Author Archives: Richard Smith

About Richard Smith

Richard Smith provides financial guidance and training since 1988 and continues to train and educate individuals and business owners in those things that actually make money. My approach and training is one of the 'Kaizen' taking small but practical steps to improve your finances without an adviser. Focusing only on what works and what costs the least.

Probate – Inheritance Tax – Time To Pay

Inheritance Tax must be paid within six months of death, unless some agreement has been made to defer or extend the period. 

There are no other exceptions.

Problem for you is this. ..

It may take you four months to get your head around the probate application, valuing the estate, collecting important information, pension statements, dealing with loans and liabilities, getting investment statements. Based on my present experience, Barclays take weeks to get investment statements prepared.

Then, once you start dealing with the Inland Revenue you need an F number – at least three weeks. And then with the delays at the Probate Registry – with their new software causing problems and the number of deaths causing a backlog in processing.

And then having to deal with Land Registry (at least ten working days to transfer ownership of a property using a TR1 form) and then the sale of the home taking weeks to deal with. There is a good chance you’ll miss the deadline of six months from the date of death in order to pay any Inheritance Tax. 

Honestly, I think the revenue are playing a dirty game in this area – but guess what – you can do little about it. That’s what you have to work with – like it or not. 

This is all very important because if you don’t get all the information to the inland revenue and you don’t get the inheritance tax paid on time then you’ll face penalties and or interest added to the amounts outstanding. Sure if the estate does not have tax due then you can afford to wait – however if there is an inheritance tax liability then you’d better get a move on or pay the price in a few months.

So, get your skates on. Everything is taking longer and longer – but the Inland Revenue don’t care and there is no political will to sort this out.

Probate Costs

Interesting to note that ‘because of Brexit’ the planned increase in the costs of probate are going to be delayed. Question is for how long. This article from the Guardian https://www.theguardian.com/money/2019/apr/08/rise-cost-probate-delayed-by-brexit-turmoil-house-of-commons

Seems to indicate that it could well be some time before these new charges start to bite. Use to the be the case that Government services were based around the cost of the service to Government and priced accordingly, yet there does seem to be more and more charges that are indeed ‘revenue producing’ – or taxation by the back door. We have seen more and more stealth type taxes introduced which does concern me a little. I wonder when these will cease.

An increase in probate costs without a doubt considerably more than the cost of the service to the taxpayer. I don’t think it will be long before these new charges drop into the mix.

The increase in charges will affect those estates of more than £300,000 which I accept is not going to be all cases – but still the Guardian estimate an increase of some £155m per year once the new rules apply – not an insignificant sum of increased cash.

Meanwhile of course if you need any help with probate you’d better get in touch.

Power of Attorney – Can I borrow money from the donor?

Short answer on this is no, not sure why you thought it may be different. It’s not your money.

More – taken from http://johnmacaulay.com/borrowing-money-as-power-of-attorney/

It’s not a UK site but succinctly expresses it.

Borrowing Money as Power of Attorney

One of the questions which I am asked over the years is whether an attorney using the authority under a power of attorney can access money held for an incapable donor to be used for other purposes than to benefit the donor.

THE SHORT ANSWER IS NEVER!
This situation arises most often when a child or children who are named as attorneys want to “borrow” money from the incapable person. The reason given is that Mom or Dad have more than enough money to keep them for the rest of their days and they would loan the money without question. Besides I am told “I will pay it back if it were needed”

I often hear that taking into account the income from government and other sources they will never need any more income. Sometimes this type of transaction is joined in and supported by all of the siblings.

Another justification given is that for estate planning reasons they wish to reduce the value of the estate on death and thereby pay less to the government. This is not within the authority of the attorney either since they are doing the same thing for another reason.

It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage. The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor. I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members.

An Attorney is a fiduciary whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, only for the incapable person’s benefit. An attorney who receives compensation for managing property must exercise the degree of care, diligence and skill that a person in the business of managing the property of others is required to exercise.

An attorney has an obligation to keep proper accounts. A trustee must keep a complete record of their activities and be in a position at all times to prove that they administered the trust prudently and honestly. They must have the accounts ready and give full information whenever required.
A trustee must make a proper accounting as a condition precedent to being awarded compensation. Without a proper accounting, the court is unable to assess the conduct of the fiduciary and to determine the compensation to which he or she is entitled.

An attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property has not adequately carried out their duties and will be held personally liable for the unsubstantiated withdrawals.

From the Public Guardians Office

Again – no.

An in-depth explanation of what you can do. CA

https://www.citizensadvice.org.uk/family/looking-after-people/managing-affairs-for-someone-else/

More from the UK https://www.blakemorgan.co.uk/news-events/blog/making-gifts-under-power-attorney/

From Alzheimers.org.uk PoA’s are not authorised to take loans for themselves nor authorise loans for other people so far as I am aware. Others will be along with more knowledge than I but that’s my understanding from discussions with the OPG.

If you are really not sure and still want to consider the options of borrowing from the elderly parent – you are supposed to be acting in the best interests of – call the Public Guardians office – you’ll the same answer as above – it is not acceptable to borrow from a donor when you have power of attorney – not now not ever.

Inheritance Tax – How Much Is Your Property Worth

The Inland Revenue are making themselves very busy over property valuations on death (note not on sale). With more and more probate cases being tested. Some are blatant undervaluations in order to reduce the amount of tax – if any is paid.

It’s a dangerous game to play – the Revenue Inspectors don’t have to pay to take a case to court so it’s not their money that’s at risk – it really is a case of Executor beware. So what are the options.

Get three Independent Estate Agents to value, formally the property. See if there is a consensus and make sure they justify the valuation. Remember it’s not the expected sale price we are trying to get – it’s the value of the property. As an Executor you have a formal obligation to value the estate – no matter if it sells for less – the valuation is important.

Other expenses like ‘reasonable funeral expenses’ can, of course, be deducted. But Estate Agent, legal costs and probate charges are not deductible – quite a lot of unfairness built into the system already.

Where the deceased offers specific gifts, like items of jewellery these need to be valued formally and included in the estate valuation.

Key is what needs to be offered up to the Inland Revenue on death and these are.

An account of assets and liabilities.

Formal valuations for things like motor vehicles and chattels along with details of any liabilities and loans of the deceased.

Then the big one, the value of the property.

Three Estate Agents valuations as a starting point and possibly a valuation survey by a RICS Member outlining the valuation at date of death – these are normally accepted without question by the Revenue. If further work is required or there is more specialised questions to be asked then the Inland Revenue District Valuer will want to get involved – best avoided if possible.

From Rumball Sedgwick The valuation should be carried out by experienced RICS property surveyors with an in depth knowledge of the local property market. The report also needs to be compliant with current HMRC inheritance tax law to reduce the risk of the District Valuer becoming involved, which invariably delays the whole process further. https://rumballsedgwick.co.uk/valuations-for-probate/

Any costs of this are born by the beneficiaries. and not on the estate, which seems harsh but the Inland Revenue have rules for a reason – they don’t always make sense. Of course they could argue that you don’t need to appoint an Estate Agent to sell the house or ask someone to take on probate for you – and you can inherit all of the available proceeds. As the Revenue say – that’s your choice.

You Have Six Months To Pay Inheritance Tax and no more. Read this post it’s important. And get in touch if you anywhere near this deadline. Probate and Inheritance Tax

From the Guardian https://www.theguardian.com/money/2012/sep/14/cheat-hmrc-property-value-inheritance-tax

Often with normal household goods valuing them is hard to do. The Revenue seem to think an auction is the best place to sell – it will obtain ‘market value’. https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm21041

Figures issued today show that HM Revenue & Customs (HMRC) has increased by 26% the amount of extra IHT it receives by successfully challenging property valuations. When someone dies, any land and buildings they own are part of their estate when it comes to working out IHT. Most estates don’t have to pay because they are valued at less than the threshold: £325,000 in 2012-13. Above this, tax is paid at 40%. However, recent figures from the Land Registry show the average house price in the UK is now £246,000, and £410,000 in London.

From Tax Insider https://www.taxinsider.co.uk/1481-IHT_And_Property_Values_Get_It_Right_Or_Else.html

Mark McLaughlin warns that inaccurate valuations of land and buildings for inheritance tax purposes can result in HMRC enquiries, additional tax and possibly penalties.
Some areas of tax compliance are much more difficult to get right (and therefore more of a risk in terms of making errors) than others. Valuing assets such as land and property for inheritance tax (IHT) purposes (e.g. on death) is one such area. 
Land valuationsOne of the difficulties with land (and many other valuations) for IHT purposes is a lack of clear guidance on what constitutes ‘market value’. This term is simply defined in the legislation as ‘…the price the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time’ (IHTA 1984, s 160).
According to HM Revenue and Customs (HMRC), inadequate valuation of land (and buildings) is one of the biggest risks in IHT compliance. HMRC enquiries into land valuations produce large amounts of additional IHT and interest. What can be done to reduce the possibility of problems with HMRC? 

Importantly items of value will need separate, formal valuations and a formal valuation of other goods remaining. My view would be that an initial position of the estate should be obtained as soon as possible in order to calculate the rough situation and then a decision made from there as to what the next stage will be.

There is a some more information here https://www.litrg.org.uk/tax-guides/bereavement/how-do-i-assess-estate-inheritance-tax-purposes

Household Items – Goods and Chattels

All the stuff that is left. You know the valueless items that no one wants – but were of course precious to the deceased. The Inland Revenue are interested and are watching carefully. For these reasons you need to be a little careful.

From the Revenue Practice Notes

Household goods and personal goods: valuation and technical issues: how we value household goods

IHTA84/S160 stipulates that the value to be included in the IHT400 (IHTM10021) is ‘the price which the property might reasonably be expected to fetch if sold in the open market at that time’. You may want to ask Shares and Assets Valuation (SAV) for advice when very valuable items are included but, otherwise, if the taxpayer has provided a professional valuation of household goods, which states that it has been prepared on the basis of the open market value and/or in in the terms of S160, you will usually be able to accept it. This is subject to the comments about sales below.

A valuation prepared on any other basis may not satisfy the terms of S160, as the value could be more, or less, than the open market value. For example, a valuation ‘for insurance purposes’ using replacement values may include too high a value.

Where a valuation is described as being made ‘for probate purposes’ or for ‘IHT purposes’ you may want to confirm with the taxpayer or agent that the open market value has been used.

If you are concerned that the value returned does not reflect the open market value ask SAV for advice, if the amounts involved are worthwhile.

Generally, sales after the death, particularly those at auction, provide the best evidence of the open market value at the date of sale.  The taxpayer or agent may be happy to substitute the sale prices for the original valuations or may argue for an adjustment due to market movement between the dates of death and of sale. You should consult SAV (Chattels) if appropriate.

You will occasionally find that the taxpayer or agent will deduct either the cost of obtaining the valuation or the costs incurred in sales from the gross value. You must remember that any costs incurred after the date of death are administration expenses and therefore not deductible.  The auction sale price is the gross proceeds of sale (or hammer price) before deduction of commission and insurance and without addition of any buyer’s premium.

You have been warned.

As always, please let me know if you need any help on the matter of probate.

Seven Things

The link to book your free consultation is here. No obligation, no matter how complex. 

Over my thirty years in financial services I’ve learned a thing or two. Here are the seven things that have made more money, made more sense than anything else.

Acceptance of where you are now, your financial situation, your cash, your skills, your liabilities.

Habits, your money habits today will decide your future. One habit you should give up is the one where you spend your money on stuff.

Flexibility, you don’t know what’s coming, so plan for that and you’ll be surprised about how quickly it comes.

Income, all investments must be income producing, if not immediately, then in the very short term.

Understand, that everything changes sometimes with notice but often without.
Never, be fully invested. Always keep a rainy day and a slush fund, always be ready to invest some more when the bottom falls out.

Skills, what new ones do you need to make yourself more saleable, more able to earn money in your marketplace, go invest in some.

You can also download theMoneyTrainers – Seven Things

Recent Updates

Abbey Life Pensions – Best Out?

Allied Dunbar – Really the worst?

Target Life – More on these

Pension Advice Crawley – need some impartial guidance?

Divorce – need some impartial help and guidance -before you split?

Divorced And Separated

Getting yourself back on track after the failure of your marriage or other long term partnership can be difficult if you follow conventional thinking.

Your family and friends will feel sorry for you, you will feel sorry for yourself and you will suffering from a lack of self-esteem and overwhelm, everyone will be sympathetic but not one of these emotions will move you toward working solution.

Of course, the feeling of overwhelm is to be expected or at least acknowledged as a potential issue, but you will need to avoid getting sucked into the massively negative opinions that will be propagated by everyone you meet. Your parents, friends and family members, neighbours and the ‘fat bloke’ down the pub will be on hand to provide you with advice and guidance, giving you their experiences about the matter.

They will all tell you that if you are not careful you will end up with nothing and outline all of the negative things that happened to them, what an outrage the legal bill was (usually true), how their ex completely ‘shafted them’. On and on the story will go, not one of them will provide you with a positive story. Which is a shame, some of them would have gone on to build new relationships with new partners and they will be blissfully happy, the sad and miserable times will be long forgotten.

Your ego will want your ex partner beaten and thrown in ditch forever which of course may be the best thing to happen, however that does not move you any closer to a resolution for the Civil War that is going on inside your head.

The first thing you need to do is to consider the truths about your marriage, except that it’s over and that you need to move forward. Think carefully about why it ended and what you think the causes were. Often there are several reasons try and work out what these reasons are and then note them down. Soon you are going to be able to analyse them and check if these are are really true.

Now you have the reasons for the breakdown (from your own perspective) you should check to see if these are really true, are these the real reasons for the breakdown, is there anything you could have done to make it different.

You may have to go back several years in order to find out these nuggets, but think of them you must, what are the reasons. The truth.

Write them down in full if you want (use the notepad).

Review these to see if you have really caused the problem, review them to determine that your actions really did cause the issues to arise and if you can work out why.

One of the reasons  I recommend you use an A4 pad to create notes on, is this forms a permanent record of your thoughts at any given time. Often you will find that your mind plays tricks on you and will limit your memory in some way, this can have a profound effect on the decision making. Which is going to be more important as you move through this process, examples of this will appear if you don’t make proper notes or keep some form of journal.

As this is an emotional experience often you will find thoughts appearing that should be noted and other aha moments which will add some value to you at some future stage but if you haven’t got a permanent record of them then they will be lost.

Be  careful who you take advice from at all stages is often you will find much of the advice you get will be extremely negative and biased in one way or another, importantly much of this advice will be flawed in some way purely because the third-party provider here will not be aware of all the facts and is likely to be emotionally involved albeit with your best interests at heart.

Taking advice “the fat bloke down the pub”  is never likely to be of much value to you, free advice never is. Find yourself great counsel and only ever take advice from them, of course, listen to friends and family, making a note but never acting on it.

There is no compensation for the end of a marriage and any settlement would need to be fair and equitable in the eyes of the law, this does not mean you get it all and your partner gets nothing, it means the settlement will be fair. If anyone tells you any different this will prove that they have little or no understanding of divorce and the financial implications.

I’m sure if you ended up here you could do with some help. Get in touch you’ll be pleased you did – use this page. In confidence – your personal information is never shared. Divorce Help

Pension Advice Crawley

The link to book your free consultation is here. No obligation, no matter how complex. 

 Pension Advice and Guidance

At the moment finding pension help and advice is not easy, you maybe considering a pension review or just want a holding hand to let you know what your options in a ‘plain English’ way or just want to know what your options are, before you take a step forward.

This service is for you if you want to understand the the following:-

  • How much you pay in charges
  • Can you reduce these charges
  • Can you retire now and what options do you have
  • Is there any point in paying more into your pensions

During a formal pension review I can answer these questions for you and at the same time let you know what you should do next with your pension(s).

Reviewing your pension is important, it’s important for you to fully understand how it will work for you, and what your options are.

You have a couple of options now.

Book your review online immediately 

Make contact with me in order to discuss your options further.

You’ll be pleased you did, I’ll leave you understanding more, with the facts and figures you need to make the right decision and a warm cozy glow – safe in the knowledge that you fully understand what is really happening with your pension and what your options are – all at a fixed price.

 

Pensions, time and money.

The link to book your free consultation is here. No obligation, no matter how complex. 


Richard is the owner over at Money Trainers – telling the truth about money. He’s


in chief over here at the  Financezone.co.uk and is currently working on the money/people/planet is close to fucked conundrum. Aged principles and modern money.

 

Money and Time

These are the two things that cause us humans most problems. There never seems to be enough money kicking around and time, well that just seems to disappear into the the ether.

Yet we seem to deny the truth about time and money, we are quite happy to trade our time in order to obtain money but very few of us it seems want to learn how to make money work for us and therefore to help us save time.

And then when we get the money, we tend to use it to purchase stuff. to consume, because this is the way of the world. If you want it’s the ultimate capitalism. We work hard, we earn money, we spend money, and that money once spent is never returned to us. It has been exchanged it is lost forever. every pound you spend, ends up in somebody else’s pocket, rewarding them. And not you.

This money has arrived with us because we have traded time. This time will never ever come back to us again, once time has been spent it never ever returns to us, sure we are able to manage our time in order to make work more effective for us but we can never make any more and we never know how much more we have left.

Time is not seen as a precious resource until it is too late and  we are close to death, a bit like not being able to draw down on your pensions until you are ¾’s dead.

This is what modern humans do, work, borrow from their futures, spend hard earned on stuff that they can’t or won’t use and that stuff is ruining the one and only ultimate safe space they have.

It seems that only modern humans suffer this fate.

Animals – not having the minds that allow them to contemplate themselves don’t worry about time – they just go round eating. Mating, running jumping. Until death. Little if any higher level thought it would seem.

Aborigines – when first discovered by foreign invaders (the British) were mocked because they had leisure time, time to paint in caves and to tell stories. Of course they understood about preserving resources – not hunting all of the wild life or taking all of the crops. They had learned this behaviour over the 65,000 years they’d live there. In 1788 when the British arrived they thought the locals were backward.

Modern Humans  – Crowd ourselves on trains in order to get to work, spend our money on stuff we don’t need after we’ve traded our lives for it and have only just started to notice  that the wholesale consumption of stuff is not doing much for our only planet. In the main, tend to have debt (a mortgaged future) are stressed up to the eyeballs and are surrounded by things that don’t make them happy, at least on the side of their lives they show. Reality check – go watch the news for five minutes or look around the office.

I’ve looked at much of this over the last ten years or so and have arrived at a couple of conclusions.

We are all fucked if we carry on as we are.

If you don’t learn how to make your money work for you now,  you are fucked.
If you don’t have a business/side business you will be fucked, slowly.
If you think someone (political party/new employer/magic button to press) is about to come and save you – you are completely fucked, now.

Sure, you may go on to have a reasonable life – but look at where we are. Record energy prices, record population (the majority of which are old and are now taking out the system and not adding anything to it. Record property prices, record reduction in state benefits like pensions – despite record levels of taxation.  The uber rich are cleaning up at the expense of the planet and many are are just working toward a minimum wage hell. You can’t even get a degree level education unless you commit to £60k of debt before you even get a job.

Before you all start trolling me. I’m not leftie, just a practical optimist – AKA a realist. You know when the system is fucked when directors award themselves a pay rise and divi just before the liquidators arrive – think Carillion – and then the Government of the day sits on it’s hands. Or when art prices are up by a squillion per cent and at the same city centre flats are never lived in.

Solutions To The Problem

 

Own your  time and your skills. That means your own business at least in part as a side hustle. Your own business, structured correctly is a  Money Machine . You can own one or Invest in one -shares for the time being.

With digital you can sell from your phone  – a side hustle is easier than ever.

Only invest in another  business (shares) if they provide an income, same goes for any investment. If it provides income back to you, that’s money that you don’t have to work for.

Home ownership as a goal. The Germans don’t as a rule, nothing wrong with the German economy.  Lobby your MP as hard as you like to make sure more houses are built, meanwhile get savvy with your money and rent. Let someone else tie up their cash property. Provided you take action on the above it won’t be long

Remember we trade our time for money, this money is then tied up an asset that produces no income (a house) it’s an expense to keep and maintain it. An asset must be like the business money machine – it should work in the background and produce an income for you without it being worked on or with – just the odd dusting down now and again.

Don’t Buy Into Pensions.

The tax benefits of pensions are a myth. Any tax relief on your contributions goes in charges, and any benefit when you are a lot closer to death is in the main taxable. Pensions are deferred income with charges deducted that you have little control over.

Pensions – are often recommended as the way to secure a future. At current retirement ages you’ll need to around seventy percent dead before you can draw on the (average life expectancy is 79 for men and you can draw on pensions from age 55).

This means you need to invest in pensions for a long while, in the hope that they will work for you, produce the capital appreciation you’ll need  between now and the. Of course the providers and advisers love pensions – they get to keep control of the money for thirty years or more and get to deduct charges over the period of time – no wonder you’ll not hear about any of the alternatives to pensions.

Importantly the lobbying carried out by financial services firms means you are left with more pensions and not less – recently auto enrolment – enforced pension savings and pension freedoms have been a massive gift to the industry.

Pensions are inflexible – you can’t get access to the funds until you get to an official date; and this date has been increasing in recent years.

Pensions  – do nothing for you between now and when you are close to being dead. They can’t produce an income you can use now, are limited in the choice of investments and add a layer of complexity to your planning.

Pensions – have notoriously high charges and adviser fees attached and there is no guarantee of any investment return, nor can you complain and expect compensation when the don’t deliver.

When you are ready for more, come over to www.moneytrainers.co.uk or www.thefinancezone.co.uk and start to get a proper education on this money and time stuff.

Swearily yours.

Richard

The great European cashpoint swindle.

The link to book your free consultation is here. No obligation, no matter how complex. 

The great European cashpoint swindle

I’m not so sure about you but certainly I can confirm we are being ripped off  buy a good number of foreign banks that seem to be working in our best interest.  So let me run you by the is

sue as I see it.

 

 

There you are lazing around the pool enjoying a couple of days of beautiful sunshine, kids commanding ice creams and of course,  the need to make sure that you have some cash around for lunch and a copy of a British newspaper.  In recent years all of the European Banks have made it so much easier for us – just about everywhere they  accept debit and credit cards and of course the cashpoints work perfectly.

I didn’t really pay much attention to these until I checked some transactions for my own current account.

You may have noticed the options you and I are now given at a foreign cash point, the one that looks so friendly and gives us an option of withdrawing cash based on your selected amount – it will normally ask you something like ‘do you want to accept our currency conversion offer’ and sometimes will be quite insistent even asking ‘are you sure you want to do that’ when you click no.

It’s not only cash points, it’s often card machines – particularly in France and Spain where I seem to get  the same, seemingly  generous offer.

I wondered what all this was about, until I realised that  I was being double charged – banks don’t give away services for free. And that includes currency transactions.

If you accept the transaction ‘with conversion’ you will nearly always face a double charge, one from the bank that owns the cashpoint and one from your own bank. You’ll also be charged a worse exchange rate (based on my experience).

The simple solution to these additional costs are always to use the local currency option and let your bank deal with the transaction – or you’ll end paying twice for the transaction.

Now you know you’ll never be ripped off again.