Finance: Your money's life after death
PUBLISHED: 16:12 20 May 2016 | UPDATED: 16:12 20 May 2016
Estate planning doesn't have to be morbid and is as much about asset protection as it is tax, says Yvette Jacobs-Lee, tax partner at top 20 accounting firm, Kingston Smith in St Albans
It is important to get your financial affairs in order to ensure matters are structured to achieve your aims in the long term. Having a Will in place allows for assets and family wealth to devolve down the generations as you wish. Many married couples assume that all assets pass to the surviving spouse automatically on the first death but without a Will, your assets will pass under the statutory intestacy rules by operation of law and that may not reflect your intentions.
Putting in place a Power of Attorney in advance does not mean giving up your say now, but in the event that you do become unable to deal with your affairs – such as the result of an accident – then a family member or professional of your choice can step in.
In addition to essential estate planning, you would be well advised to consider how to make the most of available exemptions, gifts out of income or how trust arrangements may help you achieve your aims.
Given that you have paid tax all your life, for many it does not seem fair that your estate should be taxed a second time. Currently, inheritance tax is charged at 40 per cent on all assets over a value of £325,000. An estate can pass tax free to a spouse or civil partner, creating a £650,000 joint allowance to pass assets to the next generation. From April 2017, a new additional tax-free allowance is designed to increase the joint value which could be transferred on death by a married couple up to £1m with the Family Home Allowance.
Many wealthy individuals are looking for new ways to provide resources to charity. Properly structured, a gift to your favourite cause on death can reduce the rate of tax charged on the balance of your estate passing to family members.
For business owners, Business Property Relief is a valuable estate planning tool to exempt the value of a business in your estate. Even for individuals who are not actively involved in the running of a business, certain categories of investment will also fall within the ambit of the relief and can create valuable tax savings.
There is no ‘one size fits all’ approach, so it is important to take time to consider the possibilities and seek proper professional advice.