Death is not an ‘if’, but a ‘when’.
It is easy to assume that property and possessions automatically pass on to loved ones. Often they do not. This is what estate planning is for, and what happens when it is left undone.
A quiet piece of work, rarely revisited.
Creating a plan may not feel a priority. There is a common perception that it is something done in old age. If it continues to be put off, it may simply be too late.
A Will is the first step towards reducing the Inheritance Tax that may be payable and is the starting point for the wider estate planning solutions that follow, Trusts, Lasting Powers of Attorney and considered care and gifting arrangements.
The law decides, not you.
Without a Will, the strict and rigid Rules of Intestacy apply. Instead of you making decisions as to how best to distribute your estate, the law does so on your behalf, and the consequences are not always the ones people expect.
- Your spouse or civil partner will not automatically inherit all of your estate.
- Children under 18 could be taken into care while guardians are appointed, siblings may be split up.
- There can be lengthy delays and disputes before beneficiaries access funds, even spouses on joint bank accounts.
- 'Common law' partners, or even a fiancé, may not receive anything.
40% above the Nil Rate Band.
Inheritance Tax is often regarded as one of the most punitive taxes: 40% on anything owned at death above the Nil Rate Band, which currently stands at £325,000.
Many families are left with a tax bill that takes nearly half of the inheritance intended for their loved ones. This is not unusual; it is fairly common. Several entirely legal techniques exist to mitigate it.
Regular gifts from income
If your income supports your usual lifestyle, regular gifts made from surplus income leave your estate immediately and are exempt from Inheritance Tax.
Potentially Exempt Transfers
Larger lump-sum gifts start a seven-year clock; after seven years they fall outside your estate. Taper relief begins to apply after three years.
Business Property Relief
Shares in many trading companies stop being liable to Inheritance Tax after they have been held for two years, an effective way to move value out of the estate.
EIS and SEIS
The Enterprise Investment Scheme offers 30% income tax relief on the amount invested, deferral of CGT, and shares that qualify for Business Property Relief, relieving them of IHT after two years.
Investment advice around Business Property Relief, EIS and SEIS is provided in partnership with our sister firm Ascot Wealth Management Ltd, authorised and regulated by the Financial Conduct Authority (registered number 551744).
A Lasting Power of Attorney, while you still can.
Lasting Powers of Attorney (also known as living wills) appoint people to make decisions on your behalf should you ever become mentally incapable of doing so, through age or an unfortunate accident. There are two: Property & Finance, and Health & Welfare.
Without an LPA in place
Loved ones cannot make crucial decisions on your behalf without applying to the Court of Protection for Deputyship, a long and difficult process, even to access joint bank accounts.
Once capacity is lost
If a medical professional deems you mentally incapable, there is no proof of competency at the time to make those decisions. That means:
- You can no longer make a Will.
- You can no longer create Trusts.
- You can no longer give substantial gifts.
- You can no longer create Lasting Powers of Attorney.
The family home, quietly at risk.
If the whole family home sits in the survivor's name, under current legislation its value can be taken into account and the property sold to pay for care fees.
With care costs in South East England at the rates they are, bespoke Care Home Planning, including help with local authority care fees assessments, matters for clients of any age.
Family Gift Trusts are a much under-used vehicle. Every seven years up to £325,000 can be placed into one; once seven years have passed, the gift is considered outside your estate for tax purposes. The trade-off is that once funds are settled into the trust, the settlor cannot access them.
A Will can quietly stop working.
You may have written a Will years ago, when you first bought your home, or when the children were young. Circumstances change, and so must the document.
On marriage
A Will is automatically voided upon marriage unless a contrary clause is included.
On divorce
Anything bequeathed to an ex-partner will not reach them, the Will is treated as though that ex-partner is predeceased.
New family or property
Grandchildren, a further property or a change in wishes are all reasons to review. We offer a complimentary review to help determine whether alterations are necessary.
A plan is a piece of care, expressed structurally.
A complimentary conversation with a private client specialist is often the quickest way to understand what a plan should look like for your family.