Personal tax planning FAQs

Your guide to the Personal Tax Lifecycle

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Whether you are planning for your retirement, considering your family circumstances or simply looking to understand your tax planning options, Menzies Personal Tax Lifecycle can help you make the right financial decision at the right time.

FAQs Index

This page considers some of the personal planning considerations in more detail and how Menzies can help you.

Click in the below options to find out more about:

Wills

Guardianship

Pre-Nups

Normal expenditure out of income

Gifts

Trusts

Potential exempt transfers PETs.

Contact us for more support


Wills

Why draw up a will?

The importance of drawing up a will should not be underestimated. It is an instrument that can prove beneficial to all of us, regardless of the extent of our personal wealth and possession. Consider the potential implications of neglecting to make a will: Should you die without a will there are a set of rules, known as the intestacy rules, which dictate how your property, possessions and money will be allocated after your death. There is no guarantee that the intestacy rules will mirror your own personal wishes as to how your estate should be divided. Unmarried partners and those who have not registered a civil partnership cannot inherit from each other without a will. Thus the death of one partner could conceivably lead to financial difficulties for the remaining partner. Thirdly if you have children a will can be used to ensure arrangements will be in place you or both you and your spouse die. Equally important to drawing up a will is to ensure your existing will is kept up to date; inevitably circumstances in each of our lives change with time and we want to make sure your will accommodates for such changes. A divorce or separation from your partner is a common call for change to one’s will. Also bear in mind that, subject to a few exceptions, if you enter into marriage or a civil partnership, then any previous will you have made will automatically become invalid.

How can we help?

Our services are on offer whether you need to draw up a will from scratch or already have one in place. In either case our primary focus lies with understanding your personal wishes and concerns over the distribution of your funds, property and assets following the conclusion of your lifetime. We can: Where necessary, review the terms of your current Will and advise whether amendments should be considered. Advise on any tax planning opportunities that may be suitable to your personal circumstances. We work closely with our recommended and trusted firm of solicitors who will be able to prepare a new Will should this be required. At the same time, we have experience in working with other solicitor firms should you already have one in mind.

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Guardianship

Why might you want to consider a guardianship?

Guardianship is the appointing of one or more individuals to a child. A special guardianship order is intended for those children who are unable to live with their parents and who would benefit from a legally secure placement. This order is more secure than a residence order as a parent cannot apply to discharge it unless they have permission of the court. However, it is less secure than adoption as it does not end the legal relationship between the child and his or her birth parent.

How can we help?

Where an application for guardianship is in consideration there is intrinsically a question over the welfare of the child, and this may extend to the child’s present and future financial security. Where potentially beneficial we can take you through the option of setting up a trust specifically for the benefit of the child and discuss whether or not this would be a suitable option. We can also refer you to our recommended firm of solicitors who will be able to discuss the suitability of applying for guardianship over a child, as well assist with the preparation and handling of the application itself.

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Pre-nups

What is a pre-nup?

A prenup is a document that a couple sign before entering into marriage. It is used to set out a pre-agreed financial settlement in the event of their subsequent divorce. It is an opportunity for each individual to ring fence any assets that either of them is bringing to the marriage or that they may inherit during the marriage. A prenup can, ideally, be quite a flexible document in that it can be drafted to deal with a whole host of different eventualities: What would be the impact on the financial settlement of children being born to the couple and one of them giving up work? Would the financial settlement alter should one spouse fall ill and as a result is no longer able to work? Will the financial settlement vary with the eventual length of the marriage? Understandably couples do want to have to come back and revisit the terms of their prenup each time an important life event occurs, some leeway is therefore welcomed.

How can we help?

We can provide an independent and impartial point of view on whether or not a prenuptial agreement would be a sensible addition to your personal arrangements, including some of the key assets and areas that should be addressed. We can recommend the services of an expert team of qualified solicitors to assist with the drafting of a prenuptial agreement. Alternatively, we can work closely with your preferred solicitor of choice.

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Normal expenditure out of income

What is a gift?

Regular gifts out of surplus income are exempt from inheritance tax, provided that they meet a prescribed set of legislative conditions. There is no limit on this exemption and can therefore prove to be a valuable method in IHT planning. The key conditions to be aware of : Gifts are made out of your normal income – as opposed to capital proceeds; Gifts form part of normal expenditure – the gifts are habitual or regular. After all transfers have been taken, you are left with sufficient income to maintain your usual standard of living.

How can we help?

We are experienced in helping our clients plan ahead for making gifts out of regular income. From our experience we are familiar with the key points to be considered and addressed when looking to make this type of gifting. These include: Assessing your total level of excess income; Discussing and establishing the recipient(s) of these gifts; Predetermine an appropriate schedule to follow in making gift making; Drawing up a self-declaration of intent; and Record keeping.

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Trusts

What is a trust?

A trust is a relationship in which one party, known as the settlor, gives another party, known as the trustee, the right to hold legal title to property or assets for the benefit of a third party, the beneficiary. Trusts are commonly established to provide protection over the settled property, ensuring those assets are managed in accordance with the settlor’s wishes. Where appropriate it can serve as an important tool in protecting family wealth and succession planning.

How can we help?

Advise on the suitability and effectiveness of establishing a trust. With regards to an existing trust we also advise on its continued effectiveness and, where necessary, consider the option of winding up the trust. We also can advise on the option of establishing an offshore trust, including advice on the tax implications on the settlor, trustees and beneficiaries. Ensure that the trust fully adheres to these compliance obligations. These includes assisting with: Trust registration with HMRC; Preparation of annual trust tax returns; Inheritance tax calculations on payments into or out of the trust; For some trusts, inheritance tax calculation on its 10-year anniversaries; and Maintaining trust accounts.

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Potential exempt transfers (PETs)

What is a PET?

A Potential exempt transfer (PETs) is a gift made during a person’s lifetime that is not immediately subject to tax when the gift is made, however it may be taxed should the donor pass within seven years from the date of gift.

How can we helps?

The effective rates of tax on the excess over the nil rate band are:

  • 0 to 3 years before death 40%
  • 3 to 4 years before death 32%
  • 4 to 5 years before death 24%
  • 5 to 6 years before death 16%
  • 6 to 7 years before death 8%

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Contact us for more support.