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The Great Wealth Transfer

August 2021

by Marcus Pilkington

The five fundamentals for leaving money to your loved ones

There’s an old saying that nothing is certain except death and taxes. We can’t help with the big questions about life and death. That’s a debate for the poets and philosophers. But what we can do is help you plan how to pass on your estate in a way that preserves your wealth for the next generation.

If you haven’t already made plans, and if you want to make sure the people you love are well provided for after you’re gone, you’ll need to start thinking about it. Here are some basic steps to help get you started.

1. Plan

Planning what happens to your money and possessions when you die aims to:
• make sure your money goes to the people whom you want to give it to
• reduce or even eliminate inheritance tax to leave more to those you love
• ensure that your wishes are carried out without unnecessary expense or delay

This might sound simple but managing the transfer of your money and possessions after you’re gone is a complicated area with many financial and legal hurdles. The best way to avoid unwanted consequences is to get professional advice in this area.

2. Make a Will and review it regularly

Do you know that if you don’t have a Will, then your estate will be shared according to set rules which may be different from your wishes? The consequences can be devastating for those you leave behind.

If you’ve already made a Will, that’s great. Please just make sure it’s kept up to date. A change in family circumstances, changes in inheritance tax rules – which happens more often than you might think – and wider legislation can all affect your Wil.

It’s recommended that you review your Will at least every five years.

3. Set up a Power of Attorney

Sometimes people wrongly think because they have a Will they don’t need a Power of Attorney (POA), but this isn’t true. The POA lets you appoint someone you trust to make financial and/or medical decisions for you if you’re not able to do so. For example, if you became ill.

It might help to think of a Will as something that helps your loved ones after you die, whereas a POA is designed to help you while you’re still living.

Another common mistake people make is thinking that the POA means you’ve automatically handed over control to someone else, but again this simply isn’t true. It can start immediately, or you can opt for it to kick in when you’re no longer able to act in your own best interests.

4. Make sure you know who stands to inherit your pension

It’s a strange anomaly, but your Will doesn’t decide who inherits your pension. When setting up a pension, you normally have to complete a “nomination of beneficiary” form. The people who you list on that form will normally inherit your pension when you die.

Over the years, it can be easy to forget who you’ve nominated to inherit your pension. This information can also change and quickly becomes out of date if your circumstances have changed. If you’re not sure who inherits your pension, we can help and can also update your nomination of beneficiary form if needed.

5. Speak to your loved ones about these documents

This is often the step that’s forgotten about. It’s really important to have these documents and keep them up to date, but it’s even more important your loved ones know how to get hold of them when they’re needed.

By letting your loved ones know in advance you’ve done this important planning, it can make it a lot easier on them at what could be a very difficult time. We have an In Case of Emergency file which can be used to document the financial details loved ones will need in case of an emergency.

Plan today to prevent avoidable problems

Each of us is a unique individual, no two of us have the same circumstances or family dynamics. By planning together in advance, you can ensure that your intentions are respected, your family is protected, and everything goes according to plan.

Please contact your financial adviser directly or contact us to discuss any issues raised in more detail, or to obtain a copy of our In Case of Emergency file.

 


Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.
The Financial Conduct Authority does not regulate Tax Advice, Estate Planning or Will Writing.
The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, 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 any articles. 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 value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
Pareto Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
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