Modernising wills legislation

Joshua WilliamsAs the government continues its review of the laws governing wills, Joshua Williams, of Furley Page, explains why estate planning and having a properly drafted will in place has never been more important.

We have seen recent generations become more financially astute and better at not only generating wealth, but preserving it. This means that more people than ever before have a need for detailed legal and tax advice to deal with their affairs during their lifetime and at death.

But do people actually want to think about the inevitability of death and taxes? And with continuous developments in tax legislation, is there still room for estate planning?

Inheritance tax receipts are rising

Inheritance tax is charged on an estate where the net value is over that individual’s available allowance, known as the nil rate band. This allowance has been frozen at £325,000 since 2009-10. From 2007, spouses have been able to transfer their available nil rate bands to one another, which remedied an issue with the previous legislation that often meant a married couple’s estate only benefitted from a single nil rate band. At today’s figures, this equates to a combined allowance of £650,000.

Despite this correction, inheritance tax receipts have been steadily increasing at a rate of about 11 per cent per year since 2009-10 (source: Inheritance Tax Statistics 2014-15, released 28 July 2017), and stand at an all-time high since the current inheritance tax regime was introduced in 1986.

It’s no surprise to learn that the biggest proportion of tax paying estates are located in London and the south east, where huge increases in property values have been recorded in recent years. The rate of house price increases may have slowed as uncertainties over Brexit bite, but a recent report suggests that in 10 years’ time, the average house price will have increased by a further 56 per cent.

Wills legislation is to be modernised

This year, the government has commissioned a review of wills and the legislation behind them. The consultation assesses how lawmakers can update existing legislation surrounding wills to reflect changes in society since the Wills Act was passed in 1837.   

However, the consultation has prompted fears that any radical changes in the law may tamper with some well-established guidelines and open a can of worms for litigators to relish and families to dread, rather than making it easier and more ‘accessible’ for a layperson to obtain a well-drafted will. Indeed, should a document that is of such importance be easy to create? The review will no doubt present far-reaching conclusions for practitioners and laypersons alike.

Tax has become more taxing

In addition to estates increasing in value, tax legislation is now more complex than ever. In 2011, a report from the Office of Tax Simplification found that there were 6,102 pages of primary tax legislation, and that number will only have increased over the past six years. How, therefore, does such a legislative tax burden fit neatly with a desire to keep the law of wills simple? The two are intrinsically linked, and it may not be possible for the public to have its cake and eat it.

It falls to the legal advisor to assist individuals more and more with ever-changing tax legislation and to combat its complexities. The proper consideration of a will and its implications for tax is now more important than ever, if we are going to continue the trend of recent generations and maximise the assets we pass on to our beneficiaries. 

Additional nil rate band allowance

In 2007, the Conservative Party pledged to increase the nil rate band to £1 million per person. Since coming to power, they have not delivered fully on this promise, but have introduced an additional nil rate band for a person leaving a home to certain lineal descendants, provided that they have been careful enough to keep their estate within the threshold amount.

However, the legislation that puts this into place is some of the most complex ever seen, and the allowance itself is divisive, benefitting only those people who have children (or certain other lineal descendants) and who have a home of their own.

It is doubtful that this new allowance will make a huge dent into the inheritance tax receipts seen by HMRC, but it will help many people, given that the nil rate band has been frozen for almost a decade while capital assets have increased significantly in that time.

With these changes in mind, effective tax planning is vital for everyone; a properly drafted will is a must to ensure that best use is made of the tax allowances available.

About the author

Joshua Williams is an associate in the private client, trusts and estates team at Kent-based Furley Page Solicitors, @furleypage. Joshua advises clients on a range of issues including wills, probate and estate administration, lasting powers of attorney and advice on tax issues.

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