Recently an ‘older’ client announced they were starting to think about estate planning. Well in to their 90s, some might say they were a little late – however estate planning is so much more than devising ways of depriving the Chancellor of a few pounds of inheritance tax – it’s about adding purpose to your life’s work by making a difference to others.
The first step in Estate Planning to to know where you are – income, outgoings and assets. Step two is to look after No. One (and two). Your priority is to ensure that you (and your spouse) are fully provided for with a comfortable safety buffer. Only then do you look at the tax position and it is only if you find your estate is likely to be handing a large slice of your already taxed wealth to the Chancellor that you should think about Estate Planning.
When you start looking at how you can make a difference – without causing untold damage – you begin to realise the challenge you face.
The first steps are easy. The annual tax free giving allowance of £3K plus unlimited gifts of £250 per person may not make a huge impact on your estates IHT bill, but it may stop the problem getting worse and will make you very popular with your family and friends!
Paying off family debts such as mortgages will have a material impact on their lives – without being life-changing. Also consider passing out money to be invested in premium bonds – invest the maximum £50K produces an irregular, but steady income with the potential for a much larger win.
Once the basics are covered the really interesting discussions begin. Talk to your children and grand-children about their dreams and aspirations. If money was not an issue what would they do? It might be a world cruise, or climbing a mountain, or packing in work to become a writer. How about setting up a business or working in disaster relief. Once you know the options you can decide where your hard earned money will do the most good – and you can make those dreams come true.
….. that’s why!