There are plenty of things in life that we’d prefer to pretend we didn’t have to face up to. Things like tax returns, children growing up and leaving home, and spending Christmas with the in-laws.
Another one is death. Like all of the above, our own mortality might not be something we like thinking about or talking about. It might feel easier to stick our fingers in our ears, close our eyes and hum a silly tune to shut it out. But that doesn’t make it any less inevitable.
Like the tax man, death catches up with everyone eventually.
Our reluctance to talk about death can be problematic. Because when we leave this mortal realm, the rest of the world doesn’t die with us. We leave behind family - partners, children, grandchildren - as well as all manner of personal effects and assets.
One of the biggest reasons to face up to the unavoidable truth that you won’t always be around is to start planning for what happens after you have gone. What will become of your wealth, your assets, your business interests? What about your family? What can you do to ensure they are comfortable and well looked after?
In many ways, putting your estate and your affairs in order with a view to what happens after your passing is about marrying these two things together. If you die without taking appropriate measures, you can end up leaving your family in a difficult position. They may have a hard job identifying all of your assets - face it, have you ever sat down with your children and told them in detail about everything you own and where all your money is? And they could face legal wrangles over claiming the inheritance.
That, of course, forms an obstacle to what is surely everyone’s enduring wish for when they pass away - to leave behind a legacy that helps their loved ones live a happy, fulfilling life.
So in the interests of your nearest and dearest, don’t let your squeamishness about death stop you from doing the right thing for them. Sound financial planning advice tells us that there comes a time when we all have to think about leaving the right kind of legacy behind. Here’s how.
Make a will
You might think this is stating the obvious. But it’s a point that cannot be overstated in our view. Especially not when 54% of adults in the UK don’t have a will. If you don’t write a will, you leave your loved ones at the mercy of the rules of intestacy - the laws which govern how the assets of a dead person are distributed when they die if there is no valid will in place. And no, intestacy rules do not mean your spouse, partner and children will automatically get everything.
If you want to be sure that your estate will be passed on as you would wish, you simply have to write a will. And not just write one and forget about it for 30 years, but keep your will up to date as your circumstances change.
Create a ‘what I own and where I keep it document’
The fact that so many people don’t have a will - or write a will and then let it lapse and become invalid - can be put down to people assuming that having one is such an obvious thing to do that they don’t ever get around to doing it.
Equally obvious, but even rarer in practice, is making a list of all your financial assets with instructions on where they can be found and how to access them. It’s just common sense, isn’t it? If you want your loved ones to be able to use funds you have stashed away in various bank accounts, you need to tell them what the accounts are and how to get to them. If you want to pass on various bits of property you have, it helps if they know where to find the deeds of said property etc.
A ‘What I Own and Where I Keep It’ document doesn’t have any kind of legal status like a will. But in terms of providing practical assistance to your heirs, it is just as important.
Consider your inheritance tax position
Finally, for high net worth individuals, something else to consider is what sort of tax liability you will be leaving behind. Unless you are leaving your entire estate to your spouse or partner, HMRC will take 40% of all assets over the threshold value (£325,000 or £650,000 for the combined assets of a couple).
That means children often get hit hardest by inheritance tax. If you want to maximise what your children can keep from your estate, options include putting your assets into a trust or, in the case of illiquid assets like property, taking out whole life insurance in trust.
It’s never too early to start considering the legacy you will leave to your loved ones. Independent financial advice (IFA) can help you make decisions that will not only smooth the path for beneficiaries of your estate, but also maximise their inheritance. Fiducia Wealth specialise in IFA wealth management including assisting high-net-worth individuals with estate planning. Contact their multi-award-winning professional team to find out more.
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