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 110
you cannot do so, perhaps due to an accident or illness. LPAs can be put in place for both financial and health decisions. If you lose capacity without an LPA, an application to the Court of Protection is necessary, but this is a costly process which can take months. If you do decide to downsize, you may wish to put a financial LPA in place to ensure the sale and purchase can continue if you become incapacitated or are unable to sign documents for any other reason. Other options You may wish to consider alternatives to downsizing. Despite some bad press in the early 2000s, equity release schemes or lifetime mortgages for over 55s are an increasingly popular way to release capital tied up in the family home without having to move. Equity release should not be entered into lightly. Even though most providers now offer a “no negative equity guarantee” (meaning you will never have to pay back more than the value of the property), high interest rates and early repayment charges can reduce the value of your estate. If you are considering equity release you should seek advice from an independent financial advisor and meet with a solicitor before entering into any arrangement. Tax planning Downsizing can provide the opportunity for inheritance tax (IHT) planning, although you should be careful not to allow the potential to save tax to be your sole motivation. You must be comfortable with the lifestyle changes too, otherwise you may live to regret your decision. If you do not need the cash you release by downsizing and your estate is over the IHT threshold, you could give away funds to reduce your estate for IHT purposes. You can make outright gifts to anyone over 18. However, if you would prefer to delay the age at which they receive the funds, provide for minor beneficiaries or protect the funds for any other reason (such as from a divorcing beneficiary), you may prefer to gift the funds to a trust. You will need to survive seven years from either type of gift. For further advice on downsizing please contact Francesca Sassoli on 01892 506354, email francesca.sassoli@crippspg.co.uk or visit cripps.co.uk. Leading Leading Specialists in in Family & Criminal Law Please call 01737 229 610 to arrange an appointment. Please call 01737 229 610 to arrange an appointment. We look forward to meeting you. We look forward to meeting you. Offices: 213 Camberwell Road , London, SE5 0HG | 020 7277 0110 7a West Street, Reigate, Surrey, RH2 9BL | 01737 229 610 Offices: 213 Camberwell Road Offices: London SE5 0HG 213 Camberwell 020 7277 0110Road London SE5 0HG 020 7277 0110 venters.co.uk Offices: 7a West Steet Offices: Reigate, Surrey, CR6 9LF 7a 01737 West 229 Steet 610 Reigate, Surrey, CR6 9LF 01737 229 610 Online: venters.co.uk facebook.com/venterssolicitors Online: twitter.com/Venters_law venters.co.uk facebook.com/venterssolicitors twitter.com/Venters_law VentersSolicitorsS56.indd 1 20/05/2019 17:17 Pop Up School Art Gallery Business For Sale School Art Gallery Business For Sa School Art Gallery Business For Sale (Due to retirement) Work with Surrey Work Primary with Schools Surrey Primary Schools (Due to retirement) Work with Surrey Primary Schools Ready-‐made business (Due to retirement) Ready-‐made business Work in school term time For information please call 07826 556041/01243 603803 or email johnb@imagesart.co.uk Work in school term time £18,000 excludes stock Ready-made business (Full Training provided) Work in school term time £18,000 excludes stock £18,000 excludes stock Established business w (Full Training (Full healthy provided) Training bookings provided) in 2018 For information please call 0 556041/01243 Established 603803 business or with business email healthy johnfb@btinternet.c with bookings www.imagesart.co.uk in 2019/20 healthy bookings in 2018/19 For information please call 07826 556041/01243 603803 or email johnfb@btinternet.com www.imagesart.co.uk www.imagesart.co.uk 111 JohnBradleyS57.indd 1 21/06/2019 16:56
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