Succession planning, inheritance tax planning and wills – are you up to date?

During times of uncertainty, it can be reassuring to make plans, to protect you and your family for the future. Estate planning is often overlooked or left until a late stage. Planning for this as early as possible and regularly revisiting your plans, will ensure that your estate is managed effectively and reflects your wishes. Not only can this make it easier for your family in the future, but there are also other advantages of planning this earlier, including utilising the many generous tax incentives. 

Alexander & Co is here to help you through the entire process, providing you with clear, considered advice. We have close, trusted relationships with legal advisors, to provide a hassle-free comprehensive service for all estate planning matters, from reviewing or creating wills and drafting Powers of Attorney through to providing inheritance tax planning and pension advice.

Drafting a New Will

Putting a will in place makes it much easier for family or friends to administer your estate when you pass away. It will ensure that your wishes are carried out and makes the whole process of dealing with your estate simpler.

Without a will, your estate will be dispersed in accordance with the intestate laws, which may not be in line with your wishes. This is particularly important if you are not married, as your estate would not pass to an unmarried partner automatically. Please also be aware that the whole of your estate may not pass to your spouse even if you are married.  Should you have dependents, it is also important to decide how they are going to be cared for and who would be their guardian.

We have trusted legal contacts that can advise and draft all the necessary documents. This can also be provided in an emergency and in the current climate, we can arrange this remotely, through video conferencing, emails and telephone appointments.

Reviewing Existing Wills

If you already have a will, it is important to keep this up to date. Key life events, such as divorce or marriage, the birth of your children or grandchildren, or a change in financial circumstances, can all lead to changes that may need to be reflected in your will. Failing to keep a will up to date may deem it inadequate when it comes to administering your estate and lead to contentions or challenges in the future.

Lasting Powers of Attorney

In addition to planning your will, Lasting Power of Attorney will assist greatly in situations where you lose capacity during life. Unfortunately, this is often left until much later in life and sometimes too late, when it is not possible to be executed.  These documents need to be put in place before an individual loses capacity and appointing the Power of Attorney should be executed as early as possible.

A Lasting Power of Attorney allows those appointed to look after your financial or health decisions on your behalf once you have lost the capacity to do so yourself. This can include accessing your banking or paying your bills on your behalf, or dealing with healthcare issues, such as making decisions on care and living arrangements.

Business succession and protection

Succession planning is crucial to ensure that there is a formal arrangement in place for your business in the case of an unexpected incident, such as a long term/serious illness or death that affects a shareholder, or a key member of staff. It will also protect the company when key members of a business decide to retire or step down partially from their responsibilities.

A shareholders’ agreement can alleviate much of these uncertainties. A well prepared and executed agreement will help to protect shareholders’ investment in a company, establish a fair relationship between shareholders and govern how the company operates and is managed.

The agreement will be able to set out the shareholders’ rights and obligations, outline how the company is to be run and regulate the sale of shares in the company amongst the areas it covers. In the event of the death of a shareholder, this agreement can outline how the shareholder’s interest in the company will be dealt with (such as being sold to other shareholders, rather than transferred to a family member, who may not be familiar with the company).

Succession planning is important for all businesses, it is even more salient in family businesses, where they have specific expertise and have assisted for many years. Family businesses have an extra layer of dynamics and we can provide tailored assistance and advice in relation to integrating the next generation into a business. Our family business accountants are here to help.

Inheritance tax planning

Your assets are likely to change during your lifetime and existing wills may not reflect your current situation. Even if they do, regular reviews will make sure that you are looking after your assets in the most tax-efficient way as possible.

Inheritance tax planning is often not considered until the last minute, by which time it is often too late to make a real difference. With careful early planning, there are many ways in which you can reduce potential inheritance tax bills including gifting, life insurance, trusts and discounted gift plans.

Our tax experts can work with you to ensure you utilise all the available reliefs and exemptions available to you. We can structure a bespoke succession plan considering your individual circumstances to make sure the allowances work best for you. 

Below are just some of the options we can advise on to ensure your estate is managed in the most tax-efficient manner:

Lifetime gifts

Passing on your wealth ahead of your death can be more tax efficient. Each tax year £3,000 can be gifted, without it being subject to inheritance tax. £250 can also be given to any number of people each year.

In addition to this, parents can gift £5,000 to each of their children as wedding gifts, whilst grandparents can gift £2,500 and anyone else £1,000.

There is potential to make further tax-free gifts, but you must survive for seven years after making the gift to get the full benefit of it being outside of your estate for inheritance tax purposes. Within seven years of you passing away, a tapered scale will apply, should the gifts be valued at more than the nil-rate band of inheritance tax.

Pensions

One of the most tax-efficient ways to pass on wealth. Up to the age of 75, benefits left in a money purchase pension can be paid as a lump sum or income drawn down to any beneficiary, tax-free. 

Trusts

Trusts can prove very effective in minimising inheritance tax and provide control over how your assets are utilised by future generations.

Trusts are an effective way to protect your children/grandchildren’s legacy if your surviving spouse remarries and to protect their legacy from their own marital disputes.

Within a trust, you can also keep a lump sum outside of your survivor’s estate to ensure it is not subject to inheritance tax. If you pass away within seven years of making a transfer into a trust, inheritance tax will be paid by your estate at the full amount of 40%. 

Life Assurance

If a life assurance policy is written in trust and the proceeds of the policy will not be included in your estate. On your death, the policy pays out to the trust and this can be used for the benefit of your beneficiaries or to settle any inheritance tax payments.

Discounted gift trusts

In a discounted trust arrangement, you can gift money to a trust and draw a regular income for the rest of your life from it. You can then pass the remainder of the gift to your heirs free of inheritance tax.

If you pass away within seven years of the creation of the trust, your heirs will receive a discount on the inheritance tax, because your right to draw income from the gift reduces its value.

Further tax saving opportunities

There are many other tax-efficient opportunities to explore. Certain shares and business interests become free from inheritance tax once they have been held for two years, as they will qualify for Business Relief. Enterprise Investment Schemes also benefit from Business Relief and are free from inheritance tax in the same way.

There are many other avenues that may be beneficial depending upon your own circumstances.

How Alexander & Co can help

Our expert tax team is on hand to cover all aspects of estate planning, with our partners, we can arrange for expert advice on wills and Lasting Power of Attorney and our dedicated team of tax experts can guide you through the complexities of estate tax planning, to structure a bespoke succession plan taking into account your individual circumstances to ensure you utilise all the available reliefs and exemptions available.

Contact us today

If you would like to discuss any aspect of your estate planning, please get in touch with our specialist team, using the contact form below, alternatively, email info@alexander.co.uk or telephone us on 0161 832 4841.

We are fully equipped to work remotely and can arrange a phone consultation, or video call to discuss your requirements.