Will and Estate Planning

How well are you prepared for death?

Are you well prepared for death?

It sounds like an alarming question. Death is still a taboo topic for many people in the UK; it’s not especially comfortable to discuss our mortality, even with our family or closest friends.

But because death is an inevitable part of life, and one which has financial consequences, it is essential to discuss. Preparing for death should be one part of the agenda you cover with your financial planner.

New research has found that people in the United Kingdom are better prepared than ever for death.

The research, based on a survey carried out by Will Aid, found an increase in those who have their affairs in order. 

Asking over 18s whether they have made a will, the researchers found that 50% now have. This is up from 47% last year.

Will Aid is a charity will-writing campaign which takes place in November each year. The campaign encourages people to write a will, donating their solicitor fee to charity.

Graham Norton, a Will Aid patron, said he had come face-to-face with death on two occasions.

“On the first, my own life was threatened after I was stabbed during a mugging in Queen’s Park and lost nearly half my blood.

“The second involved the loss of my father Billy who died shortly after being diagnosed with Parkinson’s disease.

“Both made me realise that life is too short. And both made me accept that death is very, very final. There are no comebacks, revivals or retaliations.

“A will is therefore a vital document that allows you to pass on your final wishes to the people you love most.”

Fellow Will Aid patron Dame Judi Dench said: 

“Death is always devastating but it is also inevitable.

“Making a will is a way to confront this certainty in the knowledge that, by completing the paperwork, you will be making the experience less traumatic for your loved ones.”

While 50% of surveyed over 18s having a will in place is a good improvement on a year earlier, it still means that half of UK adults have failed to get their act together.

Dying without a will, known as dying intestate, can have devastating consequences for our loved ones, as assets are distributed in line with the law, rather than our wishes.

Jon Jacques, Chairman of Will Aid, said: 

“When we think of the considerable assets celebrities have, we assume that because of the large sums of money involved, they would have their affairs in order, but this isn’t always the case.

“There is a misconception that if you die intestate, your relatives decide how the assets are split. But when a person dies without leaving a valid will, the estate must be shared out according to the rules of intestacy. Only married or civil partners and some other close relatives can inherit under these rules. 

“Failing to make a will can mean that your wealth could go to people you did not intend it to and leave your family and loved ones without the provisions that you wanted.”

The research found that some parts of the UK are doing better than average, including adults in East Anglia, where 58% have a will in place.

Regions falling behind the average include Northern Ireland, with 63% of those surveyed admitted they don’t have a valid will in place. In the North West of England, 58% of adults said they don’t have a will.

Mr Jacques continued: 

“Events such as becoming a parent, grandparent, losing a partner, getting divorced or separated, inheriting assets and getting married are all life events that we should update our wills to reflect.

“Buying a house, large investments, the acquisition of additional properties or businesses and retirement plans should all be kept current in terms of the contents of your will.

“Failure to update changes in your circumstances can leave the loved ones you leave behind financially unprotected.” 

Will Aid Month in November should act as a good prompt to get a professionally written will created, with the help of a solicitor who specialises in this service.

Law firms are volunteering their time and expertise during November to write wills, with fees waived so the equivalent can be donated to Will Aid instead. Donations to Will Aid support the vital work of nine partner charities.

The suggested voluntary donation for your basic Will Aid will is £100 for a single will and £180 for a pair of mirror wills.

Those who wish to make a will can book their November appointments from September onwards via the Will Aid website at https://www.willaid.org.uk/ or by calling Will Aid on 0300 0309 558.

Last year Will Aid raised more than £1million for its charity partners – ActionAid, Age UK, British Red Cross, Christian Aid, NSPCC, Save the Children, Sightsavers, SCIAF (Scotland) and Trocaire (Northern Ireland).

Jon DoyleHow well are you prepared for death?
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Are these the best ways to tackle inter-generational unfairness?

The House of Lords has published a report aimed at tackling inter-generational unfairness, and the growing gap in wealth between younger and older people in the UK.

There are some reasonably radical proposals within the report, including the removal of the state pension triple lock, getting rid of free television licences for the over-75s, and even doing away with free bus passes for pensioners.

It’s an important issue to address because the retired population have higher average incomes than younger people. This is an unusual situation and something that appears to be fueling inter-generational unfairness. Within their report, ‘Tackling Inter-generational Unfairness’, the Lords say that “inter-generational fairness should offer the opportunity of a fulfilling life.”

A combination of low wage growth, difficulty getting onto the property ladder, and lack of government support have all made this opportunity for a fulfilling life harder to obtain for younger people. Within the report, it says that one in three of the babies born in the UK today will live to celebrate their 100th birthdays.

As a result, we need to re-imagine what retirement means and how it might be experienced. Looking at some of the specific proposals within the report, the headlines have been grabbed by the suggestion to get rid of the state pension triple lock. The coalition government introduced this mechanism in 2010. It’s designed to ensure that state pension incomes rise each year by at least the level of price inflation or average wage growth.

With more people reaching state pension age, this triple lock guarantee is becoming less sustainable, diverting public funding from essential services. As a result, members of the younger generations are effectively subsidising state pension increases for older generations.

The report proposes that the state pension should rise each year in line with average earnings. Doing this would provide parity with the income increases experienced by younger people. Other state benefits are also allocated for the axe in the report, including free bus passes for the over-60s. Free television licences for the over-75s will also be scrapped if the government adopts the proposals, along with the Winter Fuel Payment for those born before November 1953.

One proposal contained within the report that we’ve seen before, as a suggested solution for funding the increasingly costly adult social care bill, is to extend National Insurance contributions past state pension age.

As things stand, if you keep working past state pension age, you don’t keep paying National Insurance contributions. The proposals in the report would see contributions made through an alignment of the National Insurance contributions threshold with the income tax personal allowance. There’s a call in the report for the reform of the current council tax system, which would reflect the value of the property, instead of relying on outdated property valuation bands.

A method to delay council tax payments for elderly residents on low incomes would also be introduced. Commenting on the report, Alistair McQueen, Head of Savings and Retirement at Aviva said the spirit of inter-generational unity in the UK was at risk.

“Without positive long-term action, an inter-generational storm may be on the horizon. “This is an important and wide-ranging report. It deserves careful and thorough consideration we should avoid any rush to make judgement.” “We are pleased to see the focus given to the inter-generational challenges of a longer working life, alongside those of housing, education, community, taxation and government planning. The report is correct to state that yesterday’s simple three-phased approach to life – education, work and retirement – is coming to an end. We must all be prepared for the prospect of a more fluid and fuller working life.”

Alistair McQueen, Head of Savings and Retirement at Aviva
Jon DoyleAre these the best ways to tackle inter-generational unfairness?
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Apathy towards inheritance tax could cost dearly

In our experience, clients typically take one of two views when it comes to inheritance tax.

One group view inheritance tax as inherently wrong and will take any necessary steps to ensure their family pays not a penny more than necessary.

Another group takes the view that their children are set to inherit more than they ever did, even after the inheritance tax bill is paid, so they are prepared to take the death charge on the chin.

Whether you fall into one of these two groups or take a view somewhere in the middle, you’re unlikely to feel particularly happy about recent increases to probate charges.

But new research has found that families are set to face increasingly higher inheritance taxes due to a mix of these rising bills and a sense of apathy towards inheritance tax. The research, carried out by Saga, found that 63% of adults don’t have a will in place. They also discovered that 40% of under 50s have no plans to write a will.

Even more worryingly, only 11% of those surveyed reported having carried out any estate planning to mitigate inheritance tax, and more than half said they had no plans to carry out any such planning.

Despite this widespread apathy towards inheritance tax, a quarter of people who plan to leave an inheritance to the next generation said they have consciously reduced their expenditure so they can leave more behind to the kids. New rules introduced on 1st April 2019, dubbed by some in the press as a ‘stealth death tax’, are set to cost some families an additional £6,000 in probate fees.

It’s because families previously paid a flat-rate £215 for a grant of probate. The new fee schedule is instead based on the value of the estate, with around 280,000 families a year paying more as a result. Around 56,000 families a year are forecast to face probate bills of between £2,500 and £6,000 from 1st April, instead of the previous flat-rate charge.

“The lack of engagement and awareness surrounding estate planning and wills is worrying. Only 15% of under 50s have written a will, and while this rises to 60% of the over 50s, just 11% of the population has conducted estate planning to manage the inheritance tax levied on their estate upon death. “With a quarter of people who plan to leave an inheritance already cutting costs to increase the amount of money to be left to their beneficiaries, there is a deeply concerning lack of understanding surrounding what individuals can really do to better mitigate against inheritance tax. On top of this, with the stealth death tax creeping in next month, beneficiaries of estates over £50,000 will be hit even harder by new tax levies. “There is clearly a desperate need for education in this space, to help people ensure that both the ‘right people’ receive the correct inheritance and that beneficiaries are not paying unnecessary high taxes. People should never feel obliged to reduce their outgoings to leave a larger provision for their families; with appropriate estate planning and tax management, we hope this concern will be alleviated and, simultaneously, the recently bereaved won’t be faced with spiraling taxes.”

Jeff Bromage, Managing Director at Saga Personal Finance

If you’re facing an inheritance tax bill for your loved ones, the first step to take is to understand the scale of the issue.

Working with a Financial Planner is an excellent way to calculate the projected inheritance tax bill, before exploring the steps you can take to mitigate this tax.

It’s also important to write a will and keep it up to date, so it continues to reflect your wishes. Having a valid will in place is the single best way to make sure that the value of your estate is distributed in line with your wishes when you die.

Jon DoyleApathy towards inheritance tax could cost dearly
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Transferring unused inheritance tax nil-rate band

A question that often comes up when it comes to inheritance tax planning is how to transfer any unused nil rate band.

It has been possible to transfer the unused percentage of the nil rate band from a deceased spouse or civil partner to the surviving spouse or civil partner since 9th October 2007.

Whilst the transferable nil rate band is available to survivors of a marriage who die on or after 9th October 2007, regardless of when the first spouse died, in the case of civil partners the rules are slightly different and the first death must have taken place on or after 5th December 2005. The date on which the first Civil Partnerships were formed under UK Law.

If the first death in a marriage or civil partnership happens after the couple are divorced, then no transferable nil rate band is available.

If the first death happened before 13th November 1974, then the full nil rate band may not be transferable. This is because the amount of the spouse exemption was limited before 1975.

It is really important to remember that the transferable nil rate band isn’t automatically applied, so it needs to be claimed.

The time to claim is following the second death, not when the first spouse or civil partner dies. Claims are made by the Executors when filling in HM Revenue & Customs form IHT402.

There is a time limit for claiming the transferable nil rate band, generally two years from the end of the month in which the second spouse or civil partner died. In order to claim, personal representatives will need to send form IHT402 and any supporting documents to HM Revenue & Customs.

This is a helpful example provided by HMRC: “A spouse died when the threshold was £250,000. They left legacies totaling £125,000 to their children with the remainder to the surviving spouse or civil partner. The legacies to the children would use up half of the threshold, leaving the other half (50%) unused. On the deceased’s death, the threshold was £325,000, so their threshold would be increased by 50% to £487,500. If the surviving spouse’s estate isn’t worth more than £487,500 there’ll be no Inheritance Tax to pay on their death. If it is, there’ll be Inheritance Tax to pay on the value above that figure.”

Introduced in April 2018, the new residence nil rate band adds a significant increase to the amount of an estate that can be passed free of Inheritance Tax. This too can also be transferred between spouses and civil partners in the same way as the standard Nil Rate Band. The unused percentage of the residence nil rate band is also claimed on the death of the second spouse or civil partner.

Unlike transferring the unused nil rate band, with the residence nil rate band the transfer can take place regardless of when the first death happened.

In fact, the unused percentage of the residence nil rate band can be used even if no residential property was owned at their time of death. There will always be an additional 100% residence nil rate band, with the exception of cases where the first spouse or civil partner’s estate was valued at more than £2 million.

You can find out more about Inheritance Tax by downloading our FREE guide here

Jon DoyleTransferring unused inheritance tax nil-rate band
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Why you MUST make a Will!

It’s fair to say that many adults in the UK put off making a will, even those in the legal profession who should know better. It is almost as if the act of making a will means acknowledging that one day they are going to die.

It is not death that a man should fear, but he should fear never beginning to live.

Marcus Aurelius

Making a will is a really important building block in terms of financial planning. At the very least it helps to ensure that you control what happens in the event of your death actually does happen. For example you may have strong views about the nature of your funeral service with or indeed without a religious ceremony.

The growing popularity of green burials is an example of something that can be catered for in your will. You may want to ensure that certain of your possessions go to the right people so a valid will might help to avoid family squabbles.

Married couples and those in Civil Partnerships, particularly those with children from the previous relationships, should take particular care because the laws of intestacy (how the State dictates your estate should be distributed if you die without a valid will) might hold some unwelcome surprises.

The surviving partner will get the personal possessions of the deceased spouse and the first £250,000 of the estate and half of everything above this. The rest goes to the children. This may absolutely not be what was required.

Making a Will does not mean you are going to die! But it does make more sense to die with one.

If you would like to speak to one of our trusted Law partners about making a will please get in touch.

Jon DoyleWhy you MUST make a Will!
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