With a little bit of planning now, you can make it easier (and hopefully less expensive) for your loved ones to sort out your affairs after your death. Not a nice thought, but it's good to get it all sorted out sooner rather than later.
Your action plan:
- Write a Will if you don't already have one.
- If you've got a Will, make sure it's up to date.
- Review your Inheritance tax situation to see if you can reduce the amount to be paid from your estate when you die.
Writing a Will
This job should be high on your list of priorities. Without a Will, the government decides how your estate should be distributed, with no regard for your wishes. This could mean friends, relatives and charities get nothing - even if you made promises during your lifetime.
It is possible to write your own Will, but it's not always advisable. It's easy to make mistakes, making it invalid. Using a Solicitor will ensure all the legal formalities are followed and they will be able to help ensure your Will is as tax-efficient as possible.
If you need help finding a solicitor in your area, then visit the law society website.
Before you see a solicitor it could save you some time if you can answer the following questions:
- What do I own?
- What do I owe?
- Who gets what?
- Is there anyone who depends on me that may question my wishes?
- Do I need to choose guardians for my children (under 18 years)?
- Do I have any other wishes such as organ donation or funeral arrangements?
- Who do I want to be my executors?
You should review your Will every five years and if:
- You get divorced.
- Your partner dies.
- Your children have children of their own.
- You move house.
- You experience any other big changes in your life.
Whatever your circumstances, you should make a Will. It is essential for making sure your estate goes to where you want it to. If you have unusual circumstances or special requests, the law may not always recognise them, so it's important you discuss them with your solicitor.
Not the most exciting to think about, but with a little bit of planning now, you could maximise the amount of inheritance you leave for your loved ones and reduce the Inheritance tax they may have to pay to receive it.
Inheritance tax (IHT) is tax paid after you die if the total of your estate exceeds a certain threshold. It is also sometimes payable on gifts you made to others during your lifetime. The current IHT threshold is changeable with budget announcements. Check the current IHT amounts on the HM Revenue & Customs website.
The things that can count towards your state for IHT purposes, includes the following minus any debts or liabilities:
- Your home and other property.
- Savings and investments.
- Insurance and pension policies.
- Payments from a pension plan or employee death benefit (unless written in trust).
- Other assets like cars, art, jewellery, furniture etc.
- Gifts you have made but still benefit from eg. a house you have given away but still live in.
- Certain gifts you have made in the last seven years.
- Assets held in trust from which you receive a personal benefit.
- Your share of any assets held jointly.
Reducing the IHT payable on your estate
For some, this tax could be more than they've ever had to pay in their lives. And it doesn't just apply to your home. It's applies to many assets, including your savings and investments.
So what can you do to ease the tax burden on those you leave behind?
- Make a Will - a solicitor will be able to help you make yours as tax-efficient as possible.
- Look into exemptions - for example how moving assets between spouses/civil partners or leaving money to charity could help.
- Use your gift allowances - if you can afford to give away some of your assets, you may want to consider doing this within the amounts allowed. Go to the GOV.UK website to find out more about the current gift allowances.
- Consider using financial planning tools like life assurance and trusts to reduce your IHT liability.