Now is the time to talk about your estate
Legal inheritance claims made against private individuals’ estates are often costly to resolve and can delay the estate’s administration, so they are best avoided.
These claims can arise when there is a dispute among family members about how their relative’s estate should be divided upon his or her death.
In recent years, the High Court has heard an increasing number of these cases, and this trend remains upward.
It is impossible to entirely eliminate the possibility of a claim being brought. However, there are several ways to lower the chances and minimise the potential disruption to the administration of the estate.
These include setting up a family investment company (FIC), family partnership, discretionary trust or Will (accompanied by a Letter of Wishes).
An FIC is a corporate structure, designed to work in the same way as a discretionary trust, which enables the founder to pass assets to the next generation through use of a limited company whilst retaining control of the assets. These structures can be more tax efficient than trusts, as corporation tax rates apply rather than inheritance tax rates.
Family partnerships are a similar idea, but they involve setting up a partnership, rather than a company. This method brings in the next generation and allows parents to transfer assets to their children immediately, being taxed at the current rate, while retaining control of the assets during the lifetime. This can be particularly useful if the value of the assets is likely to increase over time.
Discretionary trusts are particularly useful for individuals who foresee that a dispute may arise among family members after death, and as an alternative to making no provision whatsoever for somebody who might be eligible to bring a claim to challenge the dispositions in a Will.
With a Will, a testator can set out precisely how he or she wishes the estate to be divided. However, family members and dependants may still bring claims against the estate, alleging that the Will is invalid or that insufficient financial provision has been made for them. If you are proposing to make no provision for a family member, it is recommended that the Will is accompanied by a Letter of Wishes, giving objective, brief reasons for the decision.
Whichever option best suits your circumstances, the more discussion and planning that take place between family members during the lifetime, the better. Surprise and shock amongst family members are a catalyst to disputes.
At Hewitsons, we have a team of solicitors experienced in all these matters, as well as resolving disputes at highly competitive rates, should they arise.
For more information, call Hewitsons’ Northampton office in Billing Road on 01604 233 233, and ask to speak to Lucinda Brown or Tiffany Benson of our Contentious Trusts and Probate team or visit www.hewitsons.com