Estate Planning

Protecting your family’s wealth

Most people want to leave their worldly goods to their loved ones when they die rather than to the taxman. While tax rules can and will change over the years, you are able to at least control matters to a certain degree by some careful timely planning.

Having made sure that you have valid wills in place, then it is time to consider what steps may be needed to ensure that as much of your money as possible goes to those people you want to benefit.

The first thing to do is to make sure that if you have any life insurance policies, benefits under schemes at work, or pension plans, that they are under trust so they don’t end up in your estate and adding to the tax bill.

One of the most important things to remember is that your affairs should be built around your needs first, with any tax saving as a beneficial consequence. This is very important as there are several methods of minimising Inheritance Tax (IHT) and some of them can affect your access to future income or capital sums.

You should make use of gift allowances wherever possible as these are straightforward ways of transferring money and reducing your estate.

If you have sufficient money that you know you can give some away and never need it, then perhaps Potentially Exempt Transfers can be considered, although you may wish to set up a short term life insurance plan to cover any liability in case you die in the 7 year period. But you must remember these must be actual gifts with no strings attached, or HMRC will cry “foul!”, and treat them as a “Gift with reservation” so that they will go straight back into your estate.

Many people have an estate where there may be a future liability, but they simply aren’t in the position of having more than enough cash because they don’t know how long they are going to live and how much money they are going to need in the future. This means they would be unwise to give it away because once you have given the money away it is no longer yours to use.

This doesn’t mean that you can’t take action to protect your wealth now. In these sorts of situations there are a variety of solutions that can be considered, often including trusts, such as Loan Trusts, and Discounted Gift Plans.

Each type of scheme serves a different purpose. You may need an income for life, for example, where some of your capital can fall outside the estate after 7 years and your Inheritance Tax (IHT) liability could be substantially reduced from day one!

Perhaps you may need access to the capital at some stage in the future but would like any future growth on the money to be outside your estate and therefore be free from Inheritance Tax (IHT). There are also types of investment that can fall outside your estate after just two years.

Another very important consideration is that many people want to retain control over their money while they are still alive, especially given the potential pitfalls if they give money to their children who then either suffer a marriage break up or even bankruptcy. In either case the money would be at risk.

The benefit of Estate Planning is that you can arrange your affairs so that you are able to control what happens to the money and minimise the effect that any future changes in tax rules have. It does not mean having to give all your money away now!

At Ashwood Law, we have specially trained advisers who will help you plan the right strategy. Each one will be individually tailored to your own unique set of circumstances. We will discuss your assets, income needs and outgoings, future capital requirements, and who you want to benefit and when. It is a complicated process and only when we have completed an in depth analysis of your situation will we come up with a strategy for you. If there are trusts to be involved you will need to consider who you want (and will be willing) to act as trustees.

Estate Planning is not regulated by the Financial Services Authority.

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