We can't take our money with us after life

They say there are only two real certainties in life - death and taxes. Sad as that is, it is why it is crucial to have a strategy in place to manage the inheritance of your wealth and assets in the most tax-efficient way. Planning for what will happen after your death is one of the most important things you can do in finance, so that your estate isn't destroyed by taxes and is passed on to your heirs.

What is estate planning?

All of us want to be able to protect our wealth and assets for future generations. Devising a way to ensure you can gift as much of your estate to your family as possible is an essential part of financial planning. There are a number of options available, but the best way forward will depend on the value and type of assets you hold. For example, it may be advisable to set up trust funds, foundations or even managed companies in order to best protect your wealth in the most tax efficient way possible. These are all complex and technical areas and if you feel you need some help and support please contact us to find out the best option for you.

Do you have a will?

The most important part of estate and inheritance planning is having an up to date will and testament. Don’t assume your wealth will automatically go to the people you want it to. If you die without a will, it means you have died “intestate”. When this happens, your estate must be shared out according to certain rules. This becomes complicated if a couple jointly owns a property and it will impact on the amount children can inherit if there is a surviving married or civil partner. Having a will in place makes it simpler for your loved ones to organise things at what will inevitably be a difficult time for them.

Tax-effective inheritance planning

Inheritance planning is vital if you want to ensure you pass on as much of your estate as possible to your loved ones. The first thing our financial planners will consider is how you pass on wealth before you die, as it can be more tax-efficient to gift money while you are still alive. You can give away a certain amount each year without paying any inheritance tax: not only does this mitigate the tax bill, but you are also able to see loved ones benefit from the money. Your adviser will also look at whether you need to have life insurance in place – if this is put in a trust it will be exempt from inheritance tax, offering a tax-efficient way of passing on wealth. They will review your estate and advise you on how much tax you may be liable for and then look at tax-efficient strategies to reduce the tax burden.

Murphy's Law

Ever heard of Murphy’s Law? It states that you never know what might happen, and if anything can go wrong it will – and at the worst possible moment. Making plans sooner rather than later can make a huge difference to the lives of those you leave behind, especially in and around minimising the impact of inheritance tax.

 

Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate taxation advice, trusts or will-writing.

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