Take the law into your own hands
It's time to stop burying your head in the sand when it comes to wills, tax planning and all that sensible stuff. I nabbed a top solicitor for some straightforward advice.
When you have a to-do list that extends over 3 pages of A4 (I’m not even joking), there are certain tasks that tend to hover around the bottom or fall off altogether. For me, that’s anything involving financial or legal planning – I’d rather scrub the toilet with my toothbrush, quite frankly. And who has the time for forward planning anyway when daily life is such a maelstrom of work, child-wrangling and domestic chores?
Well, more fool me. After a chat with Fiona Wheeler, partner at private client solicitors The Burnside Partnership in Combe, Oxon, about the benefits of regularly reviewing your circumstances, I realised that all that stuff is kinda important, to say the least. I’d hazard a guess that I’m not alone in being an ostrich when it comes to these grown-up, eminently sensible matters – so I picked Fiona’s brains for advice about all those the scary-sounding legal things we don’t want to think about but really should. Wills being the biggie. It’s not the most exciting subject matter in the world admittedly but it’s rather useful. Pencils and Valium at the ready? OK, let’s go.
If you have mini Mudlets…
It’s sensible to review your wills every few years as your circumstances change to ensure they reflect your current wishes – think of it as an evolving document. For instance, you may not have had children when you originally wrote it and if you haven’t appointed guardians, you’ll have no control over who looks after your children if you die. A relative may be forced to make an application to the court which can be a lengthy, expensive process at an already difficult time. Even if you have made provision for guardians, you may have changed your mind since you first wrote your will. It may be that your relationship with the guardians has changed – friends can drift apart or perhaps you appointed your parents but they’ve since become infirm.
With older children, you may be helping them get on the property ladder by lending them money but have you considered how important it is to protect the money that has been lent? You may wish to consider a Declaration of Trust to address a future eventuality such as the divorce of your child.
And if you have step-children, it’s essential to have a frank and open conversation with your spouse/partner about how you would like your assets to be dealt with on your respective deaths. It may be that you have very separate assets and would therefore like these to pass directly to your respective children. Alternatively, you might have children from a previous marriage and children from your current marriage, all of whom you want to inherit. As well as ensuring that all your children will inherit on your death, it is also important to consider the future needs of your surviving spouse to avoid him/her being left with nothing and consequently facing financial difficulties.
If your parents are becoming wobbly…
Obviously it’s important for your parents to have their wills in order too, so it may be worth prompting them. And it’s worth considering the benefits of Lasting Powers of Attorney. LPAs allow individuals to nominate people to deal with their affairs on their behalf should they be unable to. If an elderly parent has already lost capacity and there is no LPA, you have to apply to the court to become a deputy – a time-consuming and expensive business. It’s worth a possibly awkward conversation now to prevent major hassle later on.
If you’re your own boss…
… then you probably have more than enough paperwork on your plate, quite frankly. However, LPAs are also extremely important if you’re self-employed – in the event of your incapacity it may be vital for someone to step in on your behalf to deal with your finances and keep your business going. Wills and tax planning are also important if you are self-employed as you may have significant assets, both personal and for business use, and it may be that you want these to pass differently on your death.
If you never got round to putting a ring on it…
Be aware that the inheritance tax benefits of being married are not extended to unmarried partners, regardless of how long they have been together or lived together. If you’re unmarried but want your partner to inherit, you need to specify this in your will as he/she does not have an automatic right to inherit from your estate.
And if a non-married couple decide to separate, it’s necessary to agree on how the assets would be divided. It may be that steps need to be taken to secure the interests in the family home. If a dispute arises, court action may be required. To avoid this, legal agreements such as a Declaration of Trust can be put into place on the purchase of a property or at the start of a relationship – another thing worth bearing in mind if you have an adult child who’s building a life with a partner with no immediate plans to marry.
If you haven’t thought about what’ll happen when you finally keel over (hey, it comes to us all!)
It is always important to review the total value of your estate and in particular how close you are to the inheritance tax thresholds. Appropriate trust arrangements can be included in your will in order to minimise IHT. If you are nearing the threshold of £325,000 for a single person (or £450,000 for a single person leaving a property to direct descendants); or £650,000 for a married couple (or £900,000 for a married couple leaving a property to direct descendants), then you may wish to consider exploring appropriate tax planning. Such planning will ensure you put all available measures in place to avoid your estate facing a large tax bill on your death.
If you wish to decrease the size of your estate to minimise any IHT liability, you can always consider making lifetime gifts to your family or friends – each person has an allowance of £3,000 per year that they can gift tax-free. Larger gifts are possible but these will need to be survived by seven years for them to ‘fall outside’ of your estate and not be liable to pay IHT.
Another thing to consider – you might find your children could lose their inheritance if your spouse remarries. Appropriate trust arrangements can be included in your will in order to protect assets for them.
The Burnside Partnership, The Carpenters’ Workshop, Blenheim Palace Sawmills, Combe OX29 8ET