Should I write my own will or get legal advice?

I’m a 56-year-old married man with two adult sons. My family rarely discusses financial matters, making the topic quite uncomfortable for us. My wife has suggested I take steps to write a will and establish a lasting power of attorney for the benefit of our young family and its future. Where should I start with this process? I’m hesitant about incurring significant costs, so is it feasible to handle this on my own, or should I seek legal advice?

Philip Sillars, trainee solicitor at Winckworth Sherwood, says you are certainly not alone in feeling uncomfortable about discussing your financial situation with your family. However, taking control of your estate planning with your family onboard now will bring peace of mind to you and your loved ones.

At 56 years old you might feel that by discussing your finances you are loosening the reins, but this isn’t the case. Sharing this information with your family will be invaluable if they ever need to act on your behalf.

In that vein, your wife’s suggestion to create lasting powers of attorney (LPAs) for each other is very sensible. In England and Wales, there are two types of LPAs for when people lose the capacity to make decisions themselves: one covers health and welfare, and the other property and financial affairs.

It is possible to create LPAs without incurring significant costs, especially if you make basic arrangements such as appointing your wife and your children. The government has produced lots of useful guidance explaining the nature of LPAs, when they can be used, and the process to create them.

Do bear in mind that the process is cumbersome and even small mistakes will result in applications being rejected, however. Experienced practitioners can guide you through the process to increase your chances of success, but their main advantage is the wealth of experience you can draw on to tailor your LPAs to your situation.

Similarly, there is no substitute for an experienced will drafter. Low-cost options are increasingly popular, but there are risks: errors can have disastrous consequences if unnoticed until it is too late.

Things that could go wrong include: unnecessary tax being payable, improper signing invalidating the entire will, and inappropriate drafting causing unintended consequences.

Wills and LPAs, when drafted properly, will alleviate much of the stress at the most difficult of times for your family. By contrast, not having them in place, or having inappropriate arrangements, will only cause further difficulties.

Will I need to pay tax on our holiday home sale?

Following the limit on the amount of time we can spend in the EU during one period we have decided to sell our holiday home in Italy. We have held the home for over 20 years and it has sold for well over €1mn. Do we need to declare the sale and the profit made on the property to the tax authorities and, if so, would that be in Italy or the UK? 

Stephen Barratt, a partner at accountants James Cowper Kreston, says UK citizens can spend up to 90 days in any 180-day period in the EU without having to obtain a visa. There are calls for change on this, in particular in France. However, this still would not mean the same rules will be adopted across the Schengen zone. 

Irrespective of any change in the length of your permitted stay, HM Revenue & Customs’ rules on income and gains from worldwide assets remain unchanged. If you are tax resident in the UK, you will need to tell HMRC about any annual rental income (net of deductible costs) and any profit or loss from its sale. That said, if you are tax resident but domiciled outside the UK you may be able to claim for foreign income and gains to be charged on the remittance basis, subject to how long you have been tax resident in the UK. Whether or not this is beneficial depends upon your specific circumstances.

Assuming you are UK resident and UK domiciled, or deemed domiciled, the sale of the property for a profit is likely to trigger a UK tax liability in the normal way and subject to the normal UK rules for reliefs and computation.

Expenditure incurred in relation to any significant improvements to the property such as the addition of an extension or swimming pool may be deductible in calculating the final profit on sale, including agents’ or legal fees. Repairs and other running and management costs, however, can be offset against rents received rather than the proceeds on disposal.

It is also important to remember that in working out the figures, expenditure is converted into sterling at the date it is incurred. It is not sufficient to calculate the gain in the foreign currency and then convert it at the exchange rate at the date of sale.

As the property is in Italy, the Italian tax consequences will also need to be examined carefully, particularly as the rules are different from the UK. The UK-Italian tax agreement does mean, however, that the double taxation is alleviated by the UK tax resident being able to offset any Italian tax paid in relation to the sale against any UK liability, via the UK tax return for that year.

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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