27/06/24
The term ‘legal services’ is a broad one that bundles a vast range of knowledge and expertise into a conveniently marketable concept. The reality is that within the legal sector there’s a wealth of specialisms that cater to every conceivable customer provision, as diverse and complex as the law itself.
The pitfalls of generalised legal services – why specialisation matters
It would be an astonishing feat for any one individual or practice to provide specialist legal advice at an expert level across the board.
This is the reason firms offering a broad spectrum of ‘legal services’ can sometimes fall short when it comes to the more technical aspects of a discipline such as estate planning and probate, as CTT’s Technical Director, Spencer Tattam, explains:
“There are a lot of practitioners out there that do a bit of everything, from probate to health and safety, to unfair dismissal and malpractice claims. While their knowledge is broad, it’s not always in depth. This has often come to light for us when dealing with third-party lawyers and will writers who offer general legal services and advice for probate,” he says.
“CTT is one of the most prominent legal services firms in the sector to only offer wills and estate planning without trying to do anything else. That’s what allows us to be so specialised in what we do. We offer our advisers and their clients expert insight during probate that general practitioners can’t always provide. It means our advisers often benefit from huge tax savings for their clients that might otherwise have been missed.”
Many advisers seeking estate planning support and advice on behalf of their clients benefit from Countrywide Tax & Trust Corporation’s specialist, in depth estate planning and trust expertise.
CTT’s specialist estate planning knowledge saves clients’ thousands
Spencer recalls two specific incidents where CTT was able to help advisers save their clients a significant amount in Inheritance Tax – over £280,000 in one case, which had been missed by the client’s general legal advisers.
The Flexible Power of Appointment Interest in Possession Trust
“The first case was in 2012. A solicitor had written a will that said the testator, Mr W, was going to leave two properties to his children and the rest of the estate to his wife. One property was his share of the main residence, the other was a family holiday home,” Spencer explains.
“When the testator died, the will was at least 20, maybe 30 years old. The value of the properties had increased significantly in that time, and they now exceeded the Inheritance Tax allowances available to his estate. This was because they were being left to the children, not his surviving spouse,” he points out.
Spencer picked up the case after the family had just paid over £120,000 in IHT to the Inland Revenue. He suggested implementing one of CTT’s specialist trusts, a Flexible Power of Appointment Interest in Possession Trust, as a means of recovering the IHT fee.
The trust was created in favour of Mrs W with the children as beneficiaries and trustees. Both properties were put into the trust via a deed of variation. As this was done within two years of Mr W’s death, both the share of the family home and the holiday house were deemed never to have passed to the children at all. Instead, the properties were recognised as assets going straight into the trust, which qualified them for Mrs W’s inter spouse exemption from IHT.
“Once the clients agreed, it meant we had the great pleasure of writing to the Inland Revenue and claiming the £120,000 of Inheritance Tax back, which the children then invested,” Spencer chuckles. “We hadn’t saved the family the tax at that point; we’d effectively delayed payment until Mrs W passed away. But it did buy us some time. The children then decided to sell the holiday home as they had no use for it.”
The children took the money from the sale of the holiday home and, under Spencer’s guidance, put it into an investment that qualified for IHT relief after 2 years. When Mrs W died a few years later, the family ended up not only saving the initial £120,000 in Inheritance Tax but also an additional £160,000 based on advice they received from CTT.
“The original advice to do the will the way they did it was wrong,” Spencer says. “When the same legal practice that did the will then carried out probate of the estate, the family paid the Inheritance Tax because the practice didn’t know there was any other option until CTT got involved and explained there was a better way of doing it.”
Executing a will with a Flexible Family Trust
The second case was a more recent one, brought to CTT’s attention when an outside solicitor was carrying out the estate administration on a will trust drafted by CTT.
The will used CTT’s Flexible Family Trust, the only discretionary trust on the market that qualifies for the Residence Nil Rate Band (RNRB). It’s a product unique to CTT and the solicitor administering the estate was unfamiliar with how it works.
“We had a trustee meeting and identified that the clauses in the trust that allow it to qualify for the RNRB had been overlooked, and as a result, the family had overpaid £140,000 in IHT which they were actually exempt from,” Spencer explains.
“We were still within two years of death, which is a really important time frame if there’s a tax advantage that can be claimed on an estate, so I suggested to the client we should do probate all over again because the original forms submitted to HMRC were wrong.”
Although the client’s solicitor was in doubt about the clauses within the trust and their ability to mitigate the estate’s tax liabilities, the client agreed to let CTT proceed with filing a corrective account with HMRC. It was successful and resulted in CTT achieving 40% relief on a further £350,000 of the estate, which amounted to a £140,000 IHT saving for the client.
How our members benefit from CTT’s future-proof wills and trusts
Spencer is the first to admit that, occasionally, the clauses CTT builds into its flexible trusts are not always called upon after death, and they can sometimes make administering the will complex. However, he maintains CTT’s approach is the most effective at helping advisers achieve a future-proof will for their clients, and this example certainly proves that.
“We do get some lawyers that come to us and say this drafting is overly complicated and unnecessary, and sometimes, we have to take that on the chin. But it’s about creating this flexibility, so the client gets the best solution, and the family and any advisers involved can make the right decisions for the estate and its beneficiaries at the point when the client dies.”
Not only do CTT members benefit from using the group’s innovative trusts in their clients’ estate planning, such as the Flexible Power of Appointment Interest in Possession Trust and CTT’s Flexible Family Trust, they also have access to the most accurate, up-to-date estate planning advice through CTT’s team of experts.
“The fellow professionals who work with us and use our services are financial advisers, solicitors, accountants, will writers and mortgage advisers. They can send a will, or a client’s estate accounts, or a policy that has been put into trust to our Estate Planning team and say, ‘Is this right? Is there a better way to do this?’ They can tap into CTT’s expertise and receive ongoing, specialist support and advice to ensure their clients get the very best, tax-efficient planning solutions that will work now and in the future. Sometimes, that can amount to a pretty significant saving – over half a million in this case!”
CTT specialises in providing expert support to professional advisers. To find out more about CTT’s specialist Estate Planning and Trust services, contact a member of the CTT Tax & Trust team today.
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