Surrey Homes | SH57 | July 2019 | Summer supplement inside

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Time for a Change

Considering downsizing? Here’s what you need to think about...

You might consider downsizing

as you enter retirement for a

variety of reasons. Perhaps you

are looking to save money and time on

property upkeep, find somewhere more

suitable for your needs, move nearer

to family or friends, want to release

capital for yourself, or to help family

members. Whatever the reason, when

deciding to leave the family home

you must consider many emotive and

practical issues. While you are likely to

have considered the potential impact

on your lifestyle and bank balance,

you may not have thought about the

impact downsizing may have on your

wider affairs. Francesca Sassoli, of law

firm Cripps, incorporating Pemberton

Greenish, outlines some legal

considerations you should be aware of.

Your will

When contemplating downsizing,

you should review your will. It may

need updating to reflect the change of

property to avoid an unwanted outcome.

For example, you may give the

property to your partner and the rest

of your estate to your children. If you

do not amend your will to refer to

your new property, the gift to your

partner may fail, so your new property

unintentionally passes to your children.

property ownership

If you are buying with another person,

you should take advice as to whether to

hold it as “joint tenants” or “tenants in

common”. Various factors, including

your will, may impact your decision.

Properties owned as joint tenants pass

automatically to the survivor on the

death of a co-owner. But if you intend

to give your share of the property to

another person, or to a trust, in your

will, the new property should be

purchased as tenants in common so

that your share passes under your will

and not to the co-owner automatically.

When preparing to sell your existing

property, you should check your

records and at the Land Registry to

see if any other parties have an interest

in your property. It is not uncommon

for couples to give a share of the

family home to a trust or to their

children during lifetime or on the

first death, which will have an impact

when downsizing. This is sometimes

recorded by a charge or restriction

registered against the property. Legal

advice should be taken regarding these

arrangements before downsizing.

residence nil rate band

This is a tax-free allowance (£125,000 at

the time of writing, but set to increase

to £150,000 from 5 April 2019)

available in addition to the ordinary nil

rate band (currently £325,000) for those

passing their home to descendants on

death. The allowance was introduced

in April 2017 and is set to increase by

£25,000 every tax year until it reaches

£175,000 in the tax year 2020/21. The

allowance can be transferred between

married couples or civil partners if

it is not used on the first death.

When downsizing, you should

consider whether your share of your

new property is worth enough to fully

utilise the allowance available, to avoid

wasting some of it. If your share of the

new property is less than the available

allowance (£250,000 for a couple at

the time of writing but set to increase

to £300,000 from 5 April 2019), a

special “downsizing relief” may be

available so your estate can still benefit

from a percentage of the allowance.

You should keep the completion

statement from your sale and purchase,

and take legal advice to check how the

provisions apply in your circumstances.

Lasting Powers

of Attorney

Lasting Powers of Attorney (LPAs) are

documents nominating attorneys to

manage your affairs on your behalf if

Downsizing –

key things to consider

• Are you ready for the

emotional impact of leaving

your current home?

• Is your home listed in your

will? It’s highly likely this will

need updating as a result of

a property sale.

• Have you considered the

different ownership options

available and their implications

to your inheritors?

• Will downsizing affect the

tax-free allowance in your

inheritance tax planning?

• Are you prepared for the risk

you may not be well enough to

complete the sale and purchase?

• Have you considered the

alternatives?

• What will you be doing with

any surplus cash as a result

of downsizing?

surrey-homes.co.uk

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