Month: January 2020

Do you know where your will is? Even more importantly, do the people who will act as your executors, in the event of your death, know where your will is stored?  

The recent discovery at Lloyds Banking Group that 9,000 wills had been left in storage and not passed on to customers serves as a stark, cautionary tale. The bank is now desperately trying to match envelopes with the relevant families.  

The wills were kept in the bank’s ‘Safe Custody’ service – an ironic name given that the custody actually proved too safe, with no one knowing about the wills’ existence. The service closed to new customers in 2011.

The error means that some executors may have administered a deceased’s estate using what turned out to be the wrong will, unaware that the right one was stored at Lloyds. As a result, some families are having to re-examine old bequests years after they were thought to have been settled.     

Not only will this have caused great inconvenience, it will also have been incredibly distressing for those involved. 

Michael Culver, chairman of Solicitors for the Elderly, commented that the processing failure could lead to estates being wrongly distributed, contentious probate claims, negligence claims against executors and administrators, issues with tax payments and, ultimately, the last wishes of the deceased not being honoured.     

The bank, however, has said that it was only in a small percentage of cases that they did not trace the will when a customer died. According to their spokesperson, 90 per cent of the newly discovered wills had already been superseded by a later will or there were copies available elsewhere. In some cases, the estates were declared intestate but had been distributed in line with the deceased’s wishes anyway.         

What action can be taken? Families affected should make a complaint to the Financial Ombudsman and a counter claim against Lloyds directly. Compensation will be offered, including legal costs, and LLoyds have promised that it won’t claw back assets given to the wrong people. 

As for the future, what lessons can be learnt? It is recommended to always register a will. This case illustrates that it is often better to use a solicitor, who will be specialised in making and storing wills, rather than a high street bank. You can also register a will with the Probate Service for a one-off fee of £20. 

The Society of Trust and Estate Practitioners (STEP) advises against safety deposit boxes for wills as it means the executor cannot get access until they get probate and this cannot be granted without a will, so it becomes a bit of a Catch 22 situation.  

If you do have a will stored in a safety deposit box, consider moving it elsewhere to ensure it is accessible. Make sure its whereabouts is known to your executors. It may not be something you or your family want to think about right now but it could save a lot of stress and worry at a difficult time later.

The tax year will be coming to an end on 5th April. With that deadline in mind, we wanted to remind our clients of all the allowances available to you during the tax year. It’s important to make sure you’re maximising your allowance in all areas so that you mitigate the impact of tax. Listed below are a few allowances you should be considering: 

ISA Allowance

With a cash ISA or a stocks and shares ISA (or a combination of the two), you can save or invest up to £20,000 each year per person, meaning that a married couple can invest up to £40,000 between the two of them. 

Top up your pension contributions

You should make sure you check your pension contributions at least once per tax year as they can be a great way to manage your tax liabilities. For the high earners among you, however, it’s important to keep the lifetime pension allowance in mind. The current lifetime allowance is set at £1,055,000. Remember that contributions causing you to exceed the allowance are taxable. 

For those of you who aren’t nearing the limit, upping your pension contributions can be an effective way to mitigate the impact of tax. If you haven’t managed to make full use of your £40,000 annual allowance, you can carry it forward for up to three years. 

Inheritance Tax

The current tax-free threshold is set at £325,000 for single individuals and £650,000 for married couples. Anything over this amount will be taxed. Inheritance tax is where a little bit of planning can pay dividends in the future. This might be by making full use of your annual gift allowance of £3,000 (£6,000 for married couples), putting assets into trust or re-writing your will. 

A new IHT Residence Nil Rate Band (RNRB) was introduced in April 2017. It is in addition to an individual’s own nil rate band of £325,000, and conditional on the main residence being passed down to direct descendants (e.g. children, grandchildren). It is being phased in over 4 years and the full £175,000 allowance will be available from April 2020. The Residence Nil Rate Band will be transferable between spouses and civil partners on death, much like the standard nil rate band. It is the unused percentage of the RNRB from the estate of the first to die which can be claimed on the second death.

Capital Gains Tax

Capital gains tax is a tax on the profits you make when you sell something, such as a second home or a personal possession worth £6,000 or more, except for your car. The tax-free allowance for the 2019/20 tax year is £12,000 per person so couples can pay no tax on a total of £24,000 of gains. Remember that genuine gifts from a spouse or civil partner do not count towards the allowance. 

Boost your children’s savings

The Junior ISA limit is set at £4,368 for this tax year. Why not take the time to give your children’s savings a boost by making sure they’re at the limit? You may even want to contribute to your grown up children’s Lifetime ISA if they have one, and the government will provide a bonus of 25% of the money invested, up to £1,000 per year. 

Your dividend allowance

If you receive dividends through a Stocks and Shares ISA or you’re a company shareholder or director, you can currently receive £2,000 worth of dividends tax free. 

For more information on how to make sure you’re maximising your tax allowances, feel free to contact us. 

You may have already made some New Year’s resolutions regarding healthy eating and exercise but could your finances do with slimming down too? The start of a new year, not to mention a new decade, is a great time to review your financial situation, examine your budget in detail and make plans for the future. Take a look at the following financial resolutions you could adopt for 2020.       

Set goals 

If you haven’t already set any financial goals, now is the time to do so. But be specific. Rather than just saying you want to ‘save more’ or to ‘improve your financial situation’, focus on what you really want to achieve. Do you want to retire a certain number of years early, buy a holiday property or pay off a loan? By pinpointing your objectives, you will spend more time reflecting and plan more carefully. It also means it will be easier to see how you far you’ve got when you come to review your progress this time next year. 

Once you’ve identified your aims, share them with others to make yourself accountable. That way you have more chance of achieving them.     

If you’ve already set some goals, why not take stock and review your objectives? Do they still fit with your circumstances and what you want to gain out of life? Or do you need to make some slight tweaks?   

Track your budget

Setting a budget may sound obvious but sticking to what you’ve outlined is the foundation of good financial management. There are many apps around today that can help you log your spending and more importantly identify where the leaks are occuring. An end of year summary from your bank or credit card company will help you analyse which categories are the main culprits so you can address them in the coming year. 

Watch those habits

Take a look at any financial mistakes you made last year. Did you overspend or overborrow? 

Have you got into a bad financial habit, such as eating out too often, having too many take-out coffees or always paying full price for clothing? If so take a step back, think about the underlying reason and try and change your behaviour.        

On the flip side, if you’ve adopted any good practices try and consolidate them by automating them. If you want to save more for your retirement or repay a debt, automate a monthly debit through your payroll or bank right now while you’re feeling motivated.       

Why not get into the habit of having a ‘no-spend day’ or ‘no-spend weekend’ each month? Eat at home, don’t go shopping and find free entertainment. You may be all geared up to get fit at the start of the year but think twice about an expensive gym membership, particularly if you’re the type of person who ends up skipping sessions once the novelty has worn off. Instead try working out in the park, going for a long walk or using one of the many free exercise apps.   

The goal is to make reviewing your finances a habit, not something you just consider on an annual basis. If you’d like to sit down and discuss your financial situation with us with a view to making changes for the coming year, do feel free to get in touch.