Can I avoid a family rift over probate?

I have recently made some updates to my will. I know that once probate is granted, my will becomes a public document and I am concerned this could cause a rift in my family, particularly regarding some of the charitable organisations I plan to leave a legacy to. I own property and some investments, as well as a valuable collection of antiques. Is there a way to maintain some privacy regarding the distribution of my estate?

Andrew Reay, probate manager at law firm Harbottle & Lewis, says the grant of probate is the document that gives the executors named in your will the authority to deal with your estate. At the point that the grant is issued, your will becomes a public document (as does the grant itself). This means that, for a small fee, anyone could download a copy from the gov.uk website.

Some personal information, including full names and addresses of you and your executors and, as you have pre-empted in your question, your chosen beneficiaries, will therefore become publicly available. The grant also gives limited information about the value of your estate.

The Probate Registry, which is responsible for issuing grants, may in some circumstances approve an application for a will to be “sealed” or not published. It has the power to do this where, in its opinion, it would be “undesirable or otherwise inappropriate” for a will to become available for general inspection. In practice, however, the registry only tends to exercise this in cases relating to senior members of the royal family.

Although little can be done about names and addresses, if you are concerned about family members — or anyone else — learning about the division of your estate, there are steps you can take now to ensure a degree of privacy on your death.

You could consider revising your will so your estate is left on “discretionary trusts”, rather than outright to named individuals. On the face of the will, you would give your estate to your chosen trustees — these could be the same as your executors — and provide them with flexible powers to distribute your estate.

You would need to name some potential beneficiaries within the will, but could give your trustees powers to add further beneficiaries after your death. Any additions of beneficiaries, or distributions made by your trustees, would be private. 

You should then prepare a letter of wishes in which you set out how you intend your trustees to distribute your estate. The letter would again be private, and need only be disclosed to your trustees on your death. It could incorporate gifts of specific assets, for example antiques, rather than you itemising valuable items in your will.

Your wishes would not be legally binding, so you would be relying on your trustees to follow your guidance. For this reason, you should choose your trustees carefully.

Where your estate would otherwise secure an exemption from inheritance tax, such as on gifts to your spouse and or charity, your estate could still benefit provided the distributions are made to the exempt beneficiaries within two years of death.

Discretionary trust wills have various advantages and disadvantages in addition to the privacy they facilitate. If you are considering using such a structure, you should take legal advice.

How can I plan to fund my granddaughter’s school fees?

I have a new granddaughter and am conscious of the expected election next year. What are the current inheritance tax rules and how is it best to plan to fund her future school fees?

Emily Minett, senior associate at Wedlake Bell, says current UK tax law states that inheritance tax (IHT) is payable on death at 40 per cent of the combined value of your estate and certain gifts made within seven years of death, to the extent that this exceeds your available nil rate band (NRB). The maximum IHT free amount is currently £325,000.

An additional IHT residence nil-rate band (RNRB) — currently set at £175,000 — is available for your home if this passes on death to your children or descendants. However, the RNRB will not apply in full, or at all, to estates exceeding £2mn. 

There are a number of reliefs and exemptions from IHT. For example, you can make unlimited gifts to your spouse or civil partner free of IHT. Shares in an unquoted trading company, including companies listed on Aim, and agricultural land or buildings can be gifted during your lifetime or left on death free of IHT, provided certain conditions are met. Gifts to charity are also free of IHT. 

In terms of funding your granddaughter’s school fees, you might be interested in the reliefs relating to lifetime gifts. The current rule is that you can make unlimited outright gifts to individuals free of IHT provided you then survive more than seven years.

You could consider gifting cash into a bare trust for your granddaughter. While she is a minor, the funds can be used towards payment of school fees. Bear in mind that if there are any funds left in the bare trust when she turns 18, she will be entitled to these absolutely. If you die within seven years of making the gift to the bare trust there may be IHT to pay, on a sliding scale.

You also have an annual exemption of £3,000 that you can give away each tax year with no IHT consequences, albeit I appreciate your granddaughter’s school fees are likely to far exceed this.

Another exemption that may be applicable is the normal expenditure from income exemption. If you have income that is surplus to your needs, you can gift unlimited amounts of this free from IHT without the need to survive seven years. There are various conditions that must be met in order for the exemption to apply, including establishing a regular pattern of gifting, but if utilised correctly this can yield a significant IHT saving. Payments could be made directly to your granddaughter’s school.

With an expected election next year, it is difficult to plan with certainty, especially when pledges to reform IHT often grab the headlines. It is less likely that changes will be imposed retrospectively, so it might be prudent to take professional advice sooner rather than later. 

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

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