Dick­en­sian ‘My pro­bate night­mare cost ost me £100,000’

In­her­i­tance tax

The Daily Telegraph - Your Money - - FRONT PAGE -

Sort­ing out your loved ones’ fi­nances after they die can be­come a long and drawn-out af­fair, of­ten tak­ing up to a year to com­plete, and can cost sev­eral thou­sands of pounds if you choose to hire a pro­fes­sional to help. Some­times, com­plex­i­ties can cause enor­mous de­lays. It took Tele­graph Money reader Robert Bar­ton, 61, about 10 years to un­ravel his late mother’s es­tate, and £100,000 in le­gal fees fol­low­ing a dis­agree­ment with HMRC about whether in­her­i­tance tax (IHT) was due.

The £2.5m es­tate, which Mr Bar­ton’s mother left to her two chil­dren, was made up of a prop­erty, cash and a trust set up in 1985 com­pris­ing £2m of shares.

HMRC said that IHT, at a rate of 40pc, was due on the trust. But Mr Bar­ton ar­gued that the trust was tax­ex­empt, as when his mother set it up she was not domi­ciled in Bri­tain.

He said she had moved to the UK from Aus­tralia in 1969. Un­der his­toric tax rules, im­mi­grants who in­tended to live here per­ma­nently had to be res­i­dent for 17 years be­fore they were “deemed domi­cile”. Trusts set up within that pe­riod were tax-ex­empt, and Mr Bar­ton’s mother set up her trust be­fore the 17-year win­dow closed. How­ever, as his mother’s records were not well-kept, Mr Bar­ton had to con­vince HMRC of the ex­act time his mother ar­rived in the coun­try, us­ing ad­dresses on old bills and school re­ports as proof. He said HMRC even­tu­ally con­ceded after enough ev­i­dence had been put for­ward to prove his case, but only sev­eral years after his mother died in 2006.

“My mother did not keep very good records so things just dragged on and we were ping-pong­ing back and forth be­tween our lawyers and the Rev­enue,” he said.

He added that the law firm he and his sis­ter hired to help with the ad­min­is­tra­tion of the es­tate – Sewell Mullings Lo­gie LLP (SML) – did lit­tle to avert the con­fu­sion and had a poor un­der­stand­ing of the tax im­pli­ca­tions of the trust. Over­all, he paid about £100,000 to the firm in fees.

“My sis­ter and I were end­lessly cor­rect­ing their in­for­ma­tion and things took so long to get done,” he said.

Mr Bar­ton said: “Do not as­sume that be­cause they are pro­fes­sion­als the lawyers al­ways know best, and be sure to con­sult more than one firm be­fore you hire some­one.”

Tim Thorn­ton-Jones, a con­sul­tant and for­mer part­ner at Ir­win Mitchell, a law firm, said that deal­ing with HMRC over com­plex mat­ters was one of the prin­ci­pal causes of de­lays in es­tate distributions. ons. He added that in re­cent years “de­lays ays have cer­tainly got worse” which h he said could be put down to a lack ck of staff.

Mar­tyn James, , of com­plaints ser­vice Re­solver, , said deal­ing with the af­fairs of f peo­ple who had died all too of­ten n took far longer than it should. He e said: “When you try to pic­ture e what pro­bate of­fices might look like, it’s hard d not to con­jure up Dick­en­sian im­ages of dusty old rooms filled with le­gal pa­pers and cob­webs.

“The process of pro­bate is in­her­ently as­so­ci­ated with old rules, le­gal terms and com­plex­ity. But with the ex­cep­tion of some par­tic­u­larly com­plex es­tates, pro­bate should be nei­ther a time-con­sumer nor an in­dus­try unto it­self.”

Mr James added that de­lays of­ten caused con­sid­er­able stress to fam­i­lies and that “time and time again” he dealt with com­plaints about fi­nan­cial ser­vices com­pa­nies “un­nec­es­sar­ily drag­ging out the process”.

He said so­lic­i­tors would of­ten charge large sums of money to ad­min­is­ter an es­tate and warned con­sumers to make sure their af­fairs were set out in a clear and con­cise way to avoid in­cur­ring need­less costs.

As an ex­am­ple, Mr Thorn­ton-Jones said trusts were not al­ways the most ef­fi­cient way of pass­ing on a legacy and re­duc­ing your tax bill. In­stead, he sug­gested a straight­for­ward gift to cut your IHT bill.

When you die you have an IHT al­lowance of £325,000, plus a “fam­ily home al­lowance” if you are pass­ing on your prop­erty to a di­rect de­scen­dant, which cur­rently stands at £125,000 and will even­tu­ally stand at £175,000 after April 2020.

Spouses and civil part­ners can dou­ble up their al­lowances. This means cou­ples will be able to pass on £1m of their wealth com­pletely taxfree from April 2020.

Any­thing above these al­lowances is taxed at a rate of 40pc. You can re­duce the over­all value of your es­tate by mak­ing a gift.

How­ever, you must do this at least seven years be­fore your death in or­der for the gift to qual­ify for full tax relief.

Mr James said those thos who were un­happy with the ser ser­vice they re­ceived from a pro­fes­sional could com­plain com­plai to both the Le­gal Om­buds­man Om­bud and Fi­nan­cial Om Om­buds­man.

You will fi first have to raise your con­cern con­cerns with the firm you are deali deal­ing with and give them eight w weeks to re­spond. If you are a still un­happy, you c can then take you your com­plaint to the omb om­buds­man.

S SML said it could not com­ment due to clien client con­fi­den­tial­ity.

H HMRC said it could not com­ment c on

ind in­di­vid­ual cases.

To many, the is­sue of pro­bate con­jures up Dick­en­sian im­ages. Robert Bar­ton, be­low, faced long de­lays and end­less pa­per­work

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