This afternoon (10th December 2014) the draft publication of the Finance Bill 2015 was released, with many of the measures having been announced by George Osborne in the recent Autumn Statement.
Today’s Wills & Probate look into the relevant changes that may affect consumers within the will writing, probate, and financial planning industries.
As declared in the Autumn Statement, ISA investment allowances will be automatically transferred the spouse or civil partner after the account owner dies. The draft documentation states that secondary legislation drafts will be released soon and the Statutory Instruments will be supported by a Tax Information and Impact note (TIIN).
The documentation released today also confirms the Government are examining the issue of Isa assets being liable for tax during probate. They are said to be working towards having the tax advantages extended while this process is taking place.
It has been reinforced there will be no introduction of single nil-rate bands for multiple trusts. However, the Finance Bill draft clause states that legislation will be brought in with regard to establishing multiple trusts within the same day. The aim of this will be to clamp down on tax avoidance schemes.
The calculation of taxation on trusts is set to be altered, with the removal of requirements to have non-relevant property included. The clause mentions that changes will also be made to other relevant legislation in order to minimise the after effect.
Within the section regarding tax credits and pensions, a clause has been included whereby beneficiaries of a joint life or guaranteed term annuity will receive future payments tax free, should their spouse die before the age of 75. This is subject to no payments having been made to the beneficiary in relation to the policy, prior to 6th April 2015. The clause also states that joint life annuities will be able to be bequeathed to any beneficiary.
The TIIN supporting new pension flexibilities that are due to be enforced next year has been updated. These updates reflect the impact from changes within the Taxation of Pensions Bill.
Colin Blears from Landmark Information Group has commented on the draft clauses, saying:
"In my opinion, the details of the Financial Bill 2015 certainly include some interesting updates that I believe will affect spouses, appointed executors or personal representatives managing a deceased’s estate.
"In particular, changes are being made so any individual can inherit unused pension drawdown funds on the death of the member, where those funds are used to provide a drawdown pension or pay a lump sum death benefit. With a promise to scrap the tax charge on this, it could provide greater potential for executors to maximise the overall value of an estate in question, and so being aware of all potential pension funds will be beneficial.
"In addition to this, the Bill suggests that spouses will also be able to inherit their partner’s Individual Saving Account (ISA) benefits after death. This means that if an ISA holder dies, the benefits of their ISA will pass to their spouse via an extra ISA allowance. When managing the administration of an estate, my view is it will therefore be important to ensure that all the correct due diligence is undertaken at the outset so all financial assets, including pensions and ISAs, have been correctly identified.
"Search services are available that ensure every angle is explored so even pensions or saving funds that may be lost, dormant or simply unknown can be located and factored into the process.
"Ultimately, by removing the taxation from pension drawdown funds and ISAs to spouses, they won’t necessarily be part of the overall IHT allowance and so it is important that estate administrators are aware of this when looking at inheritance tax thresholds."
A public consultation has commenced and any comments on the draft clauses are to be submitted by 4th February 2015.
What are your thoughts on the proposals for the Finance Bill 2015? Could these changes potentially benefit any of your wills and probate clients?
