Hectic and eclectic, the East End of London has always been a melting pot of vibrant neighbourhoods. Over the last 30 years, the area has transformed from rough-around-the-edges to the hottest joint in town. House prices in the area have rocketed, with prices set to rise another 15.3% by 2020. For those who joined the property market in the 70’s, 80’s or 90’s, East London has become a very tidy nest egg indeed. If you’re a London resident there’s no doubt that you’ve taken how much your house is worth into consideration. This dramatic increase in house prices has enabled families to become wealthier, but it has also caused divisions when it comes to distribution of the estate.
With family, we often think that paperwork isn’t necessary. However, without proper estate planning family disputes can easily arise. With a staggering third of Brits suspecting family members of taking more than what was rightfully left to them, preparation is the key to avoiding family arguments. Family estate cases are often disputes about emotional wounds and turbulent family pasts as well as about money, meaning that cases are often long, complicated and emotionally exhausting. By anticipating the problems, these conflicts can often be avoided. Here are 5 common problems that show just how important estate planning can be.
Common problem 1: Not leaving an official paper trail
An unexpected boom in property value can lead to unexpected family arguments! The average price of a London home now breaks the £600,000 barrier, but it wasn’t always that way. Say, for example, you bought a property in East London in the early 80’s, when the average property cost around £50,000. Even adjusted for inflation, the value increase to date is staggering. Say, for example, you borrowed money from your sibling to put down your deposit, or make some mortgage payments in times when money was tight. Is that sibling now entitled to part of the property? How much? By drawing up a deed of trust or listing names on the title register, the ownership of a property can be decided before disagreements arise.
Common problem 2: Not leaving a Will
Say, for example, an elderly couple pass on without leaving a Will, leaving their handsome house to their 3 children. One of the children thinks the estate should be split three ways equally. Another of the children thinks they should get a bigger portion, as they paid a monthly mortgage contribution and the others did not. What happens if an auntie who lived in the house for a few years and contributed to mortgage costs now thinks they too are entitled to a share of the money? There could have been a way to solve this without falling out – this complicated arrangement would be made much simpler if a Will had been left! Getting a Will made will ensure that your estate goes to the person you would like to leave it to, rather than decided by ‘rules of intestacy’.
Common problem 3: Not leaving a detailed enough Will behind.
Sometimes, the financial status of everyone involved needs to be taken into account. The Ahads’s left their family flat in Shoreditch to their 2 sons in their Will, hoping that their children would continue to keep the property in the family. One son, a comfortable business man, has the financial ability to keep the family flat as it is. The other son wants to start a cafe, and would prefer to sell the flat so that he can use his inheritance to kick-start his business. A family argument could be avoided by the parents leaving specific instructions in the Will as to the sale (or no sale) of the property.
Common problem 4: Leaving advanced benefits
We all want the best for our family. It’s very common for families to assist with large payments, whether on a first home, helping fund a start-up, or bailing out debt. But do these count against an inheritance? Nadiya was given £10,000 by her parents to help with her university education. She’s now a successful doctor and her parents have passed away. Her siblings feel that this extra payment she received should mean that she in entitled to less of the final estate. Nadiya thinks this is unfair, as the other siblings could have had financial help from their parents too, if they had asked. These strained relationships could have been avoided if her parents had mentioned the gift to their solicitor. This gift could have been outlined as an advancement or not on Nadiya’s inheritance and cleared up any disagreements before they had even happened.
Common problem 5: Poor estate planning leading to fund mismanagement
Trying to safeguard money is also something that is best left to professionals. For example, in an effort to mitigate the 40% Inheritance Tax, Deepak gifted a large portion of his estate to his children by transferring his house into their name. However, following a family argument about money, the children have put the house on the market. Children mismanaging funds or not making sensible financial decisions can hurt many parents’ relationships with their children. If Deepak had received proper professional advice, perhaps he would have opted to choose a trust fund and been able to retain control of how his assets were divided up, without the need for an uncomfortable family argument.
Modern family life has certainly had its role to play. Complicated remarriages, cohabitation and long distance families mean that family feuds over disputed wills have increased dramatically. When all is said and done even the ‘winner’ of these feuds has probably lost their good relationships with their family. Whether it’s over who gets what of a large property in London or who gets Mum’s sentimental jewellery, it’s important to clarify and plan the splitting of your estate with the help of professional estate planners. Proper financial planning that is kept regularly up to date can help beneficiaries and benefactors alike feel like they have all received a fair deal; emotionally and financially. Losing a loved one is difficult enough without the worry of sorting out their affairs, so our specialist team will help you through the administration of the estate at all stages.