Salus Magazine 2018

SALUS – WEALTH AND FAMILY PROTECTION private client FROM GELDARDS SUMMER 2018

Salus was one of the first Roman goddesses, she was the goddess of safety and wellbeing (welfare, health and prosperity) of both individuals and the state. Salus Magazine is brought to you by the Private Client team at Geldards to help you protect your wealth and family. FIONA APTHORPE +44 (0)1332 254 124 [email protected] JACLYN BARNES +44 (0)115 983 3747 [email protected] CLAIRE DEAN +44 (0)1332 378 311 [email protected] GAYNOR DICKENS +44 (0)29 2038 6524 [email protected] CLAIRE JOHNSON +44 (0)29 2039 1728 [email protected] ERICA THOMSON +44 (0)115 983 3745 [email protected] DAVID WILLIAMS +44 (0)115 983 3757 [email protected]

FOREWORD Hello and welcome to the first edition of our new legal and lifestyle magazine, Salus, named after the Roman goddess of welfare, health and prosperity. Daily, we advise clients across the country on many different life events. These include supporting individuals, business owners and families on protecting and passing on family wealth and business assets, tailoring wills and trust arrangements to fit their circumstances and objectives, buying and selling property and in relation to family agreements, cohabitation and divorce. We wanted to find a way to do this in a more informal, easy-to-digest manner that also made you aware of some areas of legal planning and protection you may not have considered but will assist in protecting you and your loved ones. We appreciate legal services are just one of the many areas you consider to protect your well-being, so we have also partnered with other leading professional advisers, operating in both practical and luxury markets, to bring you a well-rounded, informative source of information. We hope you enjoy reading the wide variety of articles and, as ever, if you have any comments or queries, please do not hesitate to contact us. David Williams Chairman Geldards

CONTENTS P6/8 P9 GRANDPARENTS A WILL FOR THE 21ST CENTURY AND GRANDCHILDREN P16/17 P18/21 DIGITAL ASSETS ON DEATH BUSTING THE MYTHS OF COHABITATION 4

P10/11 P12/13 P14/15 THE ART OF COLLECTING DREAMING OF - AUDLEY TRAVEL PRE NUPS, POST NUPS, NO NUPS 5 TOP TIPS ON PROTECTING YOUR VALUABLES P22/27 P28 P29 BANK OF MUM & DAD DON’T UNDERESTIMATE HOW AT A GLANCE - UK MUCH YOU NEED TO SAVE PROPERTY MARKET 5

GRANDPARENTS AND GRANDCHILDREN Applying for orders under the Children Act 1989 It is often the case that on divorce whether they need the permission apply to the Court for permission or separation the ripples of tragedy of the Court to apply for a Child before being able to proceed with the reach beyond the mother/father who Arrangements Order. If the child/ application. are separating to the extended family children have lived with the and friends. grandparents for a period of one However, if the child has lived with year immediately preceding the a grandparent for a period of three In the wings, there are often application, permission is not required years they can apply for contact extremely worried grandparents. How to continue that arrangement. orders without permission, although do they ask to see their grandchildren, they would still need permission in what is often a hostile and awkward However, the grandparent would to apply for some orders such as situation? Will it make things worse if need permission to apply for any Prohibited Steps Order or Specific they ask to remain involved in a child’s other order such as for contact with Issue Order. Grandparents, like any life? Will they see them? Can they their grandchild. Thus, if a child has other prospective applicant, are take them on holiday? The Children been living with a grandparent for usually required to attend a Mediation Act 1989 allows a ‘relative’ (which a year and the grandparent wanted Information and Assessment Meeting includes a grandparent) to make an the child, on divorce or separation, (MIAM) prior to making an application application for a Child Arrangements to continue to live with him or her, to the Court to determine whether Order i.e. an order regulating contact the grandparent could apply as of mediation may be a better option than with the other parent, grandparents, right for an order regulating those Court proceedings. third parties, where a child should live, living arrangements. If, however, a whether a child can go on holiday etc. grandparent wanted to have contact If grandparents can be forward and Grandparents will need to consider with the child, they would need to child-focused in mediation there is 6

Claire Dean Geldards no reason why grandparents cannot The child’s welfare is paramount and the Court mediate with the parents who are will examine what is in the child’s best interests resisting the grandparent’s requests before deciding if an order should be made. in relation to the children. If mediation is inappropriate, The following matters are taken into account: grandparents can make an application to the Court. The application will have • The ascertainable wishes and • Any harm which the child has to be sent to every person who has feelings of the child concerned suffered or is at risk of suffering. parental responsibility for the child. (considered in the light of their age and understanding). • How capable each of their parents, The orders that a grandparent can and any other person in relation apply for are wide ranging; they • The child’s physical, emotional and to whom the Court considers the include who the child should live with, educational needs. question to be relevant, are of how much contact the child should meeting the child’s needs. have with the grandparents, whether • The likely effect on the child of any the grandparents can take the child/ change in their circumstances. • The range of powers available to children on a holiday etc. In some the Court under this Act in the cases, they can even prevent a parent • The child’s age, sex, background proceedings in question. from attending the grandparent’s and any characteristics of theirs property on a handover. which the Court considers relevant. 7

The stronger the Grandparents often feel they are fray between the parents. This can relationship between a powerless if a parent insists the child provide a haven for children while grandparent and child, cannot see them. This is not true. keeping them in touch with the the more it influences The welfare of a child and his/her absent side of their family. the decision. best interest is the basis on which the Courts make their decisions. The stronger the relationship between a grandparent and child, The Courts recognise the value to the more it influences the decision. a child of contact with extended If grandparents have had a close family members and, in particular, connection with a child’s life, it is grandparents. They also recognise likely that such a close relationship the value of the grandparent in will bear some significant weight in facilitating contact between two any application. parents in relevant cases. However, the Court encourages a grandparent In summary, it is becoming seeking a Child Arrangements increasingly common for Order to try to remain impartial in grandparents to make applications disputes between the parents to the Courts in their own right for putting the interests of the child/ contact/arrangements in respect of children first. a grandchild. Such applications are treated seriously and are recognised A recent appeal case reiterated and by a Court. The Court will look at emphasised that grandparents have each case on its own merit and will the capacity to deliver a vital quality recognise the value of grandparents in of normality outside and above the a child’s life. 8

A WILL FOR THE 21ST CENTURY Erica Thomson Geldards Geldards Private The law governing how we make a will. This has been driven by greater Client Partner, Erica will was established in the Wills Act incidences of dementia and a better Thomson, discusses 1837 and is now over 180 years old. understanding of mental health why the process of Many view the process of making a conditions. Reducing the age at which writing a will is in need will old fashioned and out-of-date. someone can make a will from 18 of modernisation. Preparing a will and passing on your to 16 and removing the legal term wealth and possessions after you have ‘testator’ and replacing it with ‘will died is one of the most important maker’ are also proposed. In addition, things you will ever do and it should be it is intended to give courts greater straightforward. However, it is often flexibility to uphold wills that do argued that the law is unclear and not meet legal requirements. This is outdated and could put some of us off widely welcomed, particularly where making a will altogether. there are harmless errors in the will but the will maker’s wishes are With an estimated 40% of the adult nonetheless clear. population dying without making a will, it is not surprising that a public Perhaps more controversial is the consultation by the Law Commission possibility of recognising online or is viewed by many as long overdue and electronic will writing in the future. a welcome step towards updating our Such a proposal will undoubtedly raise will making laws. It is hoped that by concerns over increased fraud and overhauling the outdated Victorian undue influence against vulnerable era laws, many more of us will be people and will need to be considered persuaded to make a will. very carefully. Whilst the basics of making a will Public consultation ran until the 10th have stood the test of time, there November 2017 and the results, and is much which is in urgent need of findings, will be of much interest. The modernisation. The 21st Century has days of writing a will with a feather seen an increasing aging population, and ink are well behind us, but it may more second families and cohabiting not be too long before writing a will couples, increasing cases of dementia, on tablets and computers may become Alzheimer’s and other mental health the norm. It will be interesting to see disorders as well as a reliance on whether modernising will legislation digital technology. will lead to more of us making a will. Key issues raised in the consultation paper include changing the test to establish whether someone has the necessary mental capacity to make a 9

INSIDE TRACK THE ART OF COLLECTING 5 TOP TIPS ON PROTECTING YOUR VALUABLES Are you protecting your possessions correctly? We invited industry specialists Thomas Carroll to give us their top tips. If something means a lot to you, it is important to choose the right insurance cover. Whether it is fine art, jewellery, antiques, wine or watches, an off-the-shelf contents insurance policy is likely to fall short in the unfortunate event of a claim. Alison Davies, Managing Director of Thomas Carroll Private Clients and Club Signature, offers the following tips to help you maintain the right cover for your collections. 10

12345 At your insurance Remember, the value Bear in mind that If you own or acquire It is important renewal date, or of collectibles may go many ‘contents’ good quality items to organise and sooner, inform your up over time. Regular insurance policies either through the monitor your art and account broker of any valuations will ensure have a ‘single article trade, at auction collectibles when new items you have that you are covered limit’ that assumes or from family in transit to ensure acquired. for the correct value that no single item inheritance, it is you are adequately of your possessions so covered by the policy worth considering insured in the event you don’t end up out is worth more than the uniqueness of of damage or theft. of pocket if you have the stated limit. your item(s) and their Especially today, to make a claim in subsequent worth. since cybercrime the future. targets transit companies. GIVE IT THE INSURANCE IT DESERVES Club Signature is a tailored high value insurance service designed by Thomas Carroll, for clients whose financial position and lifestyle require high levels of individualised cover. www.clubsignature.co.uk 11

DREAMING OF Audley Travel Each edition we are going to look at more luxurious purchases you can make. We all spend a lot of time contemplating how to invest, protect and earn our money, but sometimes you deserve a little treat. For this edition we visited Audley Travel in Witney, Oxfordshire. We spoke to CEO Ian Simkins about how best we can travel the world. Cheetah in Phinda Private Game Reserve, South Africa – Zoe, Audley Tanzania & South Africa Specialist 12

S: Thank you for inviting us here external factor that drives popularity. and restaurants throughout your today. Can you please tell us about In terms of types of holidays, trip. We will take the time and your business, what is it that you do? most people want an immersive, trouble essential to carefully select IS: We are a tailor-made travel experiential trip. If you travel to accommodation and develop your own company offering individual, unique, Cambodia with Audley you can have individual itinerary. experiential holidays from the UK to a tour guide who was once a Buddhist In short, we offer a friendly, expert 83 destinations worldwide. At Audley monk so you get information from his service, supported by quotations that we provide a collection of travel ideas perspective. If you are in Hanoi we contain exceptional detail. for all corners of the world, from can put you in contact with locals who major sites and cities to the often can tell you about Vietnamese history S: Where is your favourite holiday overlooked, yet fascinating, regions from a Vietnamese perspective. destination, and why? and beyond. IS: You can’t ask me to pick just one! I once met a member of Ho Chi It really depends on what you want to S: What do you mean by tailor-made? Minh’s Cabinet at the time of the war. do. I have four trips that all stick in IS: Too many companies offer little Speaking to him completely changed my mind for different reasons, Japan, more than opportunities to glimpse my view on that history story you USA, Thailand and Kenya and they a country, and tailor-made often learn at school. This changed my view were all family holidays. means adding an extra hotel night radically on that side of the world. A In Japan we camped in Hakone, part here and there. We are radically good guide can really transform your of a National Park where we slept different. Your journey is designed trip and we will find you guides that on flat beds and had rice pillows. We around your personal interests, giving share your interests and passions. ended the trip relaxing in Bali. In the you the freedom to balance cultural A trip isn’t just about the hotel USA we went from the west coast to experiences, relaxation, scenery, and flight, we aim to broaden your the east coast, from ranching to Cape wildlife and adventure all at your horizons and change your perspective Cod. In Thailand, we trekked in Khao own pace. An extensive choice of on the world. When you take a trip Lak, then relaxed on a beautiful beach accommodation is offered, allowing with Audley what you get is a unique in Ko Samui. In Kenya, we undertook you to select luxury hotels, old experience and I would say people charity work in a school, my sons colonial villas or even an overnight want these experiences more than loved playing football and tag with the stay in a traditional village house. they just want to spend a fortnight on children, even though they couldn’t a beach. communicate with each other. We S: How is demand developing? What then went on safari, which is magical. destinations and types of holidays Although, if you do want to spend These were all fantastic trips for are fashionable? time on a beach, we also have a very different reasons and I would IS: We offer such a wide range of Hidden Beaches programme. We will definitely recommend them to destinations and trips, it is really find you beaches that are a little bit anybody. difficult to pick out just one trend. more secluded. We can send you the Over the last few years South Africa Andaman Islands that sit between S: What does the future look like for has been popular as it is relatively India and Burma. They are very Audley Travel? good value to go to and, when you are remote but it is up and coming as a IS: I just want us to keep on creating there, it is astonishingly good value destination. We can merge this with these amazing trips for our clients to for money. Exchange rates pay a huge the experiential trip above too, so you enjoy. We have a very clear strategy part in which destinations are popular. can have the best of both worlds! and the beginning of that is hiring We are also now seeing a big demand great people, training them and for Japan. I think this has been driven S: Can you give us some insider tips, looking after them. We were once by the news and events that will be what should people look for when again named in the Sunday Times’ top happening there, such as the Rugby buying tailor-made holidays? 100 best places to work for this year World Cup and the Olympic Games. IS: To guide you and plan your and we are very proud of that. Our Chile and Argentina are also growing itinerary you need to speak to people great staff drive our positioning as in popularity, these appear to be the who are truly knowledgeable. We experts in the market and allows us up and coming destinations to visit, as are. All our country experts have to provide the fantastic service we do, does Peru. British Airways launched travelled to, or lived in, the country so to keep creating these trips, we will a new direct flight to Peru in 2016 they are advising. They are constantly keep supporting our staff. followed by Chile in 2017 and this has talking to clients so can give you driven demand, another example of an real time feedback on hotels, trips 13

PRE NUPS, Fiona Apthorpe POST NUPS, NO NUPS Geldards You Need to Read This Before You Start Giving Your Money Away! 14

Geldards head of So, your beloved daughter is getting you are a parent wanting to help your family law, married. The fiancé seems alright, kids out, you must weigh up the risks. Fiona Apthorpe, your business is doing well, you’re Like a divorce rate of 42% for one. discusses why Pre feeling generous and you buy them a Nups are a good idea house. The son-in-law turns out to be They aren’t binding I hear you say? and her surprise at the a bit of a waste of space but he makes Wrong, and I bet the likes of Paul Queen! your daughter happy so you bite your McCartney and Mel B wish they’d tongue. A few years on, with a couple invested in one. Rumour has it that “Rumour has it Prince of grandchildren under your belt, you Prince Harry refused to sign a Pre Nup Harry refused to sign a hand over a million pounds as a bit of agreement for his wedding to Meghan Pre Nup agreement for tax planning which should save your Markle. I adore the Queen, but you his wedding to daughter having to go back to work. have to admit she hasn’t had much Meghan Markle“ So far, so good. luck with the marriage survival rate in the family so it surprises me she did You can see where this is going, can’t not insist! you? Yes, you guessed it. He has an affair, moves out and can’t ‘afford’ As long as they are not manifestly any child support for the children he unfair, there is financial disclosure doesn’t seem overly fussed about and legal advice, they are entered into seeing too regularly. You’ve just about in good time (and yes, I have had one got your daughter to stop crying when presented to my client on the way to she gets a solicitor’s letter demanding the church!) and without a shotgun an equal split of the matrimonial to the head they will be upheld. assets including the house (that you Yes, there is a cost and weddings paid for) and let’s not forget the £1m are expensive enough but you have which it is claimed is ‘matrimonial’ to decide what it is worth to you to money. The ex is all-loved-up with his protect your hard earned cash. new lady friend who is seen sporting a not insubstantial diamond so we know Money gifted or bequeathed to your where your hard earned cash is going child becomes theirs and if they later to end up if he pops the question. divorce the starting point will be an equal split of matrimonial assets, Fortunately, you have some sense left including your gift. If there is more and instruct me to represent your than enough money to go around you daughter. Happy ending eventually. might, I stress might, be able to ring Your daughter hung on to the million fence it but that depends on a lot of but it took several court hearings, a lot things over which you have no control. of work and a huge amount of stress If they have invested it in the family for the client. He still got half the home, and these days can they afford house, but it could have been a lot not to, well let’s just say I’m good but I worse. can’t work miracles. How could you have avoided this The moral of the story, if you have happening? Answer, a Pre Nup or, money you can’t afford to lose or if the deed is done, a Post Nup. I’m money you want to keep in the family not unromantic and they are not you need to invest in protecting it. Pre for everyone, certainly not your Nups and Post Nups properly drawn moderately well off young couple up, by an expert, with the formalities starting out. But, where there is followed, represent your best chance substantial family wealth being of protecting your money and keeping handed down either by gift or it in the family, where it belongs. inheritance, the need to protect children from a previous marriage or 15

DIGITAL ASSETS ON DEATH Have you ever wondered what happens to your Twitter account when you die? Jaclyn Barnes Geldards Individuals and personal representatives can encounter difficulties in securing succession to digital assets. These assets may include photographs stored on a smartphone, social networking accounts, digital music accounts (iTunes), online gaming accounts, PayPal accounts and cryptocurrencies such as Bitcoin. Some digital assets have monetary then be communicated to the personal value and some have mostly representatives in a letter listing all of sentimental value. Either way, will the digital assets, how to access them makers should specify to whom and whether the agreement allows the these assets pass to on their death asset to be passed upon death. and personal representatives administering estates need to deal Those digital assets with monetary with the transfer of these assets to value and/or intellectual property discharge their duties. rights attached to them should not only appear in the letter but should also be When preparing a will a will maker the subject of a specific legacy in the should have regard to their digital will. Everyone needs to understand the assets. The first question to ask is digital assets that they have and make whether the asset is truly an asset; for plans during their lifetime. example, it may not be an asset, it may only be licence that cannot be passed beyond the first user. The terms and conditions should be checked to see if it is an asset that can be passed to beneficiaries and if it is, if that agreement provides for the passing of the asset. This needs to 16

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BUSTING THE MYTHS OF COHABITATION Gaynor Dickens Geldards So, it is much less complicated if you just live together, right? Wrong. There are an estimated 3.3 million When a marriage breaks down the cohabiting couples in the UK, this court can allocate the available assets fastest-growing family-type has more and pensions based on what is fair than doubled since the mid-1990s. and the needs of each party to the Society is changing, but marriage. That is simply not the case unfortunately the laws of England for unmarried couples. If the property and Wales haven’t kept up. A recent you live in is in the name of your poll revealed that a significant partner, establishing that you have number of cohabiting couples any interest in it can be extremely mistakenly believe they difficult, even if you have paid towards are ‘common law spouses’ and that the bills for years. Making a claim this will protect them should their relying on a piece of legislation known relationship end or one partner die. as the Trusts of Land Act 1996 can be extremely complicated and expensive, The truth is you may have lived with with no guarantee that the financially your partner for years, brought up weaker party will be awarded what children together and even given up may seem fair. your career for the family’s benefit, but you still have no right to support The good news is that there is plenty if the relationship breaks down and you can do to avoid problems in the no automatic entitlement to benefit future with a little forward planning.. from your partner’s estate. 18

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A cohabitation agreement can set out who brings what into a relationship and how it should be shared on separation. Think about how you own property. advice before you take any steps to partner has no automatic right to change the ownership of the property. benefit from their partner’s estate If you are buying a property together, after his or her death, no matter how or moving in to your partner’s Make a cohabitation agreement. long they have been in a relationship property, think about how you are or whether they have children paying for the property both in terms No one wants to think that their together. Instead, the surviving of the initial deposit and mortgage relationship may break down, but then partner may face bringing a claim repayments. Be aware that if one again no one drives a car without the through the courts (under the partner is contributing all the funds benefit of car insurance. Inheritance (Provision for Family and towards the purchase of the property, A cohabitation agreement can set out Dependants) Act 1975) against their but you are buying in joint names, who brings what into a relationship partner’s relatives or even against the partner paying will effectively and how it should be shared on their own children for reasonable be giving away half the house separation. This can include the house provision from the estate to maintain immediately, which may not be his or but also other items such as cars and themselves. her intention. house contents. Think about how things may change; for example, what It is possible to frame your will to Equally, by placing the property if you have children together? Ask an provide for your partner for his or her in one person’s name, you are not experienced family lawyer to help you lifetime, to stay living in the house, guaranteeing the other partner’s put the agreement in place and review for example, whilst also protecting security. If contributions towards the it on a regular basis. the capital to pass to your children deposit or the mortgage payments eventually. This may be particularly are unequal, this can be reflected in Make sure you have an appropriate relevant and appropriate where the deeds or in a separate Declaration will in place. there are children from a previous of Trust. There are likely to be tax relationship. Assets held by a couple implications, so it is important to seek The harsh truth is that a cohabiting jointly (as ‘joint tenants’), such as a 20

house or a joint bank account, will Plan ahead to avoid an unwelcome those concerns. If marriage is in belong to the surviving partner tax bill. prospect, it is important to note that automatically on the death of one an existing will is automatically of you. But it is important to have Cohabiting couples do not benefit revoked on marriage unless it includes advice before making any changes to from the same inheritance tax a specific provision contemplating the the ownership of assets because of allowances as married couples, leaving forthcoming nuptials and expressly potential tax implications. them at a distinct tax disadvantage. preserving the will. There are steps which can be taken Sort out pension and death in to improve the position, for example, Whether you are thinking of tying service benefit. via carefully structured wills. the proverbial knot, consider this a Couples may also wish to consider life step too far, or are perhaps concerned If you have a pension or life insurance insurance written in trust to cover any on behalf of adult children or policy (including death in service inheritance tax bill on first death. grandchildren in the legal limbo of benefit), it is important to make sure cohabitation (particularly if you are you have nominated your partner as Feeling inclined to propose? helping them out financially), the the intended beneficiary of the policy importance of planning ahead with if you want him or her to benefit For those who have decided not to the benefit of specialist legal advice (this is usually via a nomination or marry because they want to keep cannot be underestimated. This expression of wish form rather than their finances and property separate allows couples to make well informed under your will). (perhaps having been ‘stung’ in a choices and take appropriate action previous divorce), the good news for real peace of mind. Again, it is a good idea to take advice is that a well drafted and properly from your financial adviser to make implemented Pre-Nuptial agreement sure you have taken the right steps to coupled with appropriately tailored deal with pensions and life policies. will planning can effectively address 21

BANK OF Claire Johnson MUM AND Geldards DAD In recent years there have been lots of the children they wish to help). children understand and acknowledge of reports in the press about the With careful planning, there are ways the basis on which financial support reliance on the Bank of Mum and Dad to address common concerns people is being provided. Is what is being in order for younger generations to have about providing financial support given a loan or an outright gift? Is get on the housing ladder. to the next generation. This might be the parent making an investment around having some control over what with the child in a property? The Even with the recent government you have given to your children. You arrangements should be appropriately schemes to help with the funding may wish to make sure it is put to good documented even in a close family of deposits there is generally still a use and not wasted. scenario (because of the different requirement to find a minimum 5% tax consequences which can arise deposit, and reliance on the Bank Even if you are happy to trust your and the fact that the nature of the of Mum and Dad is unlikely to end children to ‘do the right thing’ you arrangements may be relevant to anytime soon. may be concerned that what you give dealings with third parties). might be vulnerable to changes in your Parents are generally keen to help child’s circumstances, for example, in Outright gifts their children financially if they can. It the event of a relationship breakdown. is important that they make informed You might be keen to start reducing An outright gift means that what you choices with an understanding of the value of your estate which will are giving away cannot be recalled and the range of ways in which financial be subject to inheritance tax in the is vulnerable to changes in your child’s support may be given and the legal and future and have in mind that giving circumstances. It is not uncommon for tax consequences in each case. It is to the children sooner rather than high street mortgage lenders to insist important that parents think carefully later will achieve this. Alternatively, that third party contributions towards about the most appropriate way in providing financial support may be the purchase price of the property are which to provide financial support intended as a loan if the sums you are documented as an outright gift. depending on their views, objectives making available to your children now and the overall circumstances (their may be needed by you in the future. A key advantage of making outright own and those It is vital that parents and their gifts to your children is to reduce the 22

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value of your estate on which they will tax purposes. It is also important to Even with the recent eventually have to pay inheritance bear in mind the likelihood, in Government schemes tax. Broadly speaking your practical terms, of seeing a return on to help with the beneficiaries will pay inheritance tax your investment, if the property you funding of deposits at 40% on all assets passing on your are helping your child to buy is there is generally still death in excess of the inheritance tax intended to be their long-term home. a requirement to find a threshold. The threshold is currently Again, the understanding and minimum 5% deposit, £325,000 for an individual with acknowledgement of all parties as to and reliance on the married couples and registered civil what is intended is important to Bank of Mum and Dad partners having a combined threshold minimise scope for family fall out in is unlikely to end of £650,000 (leaving aside the new the future! anytime soon. ‘residence nil rate band’). With this in mind, the arrangements Generally, value you give away only should be documented usually leaves your estate for the purposes of in a ‘Declaration of Trust’ drawn calculating inheritance tax on your up by a lawyer recording the death if you survive seven years from contributions each party has made making the gift (though there are to the purchase and the intention some exemptions for gifts in certain that this should be reflected in the circumstances which are useful ‘beneficial ownership’ (regardless of exceptions to the seven-year rule). in whose name the legal title to the property is registered). Percentage Whilst a gift of cash can generally be ownership could be fixed based on made without any formalities, it is contributions to the initial cost of sensible to keep a record of gifts you purchase or floating by reference to have made. This is helpful to make a formula which brings into account sure that all relevant exemptions can not only initial contributions but be claimed by a person’s executors later funding of improvements or when they are called on to report unequal contributions to mortgage all gifts made by that person in repayments. the seven years prior to his or her death. The main exemptions are for It is important to understand that gifts of £3,000 capital each year per whoever is on the legal title will be donor (with one year carry forward party to any mortgage and jointly and if the exemption was not used in the severally liable for it notwithstanding previous year) and gifts made as part any Declaration of Trust. There is of regular expenditure out of surplus still a risk that in the event of your income. son or daughter divorcing, their share of the property could be taken Co-ownership between you and into account or subject to a claim by your child their ex although your share would be protected. It might mean that the Giving your children a helping property had to be sold though. hand on the property ladder may be an opportunity for you to make Co-ownership between your child an investment rather than a gift or and others loan. It may be attractive to you to contemplate that your contribution If you are helping your child to buy a may at some stage be returned to you property with someone else, such as with any corresponding growth. siblings, friends or a partner then a It is important to bear in mind that if Declaration of Trust/Co-ownership your investment does well you will be Agreement will be important to record adding to, rather than diminishing, the and protect your child’s interest. value of your estate for inheritance 24

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This can help avoid dispute if them if they want to ensure that the event of your death. On the plus side, and their co-owners fall out. It may, financial support they are providing any growth in the value of any fund for example, include a mechanism is not vulnerable to claims from or asset in which your loan is invested for one co-owner to have an option third parties against their children, by your child will be outside of your to buy the other out should he or she such as creditors or in the event of a estate particularly if the loan is made wish to sell, cover who is responsible relationship breakdown. interest free. With tax planning in for repairs and require all to agree mind it is common for family loans to other people coming to stay at the In such circumstances, it is important to be interest free and repayable on property for any extended period of that the loan is appropriately demand. time. documented so as to be legally enforceable, even if that seems a little If you make a loan and later decide to Loans at odds with the relationship of trust waive all or some of the loan, you will between parent and child in a close be making a gift at that stage. To the A loan rather than an outright gift family scenario. You may also wish extent the value being waived does gives parents the option to recall the to consider taking some security for not fall within one of the exemptions value given away and is therefore an the loan, for example, by way of a for lifetime gifts, it will fall outside attractive option in the short term. charge over a property your child is of your estate for the purposes of This is provided that, where there is purchasing. calculating inheritance tax in the also a mortgage lender, there is no event of your death once you have objection by the mortgage company It is wise to have the benefit of survived seven years. For some people, initially making a loan and A loan rather than an outright gift gives gradually waiving parts of it over parents the option to recall the value time, as your child becomes more given away. settled in life and as you feel more confident that the value you have to any third party contribution expert advice in drawing up the loaned is surplus to your own lifetime being by way loan rather than gift arrangements to make sure they do needs may be a balanced and tax (unfortunately it is not uncommon for not fall foul of Consumer Credit Act efficient way forward. As with the high street mortgage lenders to insist regulations or requirements of any loan, any waiver of it should be on the latter). institutional lender if there is also a appropriately documented with a mortgage on the property your child is deed of waiver with the benefit of A loan may be appropriate where buying and so that all parties have an legal advice. parents are able to offer some understanding of the legal position. financial support now but may have From an inheritance tax perspective, Trust planning: the best of both need of the funds themselves in the the value of what you have loaned worlds? future. It might also be appropriate will remain part of your estate in the If you are keen to mitigate inheritance tax exposure, have surplus income or capital that you would like to set aside to help your children now or in 26

the future but want to retain some mortgage from a high street lender. make an onward gift of some or all of control and provide at least a layer of Trusts are not a tax-free zone, the value of your inheritance with no protection for the funds or assets you expert advice is essential when seven-year wait before the value given are giving away then a trust could be considering how to structure the drops out of your estate. Alternatively, the answer. trust and whether to fund with cash there may be scope to vary some or all or assets to make sure the trust runs of your inheritance. If you set up a family trust for the tax efficiently. Generally speaking, first time and the gift you make into a gift into trust is not tax efficient For inheritance tax purposes a deed it is well within your available nil if you or your spouse/civil partner of variation can be drawn up so it is rate band this shouldn’t create any can also still benefit from the assets as if gift or trust was made by the inheritance tax charge when the trust in the trust (as where the person person who has died rather than by is set up. Unless the value of what you making a gift reserves a benefit then onward gift from you as the original put into trust increases significantly, generally speaking the gift will not be beneficiary. it should also be possible to avoid effective for inheritance tax planning any periodic inheritance tax charges purposes). It is usual, therefore, for What should I do next? which apply to trusts (at a marginal the person setting up the trust and rate of up to 6%) on the value in excess his or her spouse or civil partner If you are thinking about giving of the nil rate band available to the to be excluded from the class of children financial helping hand, there trust. potential beneficiaries. It is important are a whole range of options you may to have professional advice when wish to consider. It is important for By making a gift into trust you can contemplating gifts, including gifts you to understand the legal and tax start the seven-year clock running into trust, around the tax implications implications and the extent to which to remove value surplus to your when the trust is set up and ongoing. what you are considering will address lifetime needs from your estate into your concerns and achieve your an environment which you control (as Passing on an inheritance to objectives. Your chosen route should trustee). This can allow you to provide your children balance your needs, those of your for your children or other intended children as well as having an eye to beneficiaries in a measured way. Receiving an inheritance can often be tax efficiency and asset protection. It Loans can be made from the trust so the trigger for parents to think about is vital that you and your children are that the sums loaned may be re-called making some onward provision for clear as to basis on which any financial if the beneficiary’s circumstances their children. support is being given so as to avoid change. Property could be purchased any future dispute between you and in or transferred to a trust (which can If you have inherited within the last them or with third parties. help manage Capital Gains Tax due two years you should take advice to scope to postpone or ‘holdover’ the about tax planning opportunities gain). which involve making a ‘deed of variation’ within two years of the It is, however, likely to be difficult death of the person from whom you for trustees to obtain or take out a have inherited. This allows you to 27

DON’T UNDERESTIMATE HOW MUCH YOU NEED TO SAVE It is the million-pound The answer depends on how much Even £1m may not be enough on its question: how much do you money you will need to provide an own to pay for the type of retirement need to save for retirement? income when you stop work; an you want.” The truth is, probably more income that will enable you to live than you think. your retirement dreams. “With retirement planning it makes sense to start near the end; to first Adrian Watson, Divisional Director establish the life you want to live in – Financial Planning, for the Cardiff retirement and the income you will based Brewin Dolphin team, said: need to live that life and then build a financial plan around it. Many people “When you start to think in these skip this step but unless you are clear terms you may be startled by about your retirement goals you are how much money is required. To putting your future financial health demonstrate the point, we calculated at risk.” what £1m would buy if you turned it into an income at 65 using an annuity, www.brewin.co.uk/wales Even £1m may not be enough on its own to pay for the type of retirement you want.” which is a type of insurance contract that pays a guaranteed income for life. “If you want your annuity to provide protection against inflation and a two- thirds pension for a surviving spouse, that £1m would turn into a yearly income of £25,916. 28

AT A GLANCE UK PROPERTY MARKET 1 Recent surveys indicate that the upper and middle priced tiers 2 of the property market are proving the most challenging. In the latest RICS UK Residential Market Survey (April 2018) 69% of contributors reported that sales prices are coming in below asking price for properties valued at above £1m (up from 66% in January 2018). Source: https://www.rics.org/Global/4._WEB_%20April_2018_RICS_UK_Residential_ Market_Survey_tp.pdf In the 12 month period to June 2018, in Wales the annual increase in property prices was 5% with the average time to sell at 60 days. In the East Midlands, the annual increase was 4.6% with the average time to sell at 52 days. Source: https://www.rightmove.co.uk/news/house-price-index/ 3 According to the latest statistics from the Land Registry, as of April 2018 the average house price in the UK is £226,906. Property prices have risen nationally by 3.9% compared to the previous year. The UK average price of a detached house in April was £342,154 and the UK average for a semi-detached house was £214,717. In Wales, the average detached house costs £233,124 and in the East Midlands the average was £271,739. Source: http://landregistry.data.gov.uk/#ukhpi 4 In the buy-to-let market, the way rental income is taxed is changing. From April 2017, rental income must be added to other income to decide their tax rate and the ability to offset all mortgage interest against tax is being gradually phased out between April 2017 and April 2020. From 2020, landlords will only be able to get a maximum tax credit of 20% against mortgage interest. These latest changes come on top of the extra 3 % stamp duty (or new Land Transaction equivalent in Wales) introduced from April 2016. This means anyone purchasing an additional property, that includes buy-to-lets, second homes and even properties bought with children, were hit with an extra 3% charge on each stamp duty rate band, which vary by property value. Source: www.thisismoney.co.uk/money/mortgageshome/article-1596759/Ten-tips- buy-let.html Geldards LLP is not a financial advisor and will not provide any advice relating to any financial service or product. Before making an investment decision, investors should seek appropriate advice to ensure they have sufficient information to ascertain the legal, financial, tax and regulatory consequences of an investment to enable them to make an informed investment decision. 29

S OFFICES private client Cardiff Dumfries House Dumfries Place Cardiff CF10 3ZF Tel: +44 (0)29 2023 8239 London 80 Coleman Street London EC2R 5BJ Tel: +44 (0)20 7620 0888 Derby Number One Pride Place Pride Park Derby DE24 8QR Tel: +44 (0)1332 331 631 Nottingham The Arc Enterprise Way Nottingham NG2 1EN Tel: +44 (0)115 983 3650 Ilkeston 21-22 Burns Street Ilkeston Derbyshire DE7 8AA Tel: +44 (0)115 932 4101 GENERAL geldards.com +44 (0)844 736 0006* @geldards This briefing note is intended solely as an overview of the law in England and Wales. It was last updated on 26th June 2018. No responsibility can be accepted for the completeness or accuracy of this briefing note and professional advice should be taken in relation on to any specific matter. Geldards LLP is a limited liability partnership registered in England and Wales (OC313172) and is authorised and regulated by the Solicitors Regulation Authority. A list of Geldards LLP members is available for inspection at our registered office at Dumfries House, Dumfries Place, Cardiff CF10 3ZF. We use the word ‘Partner’ to refer to a member of the LLP or an employee of an equivalent standing and qualification. At Geldards LLP we recognise the benefit of working closely with other professional advisors such as accountants, investment managers and financial advisors to ensure a joined-up approach to our clients’ legal, tax and financial planning. The other advisors included in this publication are not being actively promoted by Geldards LLP. The opinions, beliefs and viewpoints expressed by the other advisors do not necessarily reflect the opinions, beliefs and viewpoints of Geldards LLP and Geldards shall not be held liable for any statements made or content written by third parties. *Please note that the cost of calling our 0844 numbers will include a “service” charge of 6p per minute and an “access” charge from your phone company. Geldards will not receive any payment from the call charges.