RegulationMay 7 2013

IHT planning: Advice to aid the bereaved

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      One of the joys of being a professional adviser is that many clients become trusted and supportive friends. But the death of such a client can be a shocking experience.

      Hopefully the client will have a well-drafted will, but even then there are ways in which financial advisers can add real value to the probate process, either by putting forward ideas that have not been considered or by just being another knowledgeable point of contact for the executors and family.

      Immediate action

      Some matters should not wait until after the funeral. The most important for an executor to consider is the insurance position of houses and their contents. A contract of insurance was one of utmost good faith: that meant volunteering to the insurance company anything that could affect the risk being covered. That rule has been modified by the Consumer Insurance (Disclosure and Representations) Act 2012, which came into force on 6 April 2013. Until this new Act plays out in practice, it is sensible to remain cautious. Box 1 highlights two of the important subclauses.

      Obviously the death of the sole occupier is relevant. On being told a property is not occupied, in most cases the insurance company will impose conditions concerning regular visits to the house. This will often involve checking its heating and the draining of its water system. Those conditions are usually fundamental terms and should be carefully observed. If they are impracticable, they should be discussed with the insurance company. Chart 1 provides a flowchart to help deal with this process.

      Also, keep in mind that burglars do read obituary notices and will break into empty houses where the occupant has just died.

      An immediate interest

      There are two other matters that advisers should consider straight away. The first is the commonsense point that most wills are drafted so that on death the will gives an immediate gift to the named beneficiary. What if that beneficiary were to die unexpectedly soon afterwards? This will raise the question as to whether the beneficiary has a will, a lasting power of attorney, and how the inheritance slots into that beneficiary’s personal position.

      It is always surprising how many beneficiaries will want to put off these considerations until after the inheritance has been received.

      The second matter is time limits, the most important of which is for a deed of variation – not where the beneficiary wants to redirect for his or her own inheritance tax (IHT) arrangements, but where the deceased has received an inheritance within the two-year period prior to their death.

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