1 Wise up to Wills
The best way to ensure that your family and friends are provided for after your death is to have a properly written and witnessed Will – but more than half of UK adults haven’t made one. November is Will Aid month, which is when many solicitors waive their will-writing fees in exchange for a donation to charity. Suggested donations are £90 for a simple single Will, (saving up to £80) and £135 for a pair of mirror Wills. To find a participating solicitor call 0300 0300 013, or visit www.willaid.org.uk to register your interest now.
2 Wedding gifts
“Parents can each give £5,000 to their children (£2,500 to grandchildren, or £1,000 to anyone else) as a gift on their marriage or civil partnership with no Inheritance Tax (IHT) liability. Small gifts of £250 to any number of people in each tax year are also completely free of IHT. Normally, large gifts, given within the past seven years, would be counted as part of the donor’s estate for IHT purposes, so early planning of passing on assets is important,” says Danny Cox, from financial adviser Hargreaves Lansdown (0117 900 9000
3 Death duty
A gift to charity could bring your estate below the IHT threshold (£325,000, or £650,000 for married couples and civil partners). If your estate still exceeds the threshold, leaving a gift to charity may still have a tax benefit. If ten per cent of an estate is gifted to charity in a will, IHT is cut from 40 per cent to 36 per cent. The RNLI, for example, could not operate without these gifts. To find out more call Mark Allwood on 01202 663032, or visit rnli.org/legacy
4 Potentially Exempt Transfers
“Any gift to an individual, which is then referred to as a Potentially Exempt Transfer (PET) becomes exempt if the donor survives for seven years from the date of the gift,” says Danny. “In theory, there is no limit to the value you may gift in this way, so a considerable sum – even the majority of a person’s assets – could be passed on via PETs. If you die within three years, tax will normally be due at 40 per cent, but after three years a tapered rate of IHT, reducing by 20 per cent each year, may apply.” Don’t give away too much, as you may have to cover care costs in later life.
5 Gifts from income
“You can give away your income – pension or earnings – if this is regular and does not impact on your standard of living. These can include regular allowances to help a child through university or birthday gifts,” says Danny. Record gifts, including dates, amounts, recipients, and if they were intended to use up one of your gift allowances.
6 Place life cover ‘under trust’
“Ensuring your life insurance payout no longer forms part of the estate is a simple and effective way of avoiding ‘death tax’. It also reduces the legal problems which beneficiaries may face, thereby making it easier to distribute the money to the right people,” says Karen Barrett, at unbiased.co.uk
7 Power of attorney
A Legal Power of Attorney (LPA) lets you appoint someone to make decisions on your behalf should you lack the mental capacity to manage your legal, financial and health affairs. Francis Klonowski, certified financial planner at Klonowski & Co (0113 273 5255) says everyone should do it. “You can download LPA forms from the Office of the Public Guardian (England and Wales, 0300 456 0300, www.justice.gov.uk). There is a £130 fee to register an application, or seek advice from a legal adviser specialising in LPAs.”
Ask the expert
James Hoare, is an independent financial advisor and a Torbay Lifeboat Crew member
Q. I want to remember my favourite charities in my will. How should I go about it?
James says: As I’m sure you’re aware, having a Will is incredibly important as it is the only way to ensure that your wishes are fulfilled when you’re no longer here. It also means that your loved ones will not have to bear the burden of sorting out your affairs at a difficult time.
If you are writing a Will for the first time, you should always consult a professional. Amending a Will is usually straightforward. In most cases you can complete a codicil, a simple document which is then attached to your existing will by your solicitor. However, I would always advise arranging a time to speak to a financial planner or solicitor to ensure that your will still accurately reflects the provisions you wish to make for your beneficiaries.
May I applaud your decision to remember charitable causes in your Will. Every gift received by charities such as the RNLI, however large or small, helps save lives. As a volunteer Lifeboat crew member, when I head out on a rescue into unknown and potentially dangerous conditions, I am incredibly grateful for the equipment and training – over half of which is paid for by gifts in Wills, which keeps me safe. The benefit of supporting a charity in this way is that you can enjoy spending your money in your lifetime, safe in the knowledge that your values and beliefs will continue on through your support of your favourite causes. So after providing for those you care for, please consider supporting a charity in your Will.
Further information on supporting the RNLI in your Will is available online at rnli.org/legacy, or call Mark Allwood on 01202 663032.