purposes, you simply add up the value of all of the assets held in the deceased’s sole name at the date of their death and deduct the value of any liabilities in their sole name. If a mortgage is held in joint names, the liability passes to the surviving joint holder and so this is not deducted for Probate purposes.

The gross and net values for Probate purposes will appear on the Grant of Representation when it is issued by the Court, but the IHT values will not appear.

Obtaining the values

This usually involves getting in touch with any financial institutions that the deceased had dealings with in order to obtain the balances on the date of death. Other assets, such as shareholdings and properties, will need to be valued to be included in the paperwork.

If you are a personal representative of an estate (either an executor or administrator), it is very important that you ensure that you give the correct financial information to the best of your knowledge to the Court and, if applicable, to HMRC as both require that you make a declaration that you have done so. Whilst honest mistakes are accepted, you are expected to have made every effort to ensure that the information that you provide is correct. When you ask Tollers to administer an estate on your behalf, we will ask you for details of the assets that you are aware of and we will contact the financial institutions on your behalf to establish the values in the estate. We will also advise you as to how properties and other assets should be valued and assist you with this.

Talk to Tollers

If you need advice or guidance…Talk to Tollers on 01604 258558.  Our experienced team is sensitive and supportive and always have your best interests at heart

The Government has recently announced details, set out in the Renters Reform Bill 2022 (“the Bill”), to end a landlord’s ability to terminate a residential tenancy on a ‘no fault’ basis. To do this, the Government will move all tenants who would previously have had an Assured Shorthold Tenancy to a single system of periodic tenancies.

The proposed changes are the biggest shake-up of the law governing Landlord and Tenant relationships for over 30 years.

Currently, a landlord can serve a tenant with an ‘s21 notice’ to bring their tenancy to an end, without having to give a reason. An s21 notice can only be served if a landlord has complied with a number of procedural requirements beforehand and is commonly referred to as the ‘no fault notice’.

The Government believes that the outlawing of the ‘no fault’ route to possession will offer tenants greater protection from alleged rogue landlords who seek to terminate tenancies without giving any reason. Government statistics state that 22% of those who moved last year did not end their tenancy by choice.

Recognising that landlords’ circumstances change, the Bill will also introduce new grounds for eviction for landlords who want to sell their property and/or move into the rental property. This ground cannot be used for the first six months of the tenancy (similar to how the current s21 procedure works).

New mandatory grounds for repeated serious arrears will also be introduced. This aims to help landlords who have tenants that pay off a small amount of arrears, keeping them under the mandatory repossession level of two months’ arrears (and thereby defeating the ability for the tenant to ‘play the system’).

Eviction will be mandatory where a tenant has been in at least two months’ rent arrears three times within the previous three years, regardless of the arrears balance at the possession hearing.

Under the s8 procedure, the notice period for the existing rent arrears eviction grounds will increase to four weeks and the mandatory threshold at two months’ arrears at the time of serving notice and hearing will remain unchanged. The reason being is to ensure that tenants have a reasonable opportunity to pay off arrears without losing their home.

The Bill will also allegedly introduce, amongst other things, a property portal to help landlords understand their obligations, give tenants performance information to hold their landlord to account, and help Local Authorities reduce poor practice. It will also be unlawful to apply a blanket ban on pets.

If you require assistance or advice on obtaining possession or a property, Talk to Tollers on 01604 258558 where our experienced Dispute Resolution team is on hand to provide you with the most up-to-date information and guidance.

More about how we can assist with all types of property disputes.

 

Every individual’s circumstances are different and when deciding whether it is best to purchase a freehold or leasehold property only you as the buyer can decide what is best for you.

Do you like your own space, not have to answer to anyone (within reason) or simply own a pet? Then a Freehold property may be more to your liking. If none of these are of concern to you then a Leasehold Property may be an option. When choosing a freehold or leasehold property, it is worth considering the following;

Freehold; you will own both the property and the land allowing you complete control over the property until such time you choose to sell. You are able to change the windows, replace doors, modify the property (subject to statutory requirements/covenants in the title) and apply for extensions, internal alterations etc..  You will not have to worry about service charges or ground rent for the property itself and can therefore budget more easily and have control over what you spend money on in respect of the upkeep of the property.

Leasehold; you will only own the property and not the land it sits on. Flats tend to be leasehold. The freeholder (Landlord) will own the actual building and will grant leases of the individual flats. It is a time-sensitive entity that you will only own for a certain amount of time and will depreciate in value once the term of the lease reduces to 80 years. You will not own communal areas such as the stairs/gardens as these are owned by the Freeholder.

You of course get to pay for this privilege by way of a service charge and ground rent. The cost of service charges and ground rent is governed by the lease and by what expenditure is required year on year for the maintenance and upkeep of the block.  If any major works are required then these can prove very costly.  Often the Landlord will employ a management company to manage the collection of service charges and ground rent. The management company will arrange for works to be carried out as and when required but their administration costs can be high and this is often another contentious point for leaseholders.

There may be covenants in the lease whereby you may need the Landlords consent to have a pet, rent out the property or carry out internal alterations and consent may not always be given thereby restricting your enjoyment of the property. Both freehold and leasehold property have their positives and negatives. A freehold property has fewer restrictions and allows more freedom. A leasehold property has more restrictions, however, you will not be responsible for the maintenance of the structure of the building or the building’s insurance.

Leasehold flats also tend to be cheaper to purchase than a freehold house which means that they are more appealing to first-time buyers trying to get on the property ladder.

If you require more advice on the best option for you and whether to choose a freehold or leasehold …Talk to Tollers conveyancing team on 01602 258558 and they will be happy to guide you through.

 

 

Losing a loved one is something that we will all experience at some time during our life and, at what is an emotional time, it can be very difficult to consider what needs to be done in order to deal with the deceased’s estate. This article will advise you of the practical actions that need to be taken.

Unfortunately, until the death has been registered there is nothing that you can formerly do in respect of the deceased’s estate. This is because all organisations will require a copy of the death certificate to confirm the death.

Did the deceased leave a Will?

If the deceased left a Will then this will appoint Executors who have the authority to deal with the estate administration.

If the deceased died Intestate (without having left a valid Will) then the Intestacy rules determine who has the authority to deal with the administration. A member of the Tollers Trusts and Estates team will be able to assist with confirming who can deal with the estate depending on the deceased’s family situation.

Register the Death

Following someone’s death you will need to arrange for the death to be registered with the local Registrar. The GP who confirms the death will need to provide the Registrar with the cause of death information and once this is received an appointment can be made by you to register the death. This can be arranged online or by phoning the office locally to where the death occurred. You will need to provide the registrar with the full name of the deceased, date of birth, date of death, full address, occupation, marital status and the full name of any spouse or civil partner (deceased or surviving).

The number of death certificates required will depend on the number of deceased’s assets but each organisation will return the original to you so there is no need to buy an excessive amount. Please also bear in mind that if you instruct a solicitor to deal with the estate administration then they will be able to provide Death Verification forms of the original death certificate instead (if required).

Deceased’s property

The most important action in respect of the deceased’s property is to ensure that the property insurance company is advised of the death and that confirmation is provided as to whether the property is no longer occupied. Most insurance companies will carry on insuring the property but this may be for a limited time or limited risks or they will increase the premium to cover the additional risk if the property is empty.

It is advisable to remove any items of value as soon as possible after the death i.e; jewellery, cash, valuable artwork, antiques etc.

If the new owner remains living in the property then it would be advisable to either transfer the policy to them or make arrangements for a new policy to be entered into in their name.

Arrange the Funeral

You will need to instruct a Funeral Director to deal with the funeral arrangements, in the event that a pre-paid arrangement is not in place. If the deceased had a pre-paid funeral plan then this may refer to a specific funeral director who should be contacted.

If the deceased has made a Will then they may have included wishes in respect of their funeral and so this will need to be taken into consideration when arranging the funeral.

The funeral director will require a ‘green form’ from the registrars before they take any action as this is the authority for them to act. You will, however, be able to make an appointment to meet with the funeral director in order to discuss the arrangements. Consider clothing, venue, flowers and reception.

Tollers Trusts and Estates Team

Our friendly and approachable team will be happy to help with any questions that you may have regarding the process of dealing with an administration of an estate after losing a loved one. We will be able to support you, provide advice and assist you with the administration process from ascertaining the date of death value of the estate, making an application for the Grant of Probate, cashing in the assets and making the final distribution to the legal beneficiaries.

If you have a question…Talk to Tollers on 01604 258558 our experienced and empathetic Trusts and Estates team is here to provide you with the best information to help you make the decsions that are required.

More information can be found here.

We are often asked what Family Investment Companies (FICs) are and what benefits they bring.

What is a Family Investment Company (FIC)?

A Family Investment Company (FIC) is often used by one generation that wishes to retain control of family assets, whilst providing for future generations to benefit from that wealth.  A ‘FIC’ is a company that can either be a limited or an unlimited company used for estate planning and wealth management.  A bespoke set of articles of association and/or a Shareholders Agreement, together with a tailored share structure, make the company, whether limited or unlimited, suitable to operate as an estate and wealth planning vehicle.

Unlimited or Limited Company?

There are pros and cons for each when choosing to set up a limited or unlimited company.  An unlimited company does not provide the limited liability that many owners seek, however, its main advantage is that it can keep its financial affairs private. A limited company benefits from limiting the personal liability of shareholders, nevertheless, the accounts of a limited company are a public document and will need to be filed at Companies House, which is easily accessible and downloadable by the public. It is important to note that small companies may be eligible for audit exemption if they meet the criteria governed by the Companies Act 2006.

The structure of Family Investment Companies (FICs).

Family Investment Companies offer a different structure in which families can pass wealth on to future generations whilst retaining control over the investments and assets.

Typically, Family Investment Companies will have a mixture of voting shares and non-voting shares, as well as different classes of shares (which allow for different dividends to be distributed to different shareholders). It is important to note that just giving a share a different name is not sufficient to create a different class; the shares must have different entitlements as well. Preference shares and redeemable preference shares are often seen in a Family Investment Company as they provide their holders with a preferential right to income ahead of ordinary shares.  The shares will normally only be owned by family members and family trusts.  The articles of association and/or a Shareholders Agreement can be tailored to the family’s needs.  Articles are publicly available documents held by Companies House, whereas a Shareholders Agreement is a private agreement between the shareholders (and the company).  These will contain provisions regulating the relationship between the shareholders and safeguarding the control of the company and the assets.  Some other provisions may include; appointment and removal of directors, share rights, transfer of shares, dividend policy, valuation of shares, dispute resolution, and compulsory transfer of shares in certain situations.

This structure allows certain family members to maintain control over the assets, while the FIC is growing wealth, in a tax-efficient manner.

Reasons why you may find a Family Investment Company (FIC) useful.

Family Investment Companies can be used instead of, or in addition to, typical estate planning vehicles. When deciding if a Family Investment Company is the right option for your family, it is imperative to obtain clear professional guidance and advice as each family is different with its own specific needs, dynamics, and objectives. Professional tax advice is recommended when considering any form of estate planning

Estate planning is forever evolving and developing. Great care should be taken to ensure the success and future-proofing of your family wealth.

Tollers have significant experience working with independent financial advisors, tax specialists and accountants in the creation and implementation of Family Investment Companies (FICs).

If you would like to discuss Family Investment Companies further… Talk to Tollers on 01604 258858 and our knowledgeable and experienced team will guide you through the process in order that you can choose the right vehicle for your needs.

 

Lack of testamentary capacity is one of the grounds upon which a disappointed beneficiary may seek to challenge a deceased’s Will. The recent case of Hughes v Pritchard 2022 EWCA Civ 386 highlighted a number of important issues concerning the level of recall required by a testator in respect of their movement away from the terms of an earlier Will, together with the weight attributed to the evidence of an experienced practitioner and medical expert, when it came to assessing the testator’ testamentary capacity to amend his Will.

The case surrounded the estate of Mr. Evan Hughes (“the Deceased”) who died in March 2017. He had three children, namely Gareth, Carys and Elfred. At the time of his death, Mr. Hughes owned a farming business, together with a substantial amount of land. Mr. Hughes’ last Will was made in July 2016 (“the 2016 Will”). At the time of making this Will, Mr. Hughes had dementia and was also grieving for his son Elfred, who had taken his own life a few months earlier.

Under the 2016 Will, Mr. Hughes’ farmland was divided equally between Gareth and the beneficiaries of Elfred’s estate. Under an earlier Will made by Mr. Hughes in 2005 (“the 2005 Will”), he left all of his farmland to Elfred.

Elfred’s widow and sons brought a claim that the 2016 Will was invalid for lack of testamentary capacity, relying upon the earlier 2005 Will.

At first instance, the trial judge found that the Deceased did not have testamentary capacity to execute a valid Will in 2016. This was despite a positive capacity assessment being undertaken by the Deceased’s GP at the time of the Will instructions, together with detailed attendance note records kept by the instructing solicitor. The trial judge at first instance, instead preferred evidence that the Deceased’s’ memory had been deteriorating over time and that he believed he was only making simple changes to his 2016 Will.

The Court of Appeal overturned the first instance decision, finding that ‘testamentary capacity does not require a testator to recall the terms of a past will they have made, or the reasons why it provided as it did, as long as they are capable of accessing the information if needed, and of understanding it once reminded of it’. The court confirmed that testamentary capacity has to be considered in relation to the complexity of the dispositions proposed and the potential to understand. The terms of the 2016 Will were discussed between the Deceased and his solicitor. The Deceased was able to recite those terms to the GP assessing capacity and the Deceased approved the terms. The 2016 Will, therefore, appeared rational on its face and there was no evidence to suggest that the Deceased had forgotten about the more favourable terms to Elfred under the 2005 Will, therefore the 2016 Will was held valid.

This case highlights the importance of practitioners following ‘The Golden Rule’ in respect of the elderly and infirm, where testamentary capacity may be called into question. The solicitor who took Mr. Hughes’ 2016 Will instructions, had completed detailed attendance note records, confirming Mr. Hughes’ instructions and acknowledging that he wanted to change his 2005 Will. In view of the concerns over Mr. Hughes’ capacity, she sensibly sought a testamentary capacity assessment from Mr. Hughes’ GP, before the Deceased executed the same.

Whilst the court confirmed that positive evidence of a contemporaneous testamentary capacity assessment is not definitive evidence of a finding that the testator’s Will is valid, such evidence should be given considerable weight when assessing whether the testator had testamentary capacity to execute a valid Will.

If you believe that there may be a valid reason to contest a Will…Talk to Tollers on 01604 258558. Our experienced contentious probate solicitors will be happy to discuss things further.

Writing your Will and lifetime planning is an important part of preparing for the future.

Inheritance tax may be payable on your death depending upon the value of your estate when you die.  There is an allowance for each person’s estate before inheritance tax is payable which, on current figures, is £325,000, known as “the Nil-Rate Band”.  Subject to certain conditions, where you own your own house and leave it to your children, your estate can also qualify for an additional allowance of up to £175,000 known as “the Residence Nil-Rate Band”.

These allowances are transferable between spouses or civil partners.  For example, if the first to die leaves everything to the survivor of them, then their entire estate is exempt from inheritance tax.  In this case, on the subsequent death of the second of them, their estate would benefit from a doubling of the nil-rate band ie their estate would need to exceed £650,000 before any inheritance tax was payable.  If they are also eligible for the Residence Nil-Rate Band then their estate will need to exceed £1m before any inheritance tax is payable.  Any sum over and above any Nil-Rate Band allowance is taxable at 40%.

It is therefore important that you look at estate planning to consider mitigating any inheritance tax payable on your death.  This can be done in a number of ways including writing a tax-efficient Will, lifetime giving, considering charities and/or managing your inheritance tax liability by making use of all available exemptions and reliefs.

It is also worth bearing in mind that if you are a beneficiary of someone’s estate and you do not “need” these funds, it may be possible to re-write the person’s Will after their death.  Most people do this to pass the inheritance onto their own children by what is known as a Deed of Variation.  Providing this is done within two years of the death and the appropriate elections are made in the Deed the gift will be treated as having been made by the Deceased rather than you for inheritance tax purposes.

If you are planning to write or update a Will or require assistance with lifetime planning in regard to your estate…Talk to Tollers on 01604 258558, our experienced Trusts and Estates team is on hand to guide you through the process.

More information regarding Inheritance tax…

At Tollers we are often asked to design share structures for new shareholders coming into an established business when the new shareholder is not paying for the shares. The existing shareholders do not want to give up the value they have created in the company but would like the new shareholder to benefit from future growth.

Growth shares:

The term “growth shares” is a loose label to describe the structuring of shares to allow a shareholder to benefit only from growth in the value of the company from the time the shares are issued. For example, if the company is currently valued at £1 million, the growth shares would participate in growth above £1 million.

Hurdle shares:

The term “hurdle shares” is used for a share structure where the shareholder benefits from growth in the value of the company above a hurdle which exceeds the current value of the company. For example, if the company is valued at £1m, then the new shareholder would only get the benefit if the valuation was above, say, £2m.

Flowering shares:

The term “flowering shares” is used to describe shares that allow shareholders to participate in the value of the company, if and when a specific condition is met. For example, exceeding a profit target or a sale price on the disposal of the company.

There are three main commercial rights that we normally look at when structuring growth shares: (1) dividends (2) voting (3) rights to the proceeds of sale of the share.

Dividends and voting:

Our team would normally suggest that a new class of shares is created for the company, and these shares are the growth shares such that the original shareholders will hold ordinary shares and the new shareholder will hold ‘A’ shares with different rights attached. One of the main reasons for this is to allow the directors to distribute a different dividend to each class of shares. A separate dividends policy in the Shareholders Agreement will specify the amounts.

Rights on sale of the company:

We normally recommend that the growth shares are entitled to a share of the purchase price once the Ordinary shareholders have received a defined amount (usually the valuate of the company at the point the A shares are issued).

If you need advice or guidance on the best share structure for potential new shareholders…Talk to Tollers on 01604 258558, our Commercial Law team is on hand to assist and guide you through the process of identifying the best share structure for your business.

Shareholder agreements and how we can help.

Post covid many employers are asking where they stand in the wake Of the self-isolation period ending and how this affects their current contracts and policies.

On 24th February 2022 England started “living with and managing” the risk of Covid-19, following the Government’s announcement in February.  One of the biggest changes was that the period of self-isolation that was previously required was removed.

This was not the only change. On 1st April 2022 free Covid-19 testing, such as PCR and Lateral Flow tests, stopped being offered by the Government, apart from to people in an at-risk group. The Government also stopped refunding statutory sick pay (SSP) for Covid-19 related absences, as well as ending “day 1” SSP on 24th March 2022.

What does this mean to you?

Whilst England has removed its measures, you still have a duty of care to your staff as an employer post covid. This applies throughout the UK. As such you do need to take steps to reasonably manage the risk of Covid-19 to your staff and have particular care for any vulnerable staff you have. We would therefore recommend carrying out an up-to-date risk assessment and reviewing your policies and procedures. As a business, you may:

As Boris Johnson said, individuals will need to take “personal responsibility.” Managing absence will continue under your existing absence management policy, but the important thing is that you assess the risk to your own staff, clients and businesses and set this out clearly in your policies. Taking legal advice on those policies and procedures to ensure compliance with employment law, particularly in relation to discrimination and health and safety issues, is strongly advised.

Updating Staff Contracts and Polices

Given the evolution of how the workplace operates in the wake of Covid-19, it is important to make sure that all contracts and policies are up-to-date.

What does this mean to you?

Contracts are the tool employers use and rely on to set out how the employment relationship will work. For example. they set out working times and places of work, which may be something that has changed since pre-pandemic times. You may also offer different benefits or staff incentives. Furthermore, s. 1 Employment Rights Act 1996 changed the minimum requirement for a contract of employment on 6th April 2020 and contracts for new starters should comply with this. As such, now is a good time to review your contracts.

As outlined in “managing sickness above”, new policies may need to be implemented, or existing policies may need to be reviewed. It is good practice to review your polices on an annual basis. Policies, assuming they’re not contractual, do not require employee approval and should therefore be easy to update.

If you would like advice or guidance post covid in regard to your company’s policies and procedures…Talk to Tollers on 01604 258558. Our experience Employment and HR law team is on hand to assist you with all you need to know. We’re here for you.

At Tollers we are passionate about supporting the local communities we serve and are always keen to get involved with as many good causes as we can. With Easter upon us, the firm’s Corporate Social Responsibility (CSR) Group enlisted the help and generosity of the Tollers teams, by asking those who were able, to donate an Easter Egg in order that they could be given to a local charity or cause.

The three main Tollers offices then selected three worthy causes to donate the eggs too.

Tollers Corby office decided to support Kettering General Hospital – which since the start of the pandemic has been hard hit with COVID patients.

On Tuesday, Tollers trainee Lauren Hamper met with Lorraine Devereux, a Community Fundraiser, at Kettering General Hospital. Lauren delivered a box full of Easter Eggs (pictured below) to Lorraine, who then pass the eggs on to the Harrowden C ward.

delivering Easter Eggs to Kettering General

The Harrowden C ward at Kettering General is one of the main COVID wards within the hospital. Since the start of the pandemic, the ward has been at full capacity with COVID-positive patients. The CSR group thought that the staff on this ward in particular needed a little something to help them smile and thank them for all of their hard work.  Shaun Mullen, the ward manager of Harrowden C, passed on his thanks and said “I really want to express my gratitude to the staff at Tollers, for thinking of us all”.

The Tollers Northampton office decided to support another local cause – The Cynthia Spencer Hospice in Northampton. Cynthia Spencer specialises in caring for people that require palliative care across Northamptonshire. The hospice provides inpatient care, outpatient services and even wellbeing groups in the North of the county. Tollers wanted to give the staff a small gift to show their appreciation for all of their hard work, as well as hopefully bring a smile to some of the hospices patients. On Wednesday, Rebekah Clarke for Tollers Trusts and Estates team in Northampton met with Colin, one of the volunteers at Cynthia Spencer and delivered a bumper basket full of chocolate goodies.

Northampton Easter Eggs

Tollers Stevenage office participated in Mather Marshall’s Easter Egg appeal.  Mather Marshall, a local Stevenage estate agent, asked locally based businesses across Stevenage and Hertfordshire to get involved and donate as many Easter eggs as they could. Tollers solicitor, Shane Taylor, played the Easter bunny and delivered 43 Easter Eggs to the Mather Marshall office. The Easter Eggs collected between all of the businesses in Stevenage are being distributed between the Lister Hospital and Watford General Hospital and will be delivered to children who are unfortunately spending Easter in hospital.

Stevenage eggs

As a firm, we are thrilled to have supported our local communities and hopefully raise a few chocolatey smiles!!

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