According to the cliché, only two things are certain: death and taxes. Although nobody likes to dwell on the inevitable, this can seem like a far less daunting prospect if you make sure that your financial affairs are in order. Give thought to your finances, your estate, the money you leave your children and your will now. This will ensure that you can be safe in the knowledge that your legacy is secured.
Reduce Inheritance Tax
It is well documented that the younger generations will find it more of a struggle than ever to get a foot on the property ladder. Poor employment prospects, frozen salaries and extortionate house prices mean that home ownership is well out of reach of many youngsters in Britain today. Nevertheless, if you are lucky enough to be in a position to help your children on to the ladder, there is a new scheme that will help you do this, whilst also reducing the inheritance tax bill you leave behind for them.
Help Your Children onto the Property Ladder
Since December last year it has been possible to help your children through a Help to Buy ISA. The government will supplement anything you put into this savings account by 25 per cent; this means that every £200 you put into this account will be matched by £50 from the government. The money that the government will contribute is, however, capped at £3,000, which means that the most a saver can pay in is £12,000. If you are already a homeowner yourself, you will not be able to take out one of these ISAs. However, your children can set up a Help to Buy ISA in their own name and you can gift them the money to put into their account. This also has the double advantage of having the potential to reduce the inheritance tax bill you leave behind for them, as gifting chunks of money will reduce the overall value of your estate. One of these ISA’s can be opened at most banks such as Halifax.
Lasting Power of Attorney
As we look to old age, we must face the possibility that we may one day become incapacitated by age or illness. It is therefore wise to consider establishing a Lasting Power of Attorney (LPA) while you are fit and able to do so. Then, should the worst happen, you can at least be confident that you have left your affairs in order for your children and loved ones. It is not possible to set up an LPA when you are already sick, which is yet another reason to think ahead. Should you already be sick, then your family must apply to the Court of Protection to act on your behalf. This can be a costly and tedious process.
There are two types of LPAs that you can set up. The first, a ‘health and welfare LPA’ gives responsibility for your medical decisions to your chosen person in the event that this should be needed. The second type, however, is a ‘property and financial affairs LPA’. This allows you to designate someone to be responsible for your affairs should you become incapacitated. This involves dealing with your bank accounts, paying bills, liaising with suppliers and insurers and claiming any sort of benefits on your behalf.
Having this in place early can save huge administrative nightmares in the future. You can set up an LPA through the website of the Office of the Public Guardian. The process takes around 12 weeks and currently costs £110 per LPA.
Is Your Will Solid?
It is important to ensure that your executor is insured against legal claims in the event of a dispute over the will – this can happen if the will is not completely clear; for this, executors liability insurance should be in place. If you allocate a firm of solicitors to take care of your will you will not need to do anything, but if you have asked a friend or family member to act as executor, they may be liable if mistakes are made.
Peter Collins is a director at LFC Risk and Insurance, who provide individuals and businesses with insurance and risk management advice as well as executors liability insurance.