There are several aspects to think of to protect your wealth and loved ones from the possibility of losing your faculties and the inevitability of death. Here are just some areas you should look at.
If you are concerned with inheritance tax then you can use tools and reliefs to ensure that you reduce your exposure to it.
Firstly, you should make a Will. The rules of intestacy mean that you could adversely end up paying inheritance tax. If you are married with children and you die without a Will then your estate would be distributed as follows, the first £250,000 would go to your spouse as well as all of the personal chattels (meaning items in the home) and the remainder would be halved between your spouse and your children. So, your children may have to pay inheritance tax on your death. By putting in place a simple Will, all your assets could be distributed to your spouse and therefore no Inheritance Tax would be due (as it would qualify for the spousal exemption). Please see our section on Will.
The residential nil rate band is a newer tax band that is only accessible to those that own a primary residence and are given to immediate family through the Will, including: children, step-children, adopted children and grandchildren. If the home is gifted to other members of the family or other beneficiaries then you may lose out on the band.
We may refer you to partner firms that specialise in financial advice around inheritance tax as you may wish to take out a financial product or use reliefs to mitigate your inheritance tax liability.
Trusts can be used as a part of your estate plan.
If you have taken out life insurance then it might be beneficial to place the policy in trust. There are many benefits to having the policy in trust:
★ The policy amount can be paid immediately to the trust on death and would not need to wait until probate has been completed.
★ The amount would be outside you estate for inheritance tax purposes. You may by taking the policy have inadvertently given your estate an inheritance tax problem. By placing it in trust, it is no longer susceptible to inheritance tax as it is no longer owned by you but by the trust.
★ You can ensure that the right people benefit from the policy as per the trust document.
You can also establish trusts within your Will. There are a variety of types including our popular Children’s Trusts and Life Interest Trusts.
The life interest trust allows for two classes of beneficiary. You give someone a life interest in the asset but ultimately others have to inherit once that ends. So if you are concerned that your spouse may remarry after your death or that you have children from a previous relationship. You can give your spouse a right to remain in your property but ultimately have your children inherit once that life tenancy ends. There are 10-yearly tax charges on trusts and you should select trustees that are capable of managing the assets.
Another popular trust is the children’s trust. This allows your child to inherit up to the age of 25 years old. It has tax benefits over other trusts.
Trusts are extremely useful tools, and you will need advice from experts like our team to ensure that you have the right planning in place.
You can put in place a Financial Affairs Lasting Power of Attorney could prevent you from missing out on any drawdown facility.
You may have taken an Equity Release plan, with an initial lump sum taken and the remainder being drawn down as and when required. If you become incapacitated how can you access the funds?
If you have a pension draw down scheme, it is the same. Without a LPA, how can you access your funds?
A LPA can alleviate this concern – please see our LPA section for more information.
We take a proactive stance on estate planning and believe that everyone should have advice on all aspects of their estate not just their Will. For more information contact our team.