Posted on 1st January 2008

New Year Resolutions for Tax Planning

Darlington law firm Latimer Hinks has launched its very own list of New Years Resolutions to help keep tax and financial affairs up to date. Many people will be making, and breaking, New Year resolutions to lose weight or exercise more, but making some legal resolutions could have a more long-lasting effect, according to Claire Reeves, partner in the firms private client department.

  • Make a will - if you do not make plans while you are still alive you can leave a whole host of problems behind for your grieving family to sort out.
  • If you have made a will review it on a regular basis. There are particular reasons why you should consider making a will (or revising it) when going through separation or divorce. For instance, if you died while separated (but not divorced) from your spouse and there is no will, your estate would be subject to the laws of intestacy. In practice, this would mean that your (estranged) spouse may inadvertently be the main beneficiary of your estate. If you made a will prior to your decree absolute, and your former spouse is a beneficiary in your will, this gift would fail because under the law your spouse would be deemed 'to have died for these purposes' on Decree Absolute - even if you still intended him or her to be a beneficiary.
  • Review your will on remarriage. Perhaps not what you want to think about at this time, but don't forget if you are getting married again you will need to change your will to reflect the new situation, otherwise the right things might not happen in the event of your death.
  • Same sex couples If you are partners, but have chosen not to register as Civil Partners, and you do not make a will, your partner has no rights to your estate on your death. If you have registered a Civil partnership, but dont have a will, the intestacy law dictates that your partner can receive up to 200,000 of the estate with the balance being divided between parents, siblings and partner.
  • Co-habiting couples - If one partner dies without leaving a will, the surviving partner will not automatically inherit anything unless the couple owned property jointly. As an unmarried couple, you need to make wills if you wish to make sure that the other partner inherits.
  • The era of the Lasting Power of Attorney (LPA). The new LPA regime involves two new separate types of Power of Attorney - the personal welfare and the property and financial. You will be able to choose to delegate decisions affecting personal welfare (including health care and medical treatment) to one (or more) attorney(s) and decision making for property and financial affairs to the same or different attorney(s). The new forms are inevitably lengthier and more complex! Seek professional advice.
  • Annual revenues from IHT have risen from 1.7billion in 1997 to 3.3billion last year. Plan ahead and take professional advice on the best ways of minimising liability.
  • Consider the use of trusts to protect assets for future generations.
  • Ensure that you take advantage of the Nil Rate Band. The law allows you to leave an estate worth up to 300,000 (2007/2008) without having to pay any Inheritance Tax upon it. This 300,000 is called the 'Nil Rate Band'. After the first 300,000, or the Nil Rate Band, the remainder of your estate will be charged 40% Inheritance Tax. From 9 October 2007, spouses and civil partners can transfer their Nil Rate Band allowances so that any part of the Nil Rate Band that was not used when the first spouse or civil partner died is transferred to the individual's surviving spouse or civil partner for use on their death.
Claire Reeves said: Planning for your death is not a particularly festive subject but at the time of year when we are all making resolutions it is a good idea to sit down and ensure that your wishes will be carried out and that the taxman is not the person to benefit.