Ken and Harriet united against Jade Goody?

When Chancellor Alistair Darling announced the apparent ‘doubling’ of the Nil Rate Band on Inheritance Tax in the pre-budget speech in 2007, it was generally seen as a knee jerk response. Just days before, Shadow Chancellor George Osborne left the Government looking distinctly flat footed with his announcement that a future Conservative Government would raise the threshold to £1 million. Even though the new rules only applied to married couples and Civil partners, and even though the Chancellor wasn’t giving people anything they couldn’t already achieve by careful planning, Darling’s announcement was a political masterstroke.

Oh, what different times they were. House prices were rising inexorably and, if you believed everything you read, we were all gorging ourselves on credit, new cars, plasma TVs, holidays and BTL properties. The then Inheritance Tax threshold of £300,000 began to look rather meagre in some people’s eyes. Then ‘some people’ grew to what politicians clearly believed to be ‘most people’ and the rest is history. The baying mob, happy with their new £600,000 allowance, were mostly happy and Inheritance Tax has not really been in the news ever since.

Until now, that is. As so often happens, two news stories have collided albeit not in a terribly obvious way.

On Sunday we heard Ken Clarke telling us on BBC1, in what seemed to be a clearly premeditated statement, that raising the Inheritance Tax threshold to £1 million might not be an immediate priority for a Tory Government. It seems to me that he must surely have had his words approved at the highest level within the party, but why might this be? Is it because that by raising the threshold to £1 million, this would save tax for those millionaire bankers whom nobody wants to be friends with? David Cameron knows a PR horror when he sees one. As our press critices anyone remotely wealthy these days, who wants to be seen as someone who gives tax breaks to bankers, sorry I mean millionaires? In what looked like a rather panicked reaction, the conservatives are now saying that, erm, they will implement the change in the next Parliament, which gives them over 5 years to think about it.

So, on the subject of PR horrors, lets move on to Harriet Harman. While listening to Five Live Drive on Tuesday evening, the normally agreeable musings of Peter Allen were nowhere to be heard, replaced as they were by an interview with Harriet Harman where she was being asked why Mervyn King was clearly distancing himself from Government spending plans. Somehow, in sidestepping the questions, she managed to remind us all that the Tory Party were only interested in protecting millionaires through their IHT policy. We can only infer therefore that the Labour party believe that millionaires’ estates should be taxed heavily on their death.

Buried among this political spat was the death of Jade Goody from cervical cancer. Jade polarised opinion, but in the end she was a 27 year old mother who left two very young children. And here’s where we ask some uncomfortable questions, because Jade was a millionaire but she wasn’t a banker. I have seen various estimates of her estate but some have valued it at around £4 million. If we are to believe what we read, Jade has not left her new husband anything as she wanted it to pass to her children. We are also led to believe that some clever tax advice may have meant she has avoided the Inheritance Tax through using a trust arrangement. All that aside, be in no doubt that this is not what the current IHT rules intended. For a mother like Jade to leave her estate to her two children would mean an Inheritance Tax bill in the region of £1.5 million if no tax planning had been undertaken.

So Harriet will be pleased because, after all, we don’t want to be protecting the estates of millionaires. But even the new Tory policy, if it’s ever implemented, would still have left the estate with a massive tax bill by anyone’s standards. If only Jade had been a banker, rather than the Essex Princess, this might have been an easier pill to swallow. Both parties could rub their hands and count the money (“at this difficult time”). This whole episode highlights the hypocrisy of both political parties around Inheritance Tax.

Our view
I wonder if the time has now come to introduce an exemption for bereaved minors. While the numbers are magnified in Jade’s case, relatively small estates being left to orphaned children still pay substantial amounts of tax. By putting these people in the same category as the latest scapegoat, we let ourselves down.

Steve Wilkes
Managing Director of Silver Lining Estate Planning Ltd

New rules of Intestacy - a red herring?

If you're thinking, "Wow, this sounds exciting!" you would be wrong. That's the trouble you see, whenever we mention Wills people glaze over. It's just not exciting. But it is interesting. And if you want to see exciting, try dealing with someone's estate if they die without making a Will. Now that's when it gets really quite interesting.

Recent surveys have shown that around two thirds of people in England and Wales have not made a Will. Of those who have, many of them are out of date, invalid or just plain badly thought out. So why don't people get round to making a Will? Largely because they think it won't happen to them and also because they think it is a complicated and difficult process. They would be wrong on both counts.

Countless problems are caused when people die intestate because the assets don't always end up where you might think they would. Besides, if you have life insurance then surely you accept that the unexpected can happen. So make a Will and your assets will go where you choose rather than goodness knows where.

So what are the Goverment doing about these huge numbers of people without a Will? Well, they are changing the rules of intestacy as of 1st February 2009. These are the rather complex (some would say confusing and unfair) rules on what happens if someone has died without making a Will (intestate).

From this date, if a person dies intestate leaving children (who may be grown up) behind, their spouse or civil partner will receive the first £250,000 of the estate, instead of the previous rule where they would have received £125,000. They also receive the personal belongings and a life interest in half the remainder.

If the person dies intestate and doesn’t have any children, but has a close relative - a parent, brother or sister, niece or nephew - their spouse or civil partner will receive the first £450,000, instead of the £200,000 under the old rules. They will also receive the personal belongings and half the remainder.

All other aspects of the rules remain the same. And they are even more confusing!

Great news I hear you cry, we won't need to make a Will now. And there's the red herring in these new rules. Even when she announced the changes, Justice Minister Bridget Prentice admitted that the changes were no substitute for making a Will.

Why? Take your pick from this list of what happens if you die intestate:

• If you are not married your partner gets NOTHING
• If you have children under 18 a Will is where you appoint Guardians for them and trustees to look after their money; if not you cannot be certain what will happen to them
• A Will is where you gifts or legacies to loved ones or charities - no Will, no gifts for anyone to remember you by
  
• Children may inherit a significant amount of money at the tender age of 18
• And anyway, would you leave everything by choice to your spouse? What if they remarry after you have gone, can you be sure that those assets won't be lost?

When you have a Will written professionally it can serve to proetect your assets for your children no matter what happens to your spouse after you've gone.

Finally, a well written will using trusts may help you to avoid care home fees and Inheritance Tax in the future, especially if you own a business or a farm.

So, still think you don't need a Will?

Stephen Wilkes
Silver Lining Estate Planning Ltd
www.silverliningep.com
01394 421092