The Life of a Dental Technology Student (Part 10 of 10). By Richard T Lishman

Making a will and minimising tax before the end

By Richard T Lishman Managing Director of the 4dentists Group of companies

Richard Lishman, award-winning Founder of The IFA’s – a specialist firm of Independent Financial Advisers that provides guidance and advice for some of the wealthiest individuals and businesses in the UK and around the globe – heads this series of editorials for lab technicians.

THE LIFE OF A DENTAL TECHNOLOGY STUDENT

(Part 10 of 10)

Previously, our character, Bridget Crown, retired from working. However, as the years advance, it’s important that Bridget has her affairs in order so that her loved ones are well provided for even after she’s gone.

WHEN THERE’S A WILL, THERE’S A WAY At this point in her life, it’s likely that Bridget has already made a will. It’s generally recommended that a person should make a will after marriage, buying a property or any other significant life step.

However, circumstances change, and there’s every chance that Bridget will want to adjust her will to implement how she wants to divide and gift her legacy. For instance, if she has now become a grandmother she may want to provide for her grandchildren in her will – or perhaps she wants to change it to favour her children instead of her partner – there are plenty of reasons why a will could need adjustment.

To change her will, Bridget will have to make a new one or add a codicil (effectively an amendment). This will mean speaking to her solicitor and making any changes that she wants to ensure her affairs are in order.

INHERITANCE TAX Inheritance Tax can be hugely expensive and mean that a lot of Bridget’s hardearned money won’t be given directly to her loved ones. The current nil rate band for Inheritance Tax is £325,000 – meaning that any assets over this worth will be subject to a 40% tax. This rate is in place until 2026, when it is likely to be revised again. SO, HOW CAN BRIDGET HELP REDUCE THE AMOUNT OF INHERITANCE TAX ON HER ASSETS? One option is Estate Planning. This service effectively involves a financial adviser looking at Bridget’s assets and calculating the amount of money she will potentially need to maintain her lifestyle (and even cover later life care if necessary) while also advising about gifting money and assets where possible so that they are no longer eligible to be taxed.

Unfortunately, it’s important to remember that any gifts given up to seven years before death may still be subject to tax depending on factors including the value of the gift, the relationship between the gifter and the giftee and when the gift was given. As such, gifting is not a fool-proof way to avoid future tax.

Another avenue Bridget can explore is finding ways to cover the Inheritance Tax bill without the amount being taken from the value of her assets. Pension policies, for example, are generally not included when an Inheritance Tax bill is calculated, so if Bridget can afford to leave her pension untouched while she funds her retirement, this amount could be used to pay off the resulting Inheritance Tax bill on her estate (or, at least, part of it).

Trusts are also an excellent idea for any money that Bridget wants to set aside for a specific reason. For instance, let’s imagine she wants to ensure that the cost of her granddaughter’s schooling is covered – this way Bridget could gift an amount and only make it accessible for this reason. Life Assurance policies can also be set up as a trust, and this is another smart way to use a policy to cover an Inheritance Tax bill in a lump sum. In this scenario, the Life Assurance policy will be set up to only pay out in the event of Bridget’s death, giving her loved one(s) the capital they need to cover the Inheritance Tax.

If she does proceed with this idea, Bridget will need to ensure that she is not the sole trustee, as otherwise the money will be considered as part of her estate upon her death and therefore be inaccessible until Inheritance Tax has already been paid.

FINAL STEPS When all is said and done, these final financial considerations will hugely depend on the state of Bridget’s assets during this period and the eventual time of her death. Planning ahead and starting processes early is the best way to safeguard capital as much as possible, however, this could make estimating the money Bridget will need for the remainder of her life more difficult.

By seeking advice from experts such as the award-wining team at the IFA’s, Bridget will be able to make the most of her estate and ensure that Inheritance Tax is minimised. The team looks at everyone’s individual circumstances and offers high quality estate planning that will cover all eventualities.

As we’ve come to the end of our Bridget Crown series it’s important to reflect on how important financial advice is at every stage of life. Financial assistance is not just a valuable guidance – it can truly change your life by giving you a sense of security surrounding your finances that can enhance your everyday life immeasurably.

For more information, please call 0845 345 5060 or 0754 336 8478 or visit www.theifas.com