7 steps to passing on your estate to your loved-ones
12 August 2019
The Summer 2019 issue of Shipshape tried to cover all the bases on making financial arrangements for your loved-ones when the inevitable happens. There's a lot to consider and it can feel a bit daunting, so we've broken it down into the following steps.
Step 1: Get your financial affairs in order
The first step to be clear about is what you’ve got to pass on. You’ll need a list of your assets like shares and property, and liabilities such as an outstanding mortgage – although the latter may be covered by life insurance when you die.
To help with this, we’ve put together a personal affairs checklist, which also covers things like details of your financial advisers and where you keep your will. You can find it on our Website at www.shipleys.com/resources/useful-tools
Step 2: Work out your potential IHT exposure
IHT is normally payable on death at 40% on the value of your estate in excess of the available nilrate band. It can also be payable during a person’s lifetime on certain gifts.
The tax payable depends on the value of your estate, who you leave it to and gifts that may have already been made.
Step 3: Put a plan in place to reduce your IHT liability
The main strategies to help keep as much of your estate as possible away from the taxman are reducing the value of your estate by giving away some of your assets, making sure you hold assets that are treated more favourably for IHT, or leaving some of your estate to charity.
Step 4: Decide where you want your money to go and update your will
Making a will is the best way to ensure that your assets end up with those you want to inherit them – and there may be options to minimise the taxman’s share. If you haven’t made a will yet, don’t put it off, and remember you may need to update your will from time to time as your circumstances change.
Step 5: Consider arranging a Lasting Power of Attorney (LPA)
An LPA sets out who can make decisions on your behalf if you’re unable to at some point in the future, for example, due to ill health or mental incapacity. Arranging an LPA gives you peace of mind that your affairs will be looked after properly and can make things easier for your family and friends to deal with if the worst happens.
Step 6: Understand what’s involved in administering your estate
It’s useful to understand the ins and outs of probate – the process that ensures the right taxes are paid and your estate is distributed in the way you intended, as set out in your will, as quickly and painlessly as possible and without incurring unnecessary costs.
Step 7: Think about your digital legacy
It’s not just physical assets that you may want to consider but digital effects too. In an increasingly digital world, the music or books you buy and download online are actually licences giving you access to them, but no one inherits these when you pass on. So it’s important to consider who should have access to these services and to your social media accounts when you pass away, as well as to your online banking details.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary, if you would like advice or further information, please speak to your usual Shipleys contact.
Copyright © Shipleys LLP 2019