There’s a lot more to safeguarding your finances than preparing a Will and dividing your estate.
Astute Estate Planning can help keep Inheritance Tax to a minimum and ensure you stay in control of your assets. “If you pass away, it’s vital that all of your financial affairs are in order and your Will is drafted in the most tax efficient manner,” shares Emily Taylor, Partner at Dutton Gregory Solicitors based in Winchester.
Below, Emily talks about the advantages of effective Estate Planning and how you can preserve your wealth.
Q: What are the most important considerations during the Estate Planning process?
A: For most clients, their main objective is to make sure their assets pass to the correct beneficiaries. Everyone’s situation is unique, with different concerns and needs. We always have an initial consultation to talk about their assets, family background and any existing wealth planning they have in place. I like to take a holistic approach and look at the big picture. This helps to narrow down the best options for them.
We often require the assistance of financial advisors and accountants, who have usually known the family for many years and have an in-depth understanding of their finances. By working together, we can ensure that the estate is divided tax efficiently and to the individual’s specifications.
Q: How can you ensure that your finances are properly protected?
A: A Will ensures that your wishes are upheld, and can include care fees planning and consideration of the current Inheritance Tax provisions. The involvement of a solicitor will ensure the legitimacy of proceedings, thereby minimising potential disputes.
For example, Wills can be contested by family members and beneficiaries on the grounds that the testator (person who creates the Will) lacked the capacity to make important decisions. When solicitors are present during the creation or reviewing of a Will, they can ensure that the testator is of sound mind and happy with the outcome.
It's also important to make sure you have a Power of Attorney in place. Attorneys are appointed to manage your finances, health and welfare, and should act in your best interest, should you lose capacity to do so yourself.
Family backgrounds and relationships are not always straight forward – solicitors know the right questions to ask and how to avoid difficult situations.
Q: What makes trusts a good Estate Planning tool?
A: Trusts are an excellent way to safeguard your finances should anything happen to you. As an agreement that is enforceable by the Court, a Trust secures a specific amount of money until the beneficiary is able to receive it. Trustees are selected to care for the Trust and act in the best interest of the beneficiary.
Trusts are perfect for clients who would still like to retain some influence in the process. For example, if a parent wishes to give £200,000 to their child, by placing it within a Trust and becoming a Trustee, they can ensure that the child benefits from it over time. It’s a great way to protect the longevity of the assets.
Q: How does Inheritance Tax work and how will it affect me?
A: The amount of Inheritance Tax paid depends on the overall value of the estate. When it exceeds the so-called 'nil rate band', which is currently set at £325,000, you may be eligible to pay tax at 40 per cent on the total figure. Tax rules are frequently changed by the government, so it's essential that your Will is regularly reviewed and updated.
However, assets that are left to a spouse or civil partner are generally exempt from Inheritance Tax. In this case, the tax payment threshold doubles to £650,000. The government has also introduced a 'residence nil rate band', which dictates that if property is left to linear descendants (children and grandchildren), each descendant can receive an extra £175,000 tax free on top of the original threshold. This nil rate band is only applicable if the estate is under £2 million in value.
Q: Why is it so important to have solicitors during this process?
A: Regulated solicitors who have received the correct training to oversee Estate Planning are invaluable. They can provide guidance and peace of mind from the early stages right the way through to the final signing of documents.
At Dutton Gregory, we have a number of experienced solicitors who can mitigate the impact of potential challenges and Inheritance Tax, conserving your hard-earned wealth for future generations.
To discover more about Estate and Tax Planning, visit duttongregory.co.uk or call 01962 863582.
