THE ESTATE PLANNER

Issue 3 – February 2015

INSIDETHIS ISSUE

Welcome to the February 2015 issue of The Estate Planner. Have you thought about the consequences to your family if you or your spouse or registered civil partner have not written a Will? If your estate is large, it could be subject to Inheritance Tax (IHT) payable currently at 40%. However, even if it is small, planning and a well-drafted Will could help to ensure that your assets will be distributed in accordance with your wishes. Find out more on page 02.

Having an estate plan is good for our finances and for our heirs, but many of us fail to put a plan in place. However, those who do have a plan often make mistakes that can lead to familial and financial problems further down the line. When it comes to estate planning, the most common mistake people make is the most simple: they fail to do it. Read the full article on page 03.

If you want to donate money to charity and good causes, there are many ways to go about it. And for taxpayers, if you choose the right payment method, you can make sure the gift is tax-efficient too. An estate can pay Inheritance Tax (IHT) at a reduced rate of 36% on some assets (instead of 40%) if 10% or more of the ‘net value’ of their estate is left to charity. Turn to page 04 to find out more.

Is it time to trust in your future?Reducing how much inheritance tax your estate may have to pay on your death

We can help you in channelling your wealth by making the use of

structures such as trusts. The structures into which you transfer your assets can have lasting consequences for you and your family. We can help you protect your assets and give your family lasting benefits in an uncertain world. 

A trust, in principle, is a very simple concept. It is a legal arrangement where the ownership of someone’s assets (such as property, shares or cash) is transferred to someone else (usually a small group of people or a trust company) to manage and benefita third person (or group of people). A trust can be used to reduce how much Inheritance Tax (IHT) your estate may have to pay on your death.

The person who creates the trust is called the ‘settlor’ or ‘donor’. The settlor or donor pays or assigns a policy to the trustee(s). The trustee(s) are the legal owners of the trust and decide what happens to it. Depending on the type of trust, the donor/settlor may be able to be a trustee. The beneficiaries are the

people the donor/settlor says they would like their money to go to.

Broadly speaking, there are two types of trust to choose from: a discretionary trust and a bare trust.

DISCRETIONARY TRUSTSA discretionary trust offers flexibility when it comes to deciding who you would like to be the beneficiaries, and the appointer can appoint benefits to the beneficiaries of the discretionary trust.

With a discretionary trust, there are possible tax liabilities to be aware of. On creation of the trust, IHT might be payable. IHT may also become payable if you die within seven years of the

creation of the trust. Depending on the value of assets in the trust, there could be further charges to consider during the lifetime of

the trust.

BARE TRUSTSA bare trust ensures that, once named, the beneficiaries cannot be changed or added to in the future. Once 18, a beneficiary can ask for the

trust to pay their share to them directly. The major advantage of bare trusts

over discretionary trusts is that they are classed

as potentially exempt transfers (PETs) with no immediate or ongoing IHT charges,

provided the creator of the trust survives more

than seven years from the date of the transfer. n

Don’t leave it to chance – to discuss your requirements, please contact us today.

Want to review your situation?

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It’s good to talkTo arrange an appointment or to discuss any concerns that you may have in relation to making appropriate protection for you, your loved ones and your estate, please contact us. We look forward to hearing from you.

KEEPING THE WEALTH THAT YOU HAVE CREATED IN THE HANDS OF YOUR FAMILYWithout a Will, you may leave behind an unnecessary mess, more cost and the law dictates how your estate is distributed

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Retirement

Your house £ Cars / boats etc. £

Other properties £ Jewellery £

Savings £ Gifts made in the last seven years £

Investments £ Collectables such as art £

Pension £ Other personal property £

Life insurance(not in trust) £ Less IHT threshold of tax liability £325,000

Business ownership* £ Amount likely to be subject £ to IHT at 40%

* Some business assets are eligible for Business Property Relief of up to 100%

Have you thought about the consequences to your family if you or

your spouse or registered civil partner have not written a Will?

If your estate is large, it could be subject to Inheritance

Tax (IHT) payable currently at 40%.

However, even if it is small,

planning and a well-drafted Will could

help to ensure that your assets will be distributed in accordance with your wishes. IHT is currently payable where a person’s taxable estate is currently in excess of £325,000 (2014/15).

A WILL TO PREPAREIf you own such possessions as a home, car, investments, business interests, retirement savings, collectables or personal belongings, then you need a Will. A Will allows you to specify who will distribute your property after your death, and the people who will benefit. However,

Calculate how much Inheritance Tax your estate could have to pay at 40%

many individuals either do not appreciate its importance, or do not see it as a priority.

If you have no Will, your property could be distributed according to the intestacy laws. Formulating an estate plan that minimises your potential tax liability is essential. The more you have, the less you should leave to chance.

We can work with you to ensure that more of your wealth passes to the people you love, through planned lifetime gifts and a tax-efficient Will.

DRAFTING YOUR WILL

Start by considering the following questions:

WHO?Who do you want to benefit from your wealth? What do you need to provide for your spouse? Should your children share equally in your estate – does one or more have special needs? Do you wish to include grandchildren? Would you like to give to charity?

WHAT?Should your business pass to all of your children, or only to those who have become involved in the business, and should you compensate the others with assets of comparable value? Consider

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How can we help?With regular reviews, we can help you to ensure that you make the most of estate planning requirements. Contact us today to find out more.

COMMON ESTATE PLANNING MISTAKESMany of us are failing to put a plan in place

Having an estate plan is good for our finances and for our heirs, but many of us fail to put a plan in place. However, those who do have

a plan often make mistakes that can lead to familial and financial problems further down the line.

When it comes to estate planning, the most common mistake people make is the most simple: they fail to do it. Some people feel intimidated or afraid when thinking about death, others don’t want to initiate a difficult conversation with a spouse, while others simply don’t know where to start.

So what are some of the basic estate planning needs that everyone should address?

WRITING A WILLThis is especially important if you have children, as it ensures that you, rather than the courts, are responsible for naming their guardians. Pay particular attention to who you name as executor.

DURABLE POWER OF ATTORNEY FOR POTENTIAL HEALTHCARE NEEDSYou don’t want the state making ‘do or do not resuscitate’ decisions on your behalf

DURABLE POWER OF ATTORNEY FOR FINANCIAL MATTERSBe clear about whether you want this to be immediately effective or ‘springing’, which means it isn’t effective unless you are incapacitated. Make sure this is allowable in your state of residence.

Your goal with these base documents is to avoid probate and the painful situation of having outside legal entities making decisions about one of the most intimate moments of your life.

Estate planning can get much more complicated than this, especially for those who have the nice problem of having net assets that exceed estate tax exemptions. But for the vast majority of people, establishing these basic documents will go a long way toward making wealth transfer as easy as possible for loved ones. n

Helping you address the issuesTo arrange an appointment or to discuss any concerns that you may have in relation to making appropriate protection for you, your loved ones and your estate, please contact us. We look forward to hearing from you.

the implications of multiple ownership?

WHEN?Consider the age and maturity of your beneficiaries. Should assets be placed into a trust restricting access to income and/or capital? Or should gifts wait until your death?

A Will is a powerful planning tool, which enables you to:

nprotect your family by making provisions to meet their future financial needsnminimise taxes that might reduce the size of your estatenname an experienced executor who is capable of ensuring that your wishes are carried outnname a trusted guardian for your childrennprovide for any special needs of specific family membersninclude gifts to charitynestablish trusts to manage the deferral of the inheritance of any beneficiariesnsecure the peace of mind of knowing that your family and other heirs will receive according to your express wishes

REVIEW YOUR WILL REGULARLYHaving taken the time to make a Will and prepare an estate plan, you must review them regularly to reflect changes in family and financial circumstances as well as changes in tax law.

Wills can also be re-written by others within the two years after your death, in the event that some changes are agreed by all concerned to be appropriate. n

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IT’S GOOD TO GIVE Giving to charity can be a tax-efficient answer to wealth protection

The content of this publication is for your general information and use only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely informa-tion, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Will Writing, Inheritance Tax Planning or Taxation Advice. All figures relate to the 2014/15 tax year, unless otherwise stated.

Taking control of your financial affairsNow is an ideal time to take IHT planning advice and to have your Will written professionally or updated. If you have any questions or would like more information on writing a Will or IHT planning, please get in touch – we look forward to hearing from you.

I f you want to donate money to charity and good causes, there are many ways to go about it. And

for taxpayers, if you choose the right payment method, you can make sure the gift is tax-efficient too.

An estate can pay Inheritance Tax (IHT) at a reduced rate of 36% on some assets (instead of 40%) if 10% or more of the ‘net value’ of their estate is left to charity.

The net value of an estate is the total value of all the assets after deducting:

ndebts and liabilitiesnreliefsnexemptions (for example, anything left to a husband, wife or civil partner)nanything below the IHT threshold of £325,000 – 2014/15 tax year – (known as the ‘nil rate band’)

DIFFERENT PARTS OF YOUR ESTATE An estate doesn’t have to pay IHT on any gifts given to charities, museums, universities or community amateur sports clubs.

You’ll need to know the value of different parts of the estate (known as ‘components’). Components only qualify for the reduced rate if 10% or more of their value went to charity. Some components may qualify while others will be taxed at the full rate, and some must be added to others (‘merged’) to qualify.

WRITING OR CHANGING A WILLYou can write a clause into your Will to make sure that you’ll leave 10% of your estate to charity. The beneficiaries of an estate can change the Will to make or increase a donation to

a charity so the estate meets the 10% test.

OPT OUT OF PAYING THE REDUCED RATEIf you’re the executor of a Will or administrator of an estate, you can choose to pay IHT at 40% rather than the reduced rate – if the beneficiaries agree. This can make it easier to deal with the estate, for example, if the cost of getting some of the assets professionally valued would outweigh the benefits of paying the reduced rate.

YOU CANWRITE A CLAUSE INTO YOUR WILL TO MAKE SURE THAT YOU’LL LEAVE 10% OF YOUR ESTATE TO CHARITY.