Make this the season to get on top of things, with a simple checklist to stand you in good stead.
Is your will up to date?
The most important but often overlooked document to be on top of is your will. Without one in place those closest to you may not automatically receive what you wish for them. It is good practice to review your will every four or five years or when your circumstances have changed. This could include:
Getting married: If you made a will before you married, it becomes void upon your date of marriage void and your estate passes under the intestacy rules. Intestacy rules, crucially, do not provide for unmarried couples or stepchildren. You may wish to protect assets for children from a previous marriage.
Having children: It is important to consider who will look after your children until they are 18, in the event that something happens to both parents. Without this in place, the decision falls to a court. Don’t forget grandchildren – have you factored in your wish to include them in your will?
Appointing executors and trustees: Who will administer your estate and manage the finances for any minor beneficiaries? Have those that you want to be executors, guardians or beneficiaries in your will changed?
Do you have a Lasting Power of Attorney?
If you do not have Lasting Powers of Attorney (LPA) in place, you may wish to consider setting them up. LPAs allows you to appoint someone – an attorney or attorneys – to help you make decisions on your behalf should you find yourself incapacitated by accident or illness and unable to make decisions for yourself. There are two types of LPAs:
Health & Welfare LPA: This covers decisions regarding your medical care and health wishes, such as giving authority to make decisions regarding life sustaining treatment or appointing a care home.
Property & Financial Affairs LPA: This allows your attorney to manage your bank accounts and investments so that they can pay your bills and sell your home if you need to move into a care home. It may be used as soon as it has been registered and is especially important should your family rely upon you financially.
Have you thought about inheritance tax?
We each have a Nil Rate Band (NRB) of £325,000 – this means that if your estate is over £325,000, the value above that will be subject to Inheritance Tax at 40%. Have you considered whether your estate has enough liquid assets to settle the Inheritance Tax? If not, then your home may need to be sold in order to pay the tax. There are reliefs and exemptions you can take advantage of:
If you leave your estate to your spouse: spouse exemption applies and your estate would not be subject to Inheritance Tax.
If you leave a cash gift to charity: those gifts are exempt from Inheritance Tax. In addition, if you leave at least 10% of your estate to charity, this will reduce the Inheritance Tax rate to 36%.
If you make a lifetime gift: to an individual and survive by seven years, the gift would not form part of your estate for Inheritance Tax purposes.
Are your policies and pensions in order?
Do your life insurance policies or pensions allow you to complete nomination forms to put them into trust? This means that any lump sum payment that is payable on your death will be paid into a Discretionary Trust and distributed to your nominated beneficiaries without forming part of your estate and therefore would not subject to Inheritance Tax. In most circumstances, the policy provider would make the lump sum payment to your beneficiaries without requiring a Grant of Probate.
If you would like to discuss any of the above, we offer a free half hour consultation. Contact our Private Client team.