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Can I contest division of my late partner’s estate?

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My partner and I were unmarried and had no children. When he died this year I discovered he had never made a will. His brother is the only person who will inherit his estate, because he is the only surviving relative. I know my partner would have wanted to help support me after his death. Is there anything I can do?

Natasha Stourton, partner in Withers’ trust, estates and inheritance disputes team, says I am sorry for your loss and that you now find yourself in this difficult situation.

I suggest you consider a claim under the Inheritance (Provisions for Family and Dependants) Act 1975. This enables a judge to award certain categories of applicants financial provision from a deceased person’s estate even if they are not named in the will or would not benefit under the intestacy rules — which dictate that your partner’s estate should pass to his brother.

My first question is whether your partner died domiciled in England and Wales? Domicile is a legal term which can be difficult to identify, but starting questions are: where was he born, where did he live during his life, where did he die, to where did he have the most connections? You would only be able to claim under the 1975 Act if your partner died domiciled in England and Wales.

My next question is whether you were living with your partner as if married or in a civil partnership for at least the two years immediately prior to your partner’s death, or whether you were financially dependent on your partner immediately before his death? If so, you should fall into at least one of the categories of possible applicants. 

When considering a claim, the judge will seek to answer two questions: do the will or the intestacy rules make reasonable financial provision for the applicant and, if not, what would be reasonable financial provision. As you were not married or in a civil partnership with your partner, reasonable financial provision will be considered through the prism of “needs”, ie what would be reasonable provision to meet your needs now and in the future.

There is no statutory definition of what this means but the precedent is that it is not so much so as to afford a lavish lifestyle but not so little so as to just avoid poverty. The judge will take into consideration various factors, including the size and nature of the estate, your partner’s brother’s financial needs and your partner’s expressed wishes, amongst others. The outcome, and if successful the size of award, will depend on the circumstances of your claim. 

As a consequence of the judge’s considerations, a 1975 Act claim can be quite exposing — you have to disclose your entire financial position to the court and other parties. But the Act is in place to assist in situations just like yours, so it is certainly worth exploring.

How can I invest more tax efficiently?

I have been investing for many years without much consideration of the tax I’m paying or if it can be reduced. Can you give me any tips on how to be more tax-efficient with my investment portfolio?

Headshot of Nick Sinclair-Wilson, chartered financial planner at BRI Wealth Management

Nick Sinclair-Wilson, chartered financial planner at BRI Wealth Management, says the tax efficiency of investments is often an overlooked area of portfolio management, but with taxes such as capital gains at 20 per cent for a higher-rate taxpayer, it can have a dramatic impact on your actual return.

The most common method of improving tax efficiency is by holding investments in a stocks and shares individual savings account (Isa). You have the option of investing £20,000 a year in an Isa, and investments within the account are free of both capital gains and income tax. If you opt to transfer funds from a taxable account you can also make use of your annual capital gains allowance of £12,300, crystallising gains that would otherwise be taxable.

It can often make sense to focus on high-yielding investments ensuring that the dividends or income they produce is shielded within the tax-free Isa wrapper. You should try to use your allowance annually, if not it is lost, and gains will build up within your portfolio.

Where possible you may wish to structure your portfolio so the dividends paid fall within your annual dividend allowance of £2,000. If married, you can also pass investments to your spouse without crystallising any capital gains using the spousal exemption. In doing so, you can utilise two sets of allowances, not only the dividend allowance, but also their Isa and capital gains allowances.

From an investment point of view, and given the current uncertain economic environment, you could consider investing directly into gilts. However, it is worth noting that while the income produced is taxable, any capital uplift is tax-free. Due to recent declines, gilts across the curve are offering the opportunity for a capital uplift if held to maturity, and therefore a tax-free return. Furthermore, the income produced from gilts is categorised as interest so this may also fall within your personal savings allowance which is £1,000 per annum for a basic rate taxpayer and £500 per annum for a higher rate taxpayer.

In a similar vein, you could also invest into a venture capital trust. VCTs typically finance younger, unlisted companies with potentially promising prospects. To encourage investment, investors receive tax relief in the form of both income tax relief at a rate of 30 per cent and tax-free dividends. While caution should be recommended given the high-risk nature of such investments, they can form a modest part of a well-diversified portfolio.

If you are concerned about inheritance tax, you could invest in business qualifying assets in the form of Aim-listed companies (these can also be held in the Isa to ensure further tax efficiency), unlisted trading companies or through enterprise investment schemes. Again, these are high-risk investment areas and advice should be sought. The latter also offers several other tax advantages such as capital gains tax deferral, loss relief and capital gains tax free growth.

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.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com

Our next question

I own a house in London with my wife that I have lived in for over 30 years. I also own a large property and a few cottages in Wales that were built by my great grandfather, which I rent out. I have heard that tax changes are afoot that could be financially damaging. Advice would be appreciated.

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