Lifting the burden
Putting in place the right solution for administering your estate can ease the pain and pressure for your family.
Throughout your lifetime, you are likely to have accumulated a substantial estate of property, investments, cash and valuable belongings. When you die, you will understandably want to ensure that your beneficiaries get the full benefit of your legacy. Like taxes, death is certain, so planning for the future can help to look after your loved ones after you’ve gone.
It is estimated that the amount of wealth passing to the next generation annually will increase by 66% between 2017 and 20271. With this increased wealth comes more complexity in financial circumstances and legal paperwork. Many people will appoint a legal professional to administer their estate, and could end up seeing a substantial proportion of it being swallowed up in fees. There are, however, other alternatives to using a solicitor, including seeking help from a specialist estate administration firm, which tend to cost significantly less.
A specialist estate administration firm can take care of the legal and tax work, including applying for the grant of probate, accounting for Income Tax in the year of death and, if required, settling any Inheritance Tax due. They can also manage the practical tasks such as dealing with bank accounts, belongings, property, pensions, utility providers and redirecting post. By appointing a specialist to administer your estate, you can alleviate some of the stress your family has to deal with at an already difficult time.
Many people who are named as an executor in a Will are unaware of the associated legal responsibility. Around six million people have experience of acting as the executor of a Will, but just 4% realise that they are legally responsible for the accurate distribution of the estate that is entrusted to them2. There could be serious repercussions for an executor from HMRC or the beneficiaries if a mistake is made. An estate administration firm will typically take on this responsibility for the executor(s) so they are no longer legally liable for the correct distribution of the estate.
Additionally, the rise in house prices means that property is expected to account for over 70% of the wealth transferred in the coming years3. The surge in property values will mean that more families will be liable for Inheritance Tax (IHT), making the estate administration process even more complicated.
IHT is generally paid if the value of your estate is above the £325,000 nil-rate band. However, if you leave everything to your spouse or civil partner, a charity or a community amateur sports club, then there is normally no IHT to pay. Furthermore, if you leave your home to lineal descendants, such as children or grandchildren, your IHT threshold will increase to £425,000 (and to £450,000 in the 2018/19 tax year). Additionally, if the value of your estate does not breach the nil-rate band, and you are married or in a civil partnership, your unused threshold can be added to your partner’s when they die.
There are steps you can take now to minimise the amount of IHT that your family will need to pay after you’ve passed away. You can legally give away up to £3,000 every tax year without being liable for IHT. Smaller gifts of up to £250 are always exempt from IHT as long as each gift goes to a different person. You can give away larger sums of money over the £3,000 limit that will be exempt from IHT if you survive for seven years or more after the gift has been made.
Planning ahead with all of this in mind can help to ensure you leave more for your loved ones, and remove much of the burden and stress they can encounter in dealing with your estate.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.
Wills are not regulated by the Financial Conduct Authority. Will writing involves the referral to a service which is separate and distinct to those offered by St. James's Place.
1,2 Kings Court Trust, 2017
3 www.gov.uk/inheritance-tax, accessed 28 March 2018