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Inheritance Tax and Will Disputes

by Ridley&Hall in Inheritance Tax, Sarah Young, Wills posted November 11, 2021.

The Office for Budget Responsibility (OBR) expects twice as many estates to be paying inheritance tax (IHT) by 2026.

To put that in context, some 6.5% of estates will face the 40% tax by 2026 – up from 3.7% last year – equating to 41,400 families each year from 2026. The Treasury will take in £7.6bn a year in IHT by 2026, an increase on the £6bn this year.

The OBR blamed unexpected rapid rises in property prices and extra deaths from the pandemic for making more estates liable for the tax. The IHT threshold (below which no tax has to be paid) has remained at £325,000 since 2009. An additional £175,000 allowance for the family home will also stay frozen until 2026. Any unused IHT allowance can be passed to a spouse, meaning married couples and civil partners can leave an estate totalling £1million without their family having to pay.

What are the potential implications of this news in relation to will disputes? Well, I can certainly foresee the possibility that those with significant assets may be encouraged by their potential future beneficiaries to share their wealth during their lifetime rather than to leave it on their death, to minimise or avoid IHT being payable.

Some lifetime giving can be a good idea from a tax planning point of view. But I’ve written a lot about the perils of lifetime financial abuse, because there’s a fine line between someone choosing or being encouraged to make substantial gifts of money or property and being put under what the law calls ‘undue influence’ to do so. The subtle, corrosive effect of emotional pressure can be very difficult to identify and contest either during the lifetime of the victim or after their death, but it can be done. Someone can appear to willingly transfer over their property, and even have the benefit of legal advice, but still be found to have done so under undue influence – these sorts of transactions can be set aside by the court.

Families need to be vigilant, not just in respect of other family members who may have self-serving agendas, but also in respect of predators who prey on the elderly wealthy. Given the steep increase in property prices this is now going to be a lot more individuals than before the pandemic.

I’ve written many times about the issue of predatory marriage – where an elderly victim, often living on their home alone, and vulnerable or suffering from dementia, is groomed by someone who befriends them. Even though the victim may lack mental capacity, there are frighteningly few safeguards to prevent a marriage taking place, sometimes only being discovered after the victim has died. Because marriage revokes a will, the victim’s ‘spouse’ will usually inherit the entire estate – and would even benefit from the IHT spouse exemption.

Sadly, most financial abuse is still perpetrated by family members who will justify their behaviour in a number of different ways. If in doubt, seek advice and put as many safeguards in place as possible to ensure that your wishes are respected. If you need legal help or advice, call us on our freephone number 0800 8 60 62 65.

Sarah Young

Sarah Young – Director & Solicitor

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