Borkakoty Wills and Estate Planning

List of potential options for your consideration based on your financial, health and personal circumstances ...

Basic Will

Level of sophistication - Low

A Basic Will allows you to transfer property, assets or chattels to beneficiaries of your choice and avoid the application of the intestacy rules. You can also appoint guardian(s) for your children. A Basic Will is suitable when no asset or property protection is needed or no inheritance tax mitigation is needed as the estimated value of the estate is likely to be below IHT Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB) as applicable, or the testator is planning for outright gifts during lifetime and avail the 7 years survival exemption.

Identical Mirrored Wills for couples, partners or cohabitants.

Wills with inbuilt Property Protection or Flexible Life Interest and or Discretionary Trusts

Level of sophistication - Moderate

Protective Property Trust (PPT) 

Client objectives: Partial asset protection, as well as to pass on the right to occupy the main residence (for client’s share) to spouse/partner for stipulated time or conditions, after which will be inherited by client’s children, lineal descendants or loved ones.

Suitable assets: Main residence with estate value within the Nil Rate Band and Residence Nil Rate Band

Key features of solution: This is a Trust featured within the Will(s) and comes in effect after client passes away. The asset held in Trust is ringfenced from financial predation and potential care costs of surviving spouse or partner. The transfer of right to occupy can benefit from spousal exemption for IHT as applicable, and transfers to children and lineal descendants can benefit from the Nil Rate Band and Residence Nil Rate Band.

Life Interest Trust (LIT) or Flexible Life Interest Trust (FLIT) 

Client objectives: Partial asset protection, pass on the right to occupy the main residence (for client’s share) to spouse/partner for life as well as the right to income from savings, after which the share of main residence and savings will be inherited by client’s children, lineal descendants or loved ones.

Suitable assets: Main residence and savings with estate value within the Nil Rate Band and Residence Nil Rate Band

Key features of solution: This is a Trust featured within the Will(s) and comes in effect after client passes away. The assets held in Life Interest Trust is ringfenced from financial predation and potential care costs of surviving spouse or partner. The transfer of right to occupy and savings can benefit from spousal exemption for IHT as applicable, and transfers to children and lineal descendants can benefit from Nil Rate Band and Residence Nil Rate Band. A Life Interest Trust provides the surviving spouse or partner a right to occupy main residence and income from the savings, while a Flexible Life Interest Trust (FLIT) provides additional discretion for surviving spouse or partner to access the capital held in the Trust as well. The FLIT helps mitigate for generational IHT as the assets are finally held in a Discretionary Trust with potential beneficiaries being children, grandchildren or lineal descendants.

Discretionary Trust (DT)

Client objectives: Partial asset protection and pass on the share of main residence and savings to a Trust for the potential benefit of spouse/partner and or client’s children, lineal descendants or loved ones.

Suitable assets: Main residence, savings and other assets with estate value within the Nil Rate Band and Residence Nil Rate Band.

Key features of solution: The main residence, savings and other assets are held in a Discretionary Trust without any life interest for anyone, and for the benefit of a list of potential beneficiaries. The Trustee(s) have discretion on the amount and timing of capital and or income distribution, as well as the beneficiaries. Given the discretion with the Trustees, the assets don’t form part of any of potential beneficiaries’ estate and thereby mitigates generational IHT for lineal descendants.

Lifetime Trusts for Bloodline Planning and Asset Protection

Level of sophistication - High

Asset Protection Trust Plus (APT Plus) 

Client objectives: Asset protection, Efficient tax planning for IHT (Inheritance tax) on lifetime transfers, Generational IHT, Stamp Duty and CGT (capital gains)

Suitable assets: Main residence or family home, and savings including shares, bonds and cash

Key features of solution: Transfer of assets into a Discretionary Trust (up to Nil Rate Band value of £325,000) where client(s) could continue to control the assets as trustees as well as be beneficiaries.  The remainder of the assets will be held in a Bare Trust. With every 7 years of survival, the Discretionary Trust (DT) will be topped up with additional £325,000 of assets as needed from the Bare Trust. The Trustees have discretion on the amount as well as timing of any income and capital distribution to potential beneficiaries, as well as how the beneficiaries enjoys the assets. The Trustees also have discretion to change the Trust period. This feature enables the Trustees to change the Trust period if needed to avail the Residence Nil Rate Band (RNRB) which is not available if assets pass to lineal descendants through DT. This option can be exercised based on the value of main residence and savings at the time of death.

This solution mitigates generational IHT for the assets held in the Discretionary Trust as these do not form part of the estates of potential beneficiaries including grandchildren and their lineal descendants. It also provides asset protection as assets held in Trust are ringfenced from any financial predation (bankruptcy, creditor claims, divorce settlements) or if beneficiaries are potentially irresponsible and or lacks capacity.

Asset Protection Trust (APT) 

Key features of solution: Compared to APT Plus, an APT solution will not have the feature for the Trustees to have discretion to change Trust period. This is suitable for smaller estates and where potential use of the Residence Nil Rate Band is remote.

Settlor Excluded Asset Protection Trust  (SE APT) 

Client objectives: Asset protection, Efficient tax planning for IHT (Inheritance tax) on lifetime transfers, IHT at death, Generational IHT, Stamp Duty and CGT (capital gains)

Suitable assets: 1-2 investment or buy-to-let properties, savings including shares, bonds and cash.

Key features of solution: Transfer of assets into a Discretionary Trust (up to value of £325,000) where client(s) can continue to control the assets as trustees but cannot be beneficiaries (including client's spouse and minor children). These assets will drop out of client's estate for IHT (at death) purposes after 7 years, and additional £325,000 can be topped up into the Discretionary Trust every 7 years of client's survival. The lifetime transfers to the Discretionary Trust are mitigated for Lifetime IHT charges, capital gains and stamp duty taxes.

Landlord Planning - a three staged solution for landlords

Client objectives: Asset protection, Efficient tax planning for IHT (Inheritance tax) on lifetime transfers, IHT at death, Generational IHT, Stamp Duty and CGT (capital gains)

Suitable assets: 4 and above  investment or buy-to-let properties managed by couples or partners

Key features of solution: Establish a formal partnership arrangement that actively manages the property portfolio , followed by incorporation of a limited company, and finally placing the relevant company shares in a employee benefit Trust. This solution results in the assets dropping out of Client's estate after 3 years for IHT (at death) purposes. The transfers of assets into the incorporated company are also mitigated for capital gains and stamp duty taxes.

Other Lifetime Trusts based on tailored objectives of Client(s)

Lasting Powers of Attorney

Level of sophistication - Low

Key objective is to provide protection for elderly loved ones or someone who is in high-risk occupation or just as matter of convenience for someone who is abroad. It provides for authority to transact on property and other financial affairs for someone who is unable to make such decisions. It also provides for authority to take decisions on health and personal   welfare matters on behalf of someone who is unable to take such decisions due to lack of mental capacity.