TIME to look at your financial and legal affairs, says Peter Shand
Political change is afoot with the election of a Conservative government and for some newly elected MPs it will feel like the first month at a new school. It is likely to be a rich time of legislative reform, particularly in the context of devolved powers in Scotland, and that will have an impact on everyone’s personal affairs. Change brings with it the desire, or even the need, to react and it is no coincidence that lawyers involved in advising clients on their personal affairs are being kept busy, post-election.
One example will be the likely modification to the inheritance tax regime, which might impact existing wills and any tax planning people have already put in place. The headlines have alluded to a possible increase in the nil-rate band, which is the amount below which no inheritance tax is payable. But on closer inspection it will not be as simple as that and, whatever comes out in the draft legislation when it is produced, the devil will be in the detail.
The starting point for many private individuals who are revisiting their legal and financial affairs is often their wills. Whist some already have a will in place, there is now all the more reason to take a fresh look at it to ensure it still achieves what is intended to happen on the succession of someone’s estate. Inheritance tax implications have the potential to upset what was intended to happen and there is also consultation just now on changes to the law of succession in Scotland.
Quite apart from tax, the original content of a will may have become obsolete; for example, if a new child has been born or following a marriage or separation. It is important to remember that there are still crucial differences between the law of succession in Scotland and England. It is little known, for example, that when an individual marries in England, any existing will is automatically revoked and needs to be re-drawn, but the same does not apply in Scotland.
Quite apart from the changes to come from Westminster, the Scottish Government announced progressive plans in the latter half of last year to pursue succession law reform in Scotland “to ensure that the law in this area is fairer, clearer and more consistent”. The initial stage is to implement a number of technical legal changes recommended by the Scottish Law Commission and widely supported by the legal profession. They plan to introduce these provisions into law during 2015. The next stage will be far more controversial and could result in a radical overhaul of succession law. One of the most eagerly anticipated changes is in the area of legal rights, known elsewhere as forced heirship. The Scottish Government proposes the long-standing distinction between heritable (land, houses, etc) and moveable property (all other types of property) is removed “to ensure a just distribution of assets among a deceased’s close family to reflect both societal change and expectations”. Legal rights currently only extend to moveable property.
With the recent changes to pensions, someone’s will can no longer be looked at in isolation. Any advice given around someone’s will must now include a discussion about pension benefits. There are some serious planning opportunities to be discussed with professional advisers, including the lawyer, and when it comes to discussing the will, this is one of the big changes since April 2015.
In retirement, care home fees will continue to be an area that causes individuals a lot of concern. With an ageing population, the number moving into care or nursing homes will continue to rise and, whilst the payment of care home fees may be inevitable for some, it is important to have it on the agenda when it comes to retirement and tax planning.
As the government seeks to implement its manifesto pledges, change will be inevitable and not always controllable. What can be controlled is how you react, and turning over a new leaf as far as your legal and financial affairs go is not a bad start.
• Peter Shand is a partner with Murray Beith Murray www.murraybeith.co.uk