Estate Planning and Bloodline Protection

In our experience, a major concern for many older people is ensuring their estate is properly structured. This usually means creating or updating a will to ensure assets are passed on to the beneficiaries they choose. Another important factor to consider for many people is Inheritance Tax. With house prices now far higher than a generation ago, many more people are finding their estate could be liable to tax. With careful planning, many people can significantly reduce or even eliminate the Inheritance Tax payable on their estate meaning their beneficiaries can receive more.

Nowadays, many people also use a ‘Power of Attorney’ to ensure their financial affairs can be managed by those they trust when they no longer have the mental capacity themselves. We help our clients when the time comes to create a ‘Power of Attorney’*, helping them through both the procedural and emotional aspects of this.

*Will writing, power of attorney and trust services are offered by carefully selected legal partners who have gone through rigorous due diligence for their expertise and reputation.

Inheritance Tax

What is inheritance tax?

Inheritance tax (IHT) is a tax on the estate (the property, money and possessions) of someone who’s passed away.

How much you pay depends on the value of your estate – which is valued based on your assets (cash in the bank, investments, property or business, vehicles, pay-outs from life insurance policies) minus any debts and liabilities.

Importantly, there is normally no tax to pay if either:

The value of your estate is below the £325,000 threshold
You leave everything over the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club.
If neither of the above apply, your estate will owe tax at 40% on anything above the £325,000 threshold when you die (or 36% if you leave at least 10% of the net value to a charity in your will).
However, this £325,000 tax-free threshold might be higher depending on your circumstances – in some cases as high as £500,000, or even £1 million.

How you can mitigate this?

Essentially, there are three types of solutions – trust based, insurance based and investing in IHT exempt assets. To know more, download our exclusive FinsBridge guide to Estate Preservation.

Here are some of the most popular smart solutions we offer:

Discounted Gift Trust (income for life): A Discounted Gift Trust allows you to give away assets yet still enjoy regular payments for life. The amount treated as given away for IHT purposes offers an instant “discount” for inheritance tax purposes. To be effective for IHT, payments should be spent by the settlor and not retained in the estate.
Business Property Relief (access to capital and growth): The Business Property Relief solutions gives investors the opportunity to invest in the shares of one or more unquoted UK companies that are having a positive impact on the growth of the UK economy. The service targets a steady, predictable, but modest level of return. We select companies that we expect to qualify for Business Property Relief (BPR), a government-approved relief from inheritance tax. Provided the investment has been held for at least two years at the time of death, it can be left to their beneficiaries free of inheritance tax.
Whole of Life Insurance: In situations where the assets within the estate are not liquid (i.e. Buy to Let property), the ideal solution is to set up a whole-of-life insurance policy to cover the tax due, meaning that more is passed to your beneficiaries. To ensure the proceeds of the life insurance policy are not included in your estate, though, it’s vital that the policy be written in trust. A whole-of-life policy has a double benefit – not only are the proceeds of the policy outside your estate for IHT purposes but the premium paid for the policy will also reduce the value of your estate while you’re alive, further reducing your estate’s future IHT bill.

This is a very complicated area of estate planning and is best done with specialist advice from our expert financial planners. So contact us today to arrange a complimentary consultation for more information.

Wills

Will: It is important for you to make a will whether or not you consider you have many possessions or much money.

It is important to make a will because:

If you die without a will, there are certain rules which dictate how the money, property or possessions should be allocated (intestacy). This may not be the way that you would have wished your money and possessions to be distributed.
Unmarried partners and partners who have not registered a civil partnership cannot inherit from each other unless there is a will, so the death of one partner may create serious financial problems for the remaining partner.

If you have children, you will need to make a will so that arrangements for the children can be made if either one or both parents die.
It may be possible to reduce the amount of tax payable on the inheritance if advice is taken in advance and a will is made.

Please contact us today to discuss your plans and wishes, and we can explain this further. We can get a will set up for you with our trusted partners so you can relax safe in the knowledge that your wishes will be carried out when you pass away.

Lasting Power of Attorney

A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf. This gives you more control over what happens to you if you have an accident or an illness and cannot make your own decisions (you ‘lack mental capacity’). There are two types:

Health and welfare lasting power of attorney

This LPA is used to give an attorney the power to make decisions about things like:

Your daily routine, for example washing, dressing, eating
Medical care
Moving into a care home
Life-sustaining treatment

It can only be used when you’re unable to make your own decisions.

Property and financial affairs lasting power of attorney

Use this LPA to give an attorney the power to make decisions about money and property for you, for example:

Managing a bank or building society account
Paying bills
Collecting benefits or a pension
Selling your home

It can be used as soon as it’s registered, with your permission.

Please contact us today to discuss this further, and we will be happy to explain this area. We can set an LPA up for you via our trusted partners so you are fully prepared for life’s uncertainties.

Download the FinsBridge Inheritance Tax Guide

Download the Guide

Useful Resources

Financial Health Check Tool

Cashflow Planning

Tracking down your pension pots