INSIDE THIS ISSUE
THE
ESTATE PLANNER Issue 33 – September 2017
Welcome to the September 2017 issue of The Estate Planner. What would happen to you and your family in the event of unforeseen circumstances such as the diagnosis of a serious illness or premature death? Worryingly, research from Scottish Widows reveals that more than half (53%) of men in the UK with dependent children have no life cover, meaning that 3.9 million dads are potentially putting their family’s financial security at risk if the unexpected were to happen. Find out more on page 02. Inheritance Tax is payable by some people that, for the most part, could have avoided it. If you want your estate to go to your loved ones with the minimum amount of IHT payable, you should obtain professional advice. There are currently a number of generous reliefs relating to IHT. Indeed, if the correct planning is started early enough, it may be possible to avoid IHT altogether. Turn to page 04 to read the full article.
It’s good to talk To 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.
WITNESSING A WILL What are the requirements?
F
rom a legal standpoint, a witness is a person who satisfies two criteria: firstly, they observe a particular event, and secondly they are willing to confirm that the event occurred.
the Will is declared valid by the Probate Court – a special court designated to handle matters of ‘probate’ (the official proving of a Will and its validity) and estate administration.
THE LEGAL SIDE The Government passed the Wills Act 1837, which requires two independent witnesses (over the age of 18) who have seen the signing of a Will and are prepared to have their information included in the Will in order to prove the existence of the Will itself.
WHO CAN WITNESS A WILL? A Will can be witnessed by anyone over the age of 18, although a blind person or someone of unsound mind is not normally capable of witnessing a Will. If you have appointed a solicitor or an executor for your Will, they can act as a witness.
By having their personal information added to the Will, a witness does not commit to doing anything. The function of this information is purely to meet the requirements of the Wills Act, which ensures that
Due to the principle that a beneficiary cannot legally benefit from a Will they have witnessed, any gift made in a Will to such a person will be void. However, this will not affect the validity of the rest of the Will.
How can we help? With regular reviews, we can help you to ensure that you make the most of your estate planning requirements. Contact us today to find out more.
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FINANCIALLY UNPROTECTED
Dads putting their family’s financial security at risk if the unexpected were to happen What would happen to you and your family in the event of unforeseen circumstances such as the diagnosis of a serious illness or premature death? Worryingly, research from Scottish Widows reveals that more than half (53%) of men in the UK with dependent children have no life cover, meaning that 3.9 million dads[1] are potentially putting their family’s financial security at risk if the unexpected were to happen. INSURING AGAINST SERIOUS ILLNESS Only 16% of dads have a critical
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illness policy, leaving many more millions at financial risk if they were to become seriously ill. Fathers are, in fact, more likely to insure their mobile phones (21%) than to insure themselves against serious illness. More than a fifth (22%) of dads admit their household would be placed at financial risk if they lost their income due to unforeseen circumstances, and 28% say they could only pay their household bills for a minimum of three months. Two
fifths (40%) say they’d have to dip into their savings to manage financially, but 42% say that their savings would last for a maximum of just three months. BASIC LEVEL OF SUPPORT The research shows that in the event of themselves or their partner dying, 22% of men with dependent children believe they could rely on state benefits to support their family. While this provides a basic level of support, we would firmly advise people to make their own provision for themselves and their families in
order to provide peace of mind with the knowledge that there’s a financial safety net in place. Many fathers don’t consider having insurance as a necessity, with 18% saying they don’t see critical illness cover as a financial priority, 19% saying they don’t think they need it, and 17% saying they can’t afford it. BEREAVEMENT SUPPORT PAYMENT SYSTEM With a new Bereavement Support Payment system now in place, it’s more important than ever for
dads to review their financial protection needs. You may be able to get Bereavement Support Payment if your husband, wife or registered civil partner died on or after 6 April 2017.
[1] Percentage of adult population that are fathers with dependents = 735/5077 = 14.48%; 14.48% of adult population of 51,339,000 = 7.4 million; 53% of these don't have cover, so 3.9 million.
It’s estimated that 91% of widowed parents will be supported for a shorter period of time (now just 18 months) than they would under the previous system, which could pay out until the youngest child leaves school, according to research from the Childhood Bereavement Network. In 2014, 70% of claimants were female[2], so it’s important that fathers seek advice to make sure their household is covered.
[2] Childhood Bereavement Network submission to the Commons Work and Pensions Select Committee
MORE THAN A FIFTH (22%) OF DADS ADMIT THEIR HOUSEHOLD WOULD BE PLACED AT FINANCIAL RISK IF THEY LOST THEIR INCOME DUE TO UNFORESEEN CIRCUMSTANCES, AND 28% SAY THEY COULD ONLY PAY THEIR HOUSEHOLD BILLS FOR A MINIMUM OF THREE MONTHS.
CLAIMING FOR BEREAVEMENT BENEFITS This is especially the case for cohabitees, who are not eligible to claim for bereavement benefits, despite the fact that 21% of couples with children are not married, according to figures from the Office for National Statistics for 2016. There are many things to consider when looking to protect you and your family. Being diagnosed as suffering from a specified illness or the loss of income need to be considered as part of an effective protection planning strategy. DO YOU HAVE APPROPRIATE PROVISION IN PLACE TO PROTECT YOUR FINANCIAL PLANS? No matter what our personal circumstances, it is vital for all of us to ensure we have an appropriate plan in place to protect our finances, helping avoid the need to dip into our savings, which could present even greater challenges further down the line. If you have any questions or queries, or you’d just like to know more about how to protect you and your family, get in touch with us and we’ll be happy to help. Source data: Scottish Widows’ protection research is based on a survey carried out online by Opinium, who interviewed a total of 5,077 adults in the UK between 16 and 27 March 2017.
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ESTATE MATTERS
Structuring your affairs efficiently means starting the correct planning early enough Inheritance Tax (IHT) is payable by some people that, for the most part, could have avoided it. If you want your estate to go to your loved ones with the minimum amount of IHT payable, you should obtain professional advice. There are currently a number of generous reliefs relating to IHT. Indeed, if the correct planning is started early enough, it may be possible to avoid IHT altogether. NEW MAIN RESIDENCE TRANSFERABLE NIL-RATE BAND Since 6 April 2017, there is a main residence transferable nil-rate band (family home allowance) that applies when a main residence is passed on to a direct descendant. This main residence transferable nil-rate band works alongside the existing IHT nil-rate band, which is currently £325,000. In the same way as with the nil-rate band, any unused main residence transferable nil-rate band will be transferred to a surviving spouse or registered civil partner. A property which was never a residence of the deceased, such as a buy-to-let property, will not qualify. The allowance was initially set at £100,000 for 2017/18, increasing to £125,000 in 2018/19, £150,000 in 2019/20 and up to £175,000 in 2020/21 (and then increase each year in line with inflation [CPI]). INHERITED FROM A SPOUSE It is possible therefore that by 2020/21, an individual will
have their own nil-rate band of £325,000 as well as a main residence transferable nil-rate band of £175,000 in respect of their main residence, plus a nilrate band of £325,000 inherited from their spouse and a main residence transferable nil-rate band of £175,000 inherited from their spouse. This gives the much advertised total of £1 million. It is worth noting that the current nil-rate band of £325,000 is now set to remain until 2020/21. There is also going to be a tapered withdrawal of the main residence transferable nil-rate band for estates worth more than £2 million. EFFECT OF THE PROPOSED CHANGES Few taxes are quite as emotive – or as politicised – as IHT. The structures into which you transfer your assets can have lasting consequences for you and your family. The current rate of IHT payable is 40% on property, money and possessions above the nil-rate band. The rate may be reduced to 36% if 10% or more of the estate is left to charity. It makes sense to ensure that your affairs are structured in the most tax-efficient way possible. However, it isn’t easy to keep up with the many exemptions and reliefs available. So what should you consider? LIFETIME GIFTS Lifetime gifts to individuals are potentially exempt transfers and fall outside the scope of IHT,
provided the donor survives at least seven years from the date of the gift.
purposes can be highly effective in potentially reducing an IHT charge on death.
TRUSTS Trusts can sometimes help you to eliminate unnecessary tax charges, enabling the maximum possible part of your family’s wealth to be preserved. You may like to transfer part of your wealth to a family member but still retain control; our specialists can advise on setting up trusts and can take care of all the administration.
ARE YOUR NEEDS FULLY CONSIDERED? Without the right advice and careful financial planning, HM Revenue & Customs could become the single largest beneficiary of your estate following your death, which is why you should obtain professional financial advice to ensure your needs are fully considered. To review your situation, please contact us.
WILLS One important way to minimise IHT is to make a Will, so as to leave your family with the maximum assets and at the least tax cost. BUSINESS AND CORPORATE STRUCTURES If you have a business, it is also important to examine the structure of your business when considering your affairs. Changing the structure of a business can have significant tax implications.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE WILL WRITING, INHERITANCE TAX PLANNING OR TAXATION ADVICE.
ENJOY SPECIAL CONCESSIONS The treatment for IHT purposes is more favourable for some assets than others. Business assets and shares in unquoted companies, agricultural land and works of art, for example, all benefit from special concessions which may assist in passing wealth from one generation to the next. CHARITABLE GIFTS Making gifts for charitable
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 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 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 2017/18 tax year, unless otherwise stated.
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