Making plans for your inheritance and for what happens to your estate after you’ve died can be one of the most important things you ever do.
The decisions you make now could have a huge bearing on what you are able to leave your loved ones. And if your estate is worth more than the threshold for inheritance tax (IHT), your beneficiaries might have to write a larger cheque to the taxman than if you had planned properly.
But there’s much more to estate planning than simply trying to minimise IHT. It also involves making sure you have enough money to live on while you’re still here rather than tying everything up for your loved ones to enjoy later. And when you do leave your wealth to the next generation, you might want to have some say over what it is used for – not just who gets it.
As trusted wealth managers, we build long-term, personal relationships with our clients, and we have the experience and knowledge to help people with their inheritance and estate planning. We regularly gain new clients via personal recommendations, and people across Norwich & Norfolk, Suffolk, Cambridgeshire and Peterborough – and further afield, too – have trusted us to manage their wealth for nearly a decade.
The cliché is that the only two things that are guaranteed are taxes and death. Estate planning involves both of these.
Perhaps the most well-known aspect of estate planning involves trying to mitigate the effects of inheritance tax (IHT) on the wealth you leave behind.
But there’s much more to it than that. It also involves making sure that the measures you put in place for after your death don’t preclude you from enjoying your wealth while you are still here, and it can also involve specifying other things relating to your life and after your death.
Making a will* is an important start, but there are other steps you can take now to address all these issues.
Everyone has an estate, even if it’s just the clothes they are wearing. But while some might think that estate planning is only for the super-rich, the benefits of getting a plan in place early can help a lot more people than might first be apparent.
For starters, the combined value of your assets might be higher than you realise. Once you have added up the value of your property, your car, your savings and investments, your life insurance, your valuables and so on, your net worth might surprise you.
But if you leave estate planning too late, you risk missing your opportunity. There’s no time like the present to start the process.
Much of the focus of estate planning is on what happens to your wealth after you die, but there are other components, too.
It can include details of what you want to happen to you should you become incapacitated and unable to make your own decisions. You might want to leave a family member who has special needs some money, without them missing out on mean-tested benefits as a result. If you have a relative with large debts, you might want to leave them something while making sure it isn’t immediately snaffled up by their creditors. Or you might have a business that you want to leave in safe hands.
These are all things that can be addressed as part of the estate planning process.
If you fail to plan properly, it won’t be you who has to pick up the pieces. The people you leave behind can find themselves with a large mess. As well as being potentially very expensive for them to sort out, it can cause family problems and result in bad blood, and that’s not the legacy you want.
Sometimes called the “death tax” by its critics, IHT is a tax on your estate that’s paid to the taxman after you die.
The tax rate is currently 40% and the nil-rate band (or threshold) is £325,000. In other words, you can pass on the first £325,000 free of tax, but the government takes up to 40% of the rest. So if your estate is worth £500,000 when you die, the IHT bill could be up to 40% of £175,000, which is £70,000. On an estate worth £1m, IHT could be £270,000.
Estate planning is an ongoing process and not a one-off event.
Once we build a relationship with you, you’ll trust us to keep an eye on your estate planning and amend things accordingly. As changes are made to exemptions, tax relief and rates, we will make sure that your plans remain tax-efficient and appropriate.
We will also help you enjoy your wealth both now and in later life, and we’ll help you draw up a balance between living comfortably and leaving an inheritance to your loved ones after you die.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief is dependent on individual circumstances.
*Will writing involves the referral to a service that is separate and distinct to those offered by St. James's Place and are not regulated by the Financial Conduct Authority.
Do get in touch with us if you need a bit more information about these services, or any of our other financial planning advice.