Rachel Griffin, head of product law and financial planning at Old Mutual International, said that in 2016 they were inundated with reminders of financial complications that can arise on death, flagging the need that inheritance tax planning should be a new year’s resolution for many.
“In the last week of December, the press reported that celebrities have left behind their large estates through both wills and trusts. George Michael left most of his £105m (€124m, $129m) fortune to his sister in his will. Meanwhile, reports suggest Carrie Fisher is leaving her $25m estate to her daughter through a trust.
“However, not all who died this year planned ahead for these occurrences. When Prince passed away he had no plans in place and so his fortune of about $300m will be divided according to Minnesota Law. The musician only has one full sibling, who is expected to get the money and estate, but there are also rumours that his five half siblings could get some of his fortune.”
Heavily disputed case
Griffin said the important differences between wills and trusts are highlighted in the heavily disputed case of Heather Ilott, who challenged her mother Melita Jackson’s will after discovering she had left it entirely to charities.
In July 2015, the Court of Appeal granted Ilott an award of over £143,000 of her mother’s estate. The charities have since challenged the decision and took the case to the Supreme Court who heard the case on December 12.
“The outcome is expected in early 2017 and the result will set the scope of the court’s powers for Inheritance (Provision for Family and Dependants) Act 1975 disputes in cases to come.
“In 2017 people should consider using trusts, which have both tax benefits and offer the opportunity to gain greater control over the distribution of wealth on death. A scenario such as the Ilott case is also unlikely to occur as the Inheritance Act does not apply to trusts. Plus, distribution of trust assets against the terms of a trust would be a breach and could be legally challenged. A bonus is trusts are confidential, so unlike wills they do not become public knowledge.”