PRIVATE CLIENT MATTERS
TIME IS OF THE ESSENCE
In February 2015, Jeremy Hunt said Britain will become “the best country in the world to grow old in” announcing plans to commit more money for dementia research and ensure a diagnosis within six weeks. In a recent interview with the Telegraph, the Health Secretary said that the fight against dementia is a “litmus test” of how the Government is responding to Britain’s ageing population. There are approximately 850,000 people living with dementia in the UK with the number expected to hit a million within the next 10 years. The Government has since announced its plans to invest over £300 million into UK research into the disease in an attempt to find a cure for dementia by 2025. They also stated their ambition that people exhibiting signs of dementia should be seen by a medical expert within six weeks. Rachel Alexander, Senior Solicitor in our Dundee office commented: “With 42% of the UK population having a close friend or family member with dementia, a cure can’t come soon enough. We are seeing this statistic demonstrated on a weekly basis through our clients. But until a cure is found, people can alleviate the potential burden on their loved ones by putting a Power of Attorney in place before dementia affects them.”
A Power of Attorney is a formal document authorising someone you trust to act on your behalf. It can only be granted when you have full mental capacity therefore it is crucial that the document be prepared as early as possible. Many people believe that Powers of Attorney are only required for the elderly. While the urgency to grant a Power of Attorney may be due to the onset of any degenerative illnesses such as dementia, they are also extremely important where an individual becomes mentally incapable due to an accident or illness. In Scots law there are two types of Powers of Attorney: Continuing – This covers financial and business affairs and can be brought into operation at any time, i.e. before you lose capacity with your consent; Welfare – This covers personal affairs and can only be brought into operation once capacity is lost. If you don’t have a Power of Attorney in place and you lose capacity, it may be necessary for your family to go to Court to have a guardian appointed to manage your affairs. This can be a lengthy, expensive and stressful process. Whether a cure for dementia is within our grasp remains to be seen. Until then, individuals have control to decide who they would wish to manage their finances and personal issues in the event that capacity is lost, but time is of the essence.
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CARE COSTS: PEACE OF MIND?
The contentious subject of care costs has been in the headlines again as the Care Act 2014 came into force on 1st April 2015 in England. This Act does not affect Scotland and at present there are no similar proposals being brought forward by the Scottish Government but it is interesting to note these ongoing developments in England. With growing numbers of the population living longer, it is predicted that the average cost of long term care for the elderly will rise significantly in the coming years. The Care Act is the biggest change in social care in England in more than 60 years and is being introduced in two parts in April 2015 and April 2016. The UK government has said that there will be a care cap from April 2016 which will mean that no-one will spend more than £72,000 on their care needs. They have said that this cap on care costs will give certainty to families but it is not all that it seems. It is estimated that only a fifth of people face costs in excess of £72,000 meaning that a majority of people will still have to pay all of the bill. If the local authority is involved in arranging a individual’s placement, the amount they will have to pay will be based on nationally set means-testing guidelines. Currently in Scotland, if an individual has assets of more than £26,250, they will need to pay the full cost of their care. However, their home won’t be included in this if a partner or close relative still lives there. Donnie Macleod, Associate Solicitor, in our Perth office commented: “Whilst these measures only apply in England, there is still no cap on care costs in Scotland and so we recommend that clients plan for their future care needs. Anyone with assets over £26,250 will have to pay for their own costs and therefore it is important to consider how long term care will be funded. There are a number of options that clients can consider and we are finding that an increasing number of clients are seeking our advice on this issue.”
DID YOU KNOW…. Miller Hendry raised more than £500 for charity by swapping Christmas cards for donations to charity in memory of Eileen Matthew, a partner in the firm who sadly passed away unexpectedly last year. The money raised has been donated to the Scottish Catholic International Aid Fund, an international development charity that was close to Eileen’s heart. 2
IT’S A SMALL WORLD Do I need more than one will? The world is a much smaller place nowadays and it is becoming more and more common for people to own assets abroad as well as at home. Your Will may be fully compliant with Scottish law in both its words, format and execution but it may fail, in whole or in part, because it conflicts with the laws of another country where you have other assets. Whether you own an apartment in Spain or have a bank account in France, you should take the time to think about what will happen to these assets when you pass away. The most common issue if you hold assets outside Scotland and the UK is likely to be forced heirship laws specifying that certain relatives must inherit. The majority of European countries, and many others elsewhere, have some sort of forced heirship laws requiring a person to pass a fixed proportion (typically between one-third and one-half) of their estate to near relatives, usually their children or spouse. France, for example, requires that certain percentages be passed to the children of the deceased as well as to a surviving spouse. Your moveable estate, cash, bank accounts, or investments in France will pass to your spouse entirely but land and buildings held in France may not. If you do not leave a Scottish Will, or a Will in the country your foreign assets are held, and you were last deemed to be domiciled in Scotland, the Scots law of intestate succession will govern who inherits your moveable estate, irrespective of where your moveable assets are situated (subject to a different view being taken by the legal system having control over the assets). Land and buildings are generally governed by the law of the country in which the property is situated. Even if you leave a Scottish Will, and there is a foreign element to your estate then problems may arise when trying to sell or transfer the property. The right of the executor to administer your estate under Scottish law may conflict with the foreign legal system. For example, German succession laws do not provide for the appointment of executors and the deceased’s property vests directly in the person who is inheriting it. Aileen Scott, a Senior Solicitor with Miller Hendy, comments: “We live in international times and therefore making a Will in Scotland and making an additional Will abroad which covers foreign assets will usually make it cheaper and quicker to deal with the administration of your worldwide estate. Making a foreign Will should also eliminate language ambiguities. However, care should be taken that any foreign Will does not conflict with, or revoke, your Scottish Will.”
Tax Summary for 2015/2016 The Higher Rate Threshold is decreased from £31,865 to £31,785.
From 2015/16 an individual’s personal allowance depends on their date of birth and their income in the tax year.
For those born after 5th April 1948, the Personal Allowance is increased from £10,000 to £10,600.
Tax will be charged on earned income:
Tax payable on Capital Gains over the Annual Exemption of £11,100:
Inheritance Tax:
Basic Rate - 20% on taxable income up to £31,785 Higher Rate - 40% on taxable income in excess of £31,786 Additional Rate - 45% on taxable income in excess of £150,000
18% for Basic Rate tax payers 28% for Higher and Additional Rate tax payers
Nil Rate Band—£325,000 (frozen until 2017/18) Anything above the threshold taxed at 40% (36% for those who leave 10% or more of their net estates to charity)
Miller Hendry offer tax advice and assistance in relation to Personal3 Tax advice, Capital Gains Tax planning, Inheritance Tax planning and taxation during the administration of Estates and Trusts, Please contact our tax specialist, Lesley Rance 01738 637311.
First and Foremost Your Interests
GENEROUS
Miller Hendry is a long established legal and estate agency practice which has served individuals and businesses in the Tayside and Strathearn area for generations. The firm has grown to be one of the largest legal practices in the area. Our staff include highly professional solicitors and legal staff, trust and tax specialists, property valuation managers and sales negotiators who are all equipped to provide a complementary blend of specialist and more general expertise in various fields.
TO A FAULT Elderly parents wanting to make generous gifts to their children or friends before they die need to consider the consequences and be clear and open about their intentions, if they wish their family to avoid fights and court battles following their death. A recent English case highlighting this problem revolved around the will made by Richard Frost in September 2007, where he set out that he wished to leave a third of his estate to each of his daughters, Linda and Susan, and a third to his son and his grandchildren. Shortly after preparing his will he moved in with his daughter Susan and sold his house for £350,000. Knowing that he was dying of bowel cancer, he gifted £100,000 to each of his two daughters out of the proceeds of the house sale. He died a few months later in March 2008 and, as a result of the gifts made to each of his daughters, his estate was valued at only £135,000. The executor of his will did not know whether Mr Frost intended the gifts to his daughters to be treated as advances against his estate so he asked the Courts to decide the matter.
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The judge was persuaded that Mr Frost made the gifts to his daughters to show his gratitude to them for looking after him, and to compensate them for the expense incurred in doing so. She ordered that the estate should be distributed, as set out in the will, and that the £200,000 of gifts made during Mr Frost’s lifetime were not to be included as part of his estate. One of Miller Hendry’s wills and trusts solicitors, Caroline Fraser commented: “No one will ever know for certain what Mr Frost intended. He may have assumed that it was obvious that the gifts to his daughters should be brought into account in distributing his estate equally, but it is just as likely that that he never gave the issue a moment’s thought. “What is certain is that he left a legacy of ill will and division amongst his family by not clearly stating what his intentions were with regards to his generous gifts. If he had taken legal advice, his son and grandchildren might have found it easier to accept the outcome.”
This leaflet is a general discussion document and is for guidance only. It is not a substitute for legal or financial advice. Each situation must be looked at it its own right. You cannot rely upon points raised and should always seek advice specific to your own circumstances.
Key Contacts
Ernest Boath: ernestboath@millerhendry.co.uk
John Thom: johnthom@millerhendry.co.uk
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Susan Green: susangreen@millerhendry.co.uk