Life Focus June 2015
Published byIan Macdonald
- Contact the Team
- Leaving your bank details after death
- Deeds of Variation- is this the end?
- Dealing with Domicile
- Brain Gain; Wallet Drain
- A Power of what?
Welcome to our Summer 2015 edition of Life Focus.
Although your mind might be turning to enjoying the longer evenings, holidays and family barbecues don't forget to make sure that your personal business is kept up to date. It's all too easy to put important matters to the back of your mind but we've looked at a few things for you to think about so that you can sit back and relax, knowing that they are taken care of.
As ever, if you have any questions or points for discussion, please get in touch.
Contact the Team
If you have a savings, tax, pension or investment issue you'd like to chat about, please contact the team on 0141 248 3434 or by e-mail:
Ian Macdonald: im@wjm.co.uk
Grant Johnston: wgj@wjm.co.uk
Susan Hoyle: sjh@wjm.co.uk
Sign up for Life Focus
If you’ve found this issue of Life Focus interesting, why not sign up to have future copies delivered straight to your in-box?
Sign up by sending your email address, along with your name to marketing@wjm.co.uk with ‘Life Focus’ in the subject line.
WJM is authorised under the FCA. Financial circumstances will vary from one person to another and detailed advice should be taken before any decision is made on any of the content of this publication.
Leaving your bank details after death
Is it a good idea to leave your bank account details and password for online banking somewhere to allow access to your bank accounts after death?
This seems like a practical approach, and certainly would seem to make things easier. However, most banks will have made you sign Terms and Conditions stating that you would not give your password to anyone else, and will almost certainly have an issue with someone accessing your bank account after you have died without the proper channels being followed. More seriously, using a deceased’s bank details to access their bank account after death, even with the deceased’s instruction, may well constitute theft and fraud against the estate of the deceased.
The easiest way to ensure that your wishes are carried out after your death is to have an up-to-date Will in place. Your appointed executor will then be able to follow your instructions and distribute your estate. Any instructions which you leave before death regarding the distribution of your property which are not included in a Will are not legally binding on your executor after you die. One of the easiest ways to ensure that your property is correctly identified and therefore distributed exactly as you wish is to keep a note of your assets and ensure this will be available for your executor after you die.
Having a Will in place will give you peace of mind. A Will is a very personal legal document and the team at WJM will be happy to assist with any queries you have.
Deeds of Variation- is this the end?
In the pre-election Budget, the Chancellor warned that there would be a review of Deeds of Variation. This is not the first time Deeds of Variation have been in the spotlight. Years ago there was a consultation on whether they should be abolished. They survived that round but what if they don’t survive this time? While it would signify the loss of a useful tax planning tool, we suggest that not all is lost.
Deeds of Variation allow the deceased’s beneficiaries to ‘vary’ within two years of death either 1) the terms of the deceased’s Will after death or 2) the Scottish succession rules which apply when someone dies without a Will. Take, for example, a father whose Will leaves everything to his wealthy adult child. In order to avoid increasing his own inheritance tax problem, the adult child can enter into a Deed of Variation which effectively changes his father’s Will and allows the inheritance to be redirected to his own children. By skipping a generation, it reduces the chances of inheritance tax being paid twice on the same assets.
More often than not, Deeds of Variation are used where the Will doesn’t fit with the aims of the family or when there is no Will at all. While they can be useful, in the majority of cases they are not essential as the deceased could have arranged his affairs in advance to achieve the same outcome. Ultimately, the Chancellor’s announcement should serve as a reminder that you should be engaging in effective estate planning before your death. Have open discussions with your family, ensure you have a Will in place which is a true reflection of your wishes and best caters for your and your family’s needs and remember to update your Will when circumstances change.
Dealing with Domicile
Domicile is the permanent home of a person and is defined by the country to which that person has the most substantial connection.
Where a person is domiciled is becoming an increasingly relevant subject in today’s modern world.
It is becoming more common for people to live in multiple countries throughout their lives; settle down with people from different countries; and to own property in multiple countries. As such, domicile is an important factor to consider when it comes to tax and succession planning.
Your place of domicile is not necessarily the country where you live or where you were born and it is not defined by your nationality. Instead, it is determined by looking at your individual circumstances as a whole to determine the country with which you have the most substantial connection.
A person with a UK domicile will be subject to UK tax law, meaning all their worldwide assets will be liable for Inheritance Tax at 40% of the value of that property. If you do not have a UK domicile, only the assets within the UK will be subject to this tax.
However, the importance of domicile is not limited just to Inheritance Tax. A person’s domicile determines the law which applies to a person’s will. Additionally, where a person has a spouse or civil partner of a different domicile, there can be implications on the tax benefits they can receive in life and on death when assets are transferred between spouses or civil partners. It can also affect the rights of cohabitating couples.
If you have lived in multiple countries or are married, in a civil partnership or cohabitating with someone from a different country and would like to speak to a member of our Private Client team regarding domicile when carrying out tax and succession planning, please contact us.
Brain Gain; Wallet Drain
A look at university costs and saving for your children’s further education.
It’s exam season and that means tears, jubilation and perhaps university. Just when you thought having children couldn’t be any more expensive, they pass their exams with flying colours and head out of the door for university. However, while their mind is being filled with new ideas, your wallet might be emptying.
What are the costs?
- Tuition Fees
- Cost of Living
In Scotland, tuition fees are £1,820 pa. In England, tuition fees can be up to £9,000 pa. If you are Scottish, the Student Awards Agency for Scotland will cover the fees but what about the cost of living? Edinburgh University estimate that a student’s weekly living costs will be at least £600. With 31 term weeks that’s £18,600 per year. A Student Loan will cover some of the cost and becomes payable once the student earns at least £17,335pa but most students will rely on bursaries, grants or the Bank of Mum & Dad to get them through university.
What can I do?
The time to start planning for university costs is when your child is young. This is a long term investment so the key is to protect the value of capital against inflation, which is not usually possible with cash deposits. Tax efficiency would be sensible, perhaps using a Junior ISA. Regular investment contributions could benefit from pound cost averaging (when prices are high, a monthly contribution may buy fewer shares, but when prices are low the monthly contribution buys more shares).
As an example, investing £162 each month over 18 years could generate an investment pot of £56,265* – enough to fund Edinburgh University’s estimated current cost of living over a 3 year university course.
Are you considering how to provide for your child’s further education? Do you think that long term investment, rather than cash savings, is the route for you? Are you unsure if you want to retain full control over the money or have it pass to your child at age 18? If so, give us a call to discuss.
* Investment values can fall and you may get back less than you invested. All information provided is for illustrative purposes only and is not intended as investment advice. Investment pot quoted assumes growth rate of 5%pa.
A Power of what?
Until they have had first-hand experience of acting under a power of attorney for a family relative, most people are not aware of how invaluable having an attorney in place can be for their loved ones.
We all hope to live to a ripe old age, but with that can come unforeseen health issues. Losing capacity is one we all hope not to experience but sadly, many people can find it creeping up on them or their parents or friends.
Once someone is no longer able to make their own decisions, life can become very difficult for those who are trying to make decisions on their behalf. Without a power of attorney in place, this can become almost impossible: banks will not accept instructions, property cannot be sold, medical decisions cannot be made.
We can advise you on what putting a power of attorney in place will mean for you and guide you as to who your attorneys should be. Your power of attorney can be changed at any time and we encourage clients to put them in place as early as possible and review them to ensure that they reflect their current personal situation, for example you may wish to appoint your children who are now adults as substitute attorneys.
If you would like to speak to a member of our Private Client team about putting in place a power of attorney or about reviewing your existing power of attorney, we would be happy to meet with you.
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at June 2015. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 319 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.
