Most people who have an inheritance tax problem, don’t know about it.
Sounds implausible, doesn’t it? Yet because the issue of passing on your estate won’t actually arise until after your death, the majority of people spend their lives in ignorance that the legacy they leave won’t actually be the legacy they intended to leave…. until it’s too late.
In fact, most people will never know they had an inheritance tax issue that could have been mitigated – and their estate protected – because, by the time it comes to light it’s their surviving family members who have to pick up the pieces and deal with the distress at losing both their loved one and a large piece of their financial legacy.
I know that sounds alarming. And yet time and time again I come across people who are making assumptions about inheritance tax and thinking it doesn’t affect them.
Inheritance tax is a complicated subject and – let’s face it – it’s not the most appealing of topics. The recent changes to the inheritance tax threshold and the ensuing media coverage have done nothing to alleviate the anxiety most people feel at the mention of the matter.
While the recent amendments to the law do further complicate an already complex subject, for the majority of people, the new changes won’t fundamentally effect the problem they have with their legacy.
If you’re asking yourself whether that applies to you? Statistically, it probably does.
The figures are that about 70% of people die without a Will and of the 30% that do have a Will, about two thirds of those have issues that mean the legacy left will not be the one they intended.
This is compounded by a legal anomaly, where the sources people turn to for advice need not be qualified, because there is no regulation on who can, and who cannot be a proper Will writer and estate planner.
So, what can you do?
- Make plans for everything that will happen on your death, not just a Will
Of the folks who do leave a Will, very few have thought further than simply having the Will.
Unfortunately, this usually isn’t enough. When an individual dies, the issues their loved ones face are more complicated than a standard Will allows for. Inheritance tax, financing the funeral, paying residential care bills, considering what may happen when the estate goes through probate – there are many different factors influencing the legacy as a whole.
By speaking to a genuine expert, you will be guided to think further about the consequences of different actions, and you can be educated as to the knock-on effects.
For many of our clients, we actually unravel the plans they have already set in place, consider the implications of each and, when they realise their legacy isn’t protected in the way they thought it was, we are able to restructure it in a truly effective and current way.
Consider the whole picture – because everything of family and finance affects the estate.
- There is no ‘standard family’.
I think we can all agree that our own family is unique. From the makeup of the family unit, the history of the individuals, inter-personal relationships between family members, the temperaments and litigiousness of various relatives – the variations in family dynamics are endless, yet most people still believe that a ‘one-size-fits-all’ Will is enough to cover all the nuances.
Most people know exactly how they would like to leave things on their death, and don’t realise the instructions they put in place before they pass aren’t thought out enough to carry through their wishes. Perhaps there are family members to whom you would prefer not to leave a share of your wealth; you may want to protect your child’s share of inheritance from potential divorce or creditors; or maybe you have a definite age in mind when you think your children would be mature enough to handle a lump sum of inheritance money and which may not fit with the legal position that children become ‘adults’ at 18.
Issues with your plans won’t show up until the Will goes to probate at which point it’s too late to put corrections in place to ensure your Will is upheld.
Talking to the right expert – one who is able to foresee any potential problems and is aware of relevant legal precedents – will make sure your Will is watertight enough not to be contested. In addition to the Will itself, the correct professional guidance will talk you through how to pick the right trustees to manage any Trusts in the way you intended.
There is no such thing as a standard family, so why would you want a standard Will?
- Think carefully about who to trust
Two of the most damaging assumptions that people make with regards to Wills and Estate Planning are:
1) There is enough industry regulation in place to ensure they are dealing with a qualified professional and
2) The provider with the lowest price provides the best value for money.
Neither of those assumptions is correct.
There is currently no regulation around who can write your Will, so it’s up to you to pro-actively ascertain whether the person advising you is qualified and knowledgeable enough to do so.
When you choose an ‘expert’ to work with, don’t just go for the one with the lowest price or the most stylish branding. Interview them so you can decide from an informed view. Look for somebody who is prepared to sit down to discuss your own personal requirements and looks deeply into your unique situation. Make sure they are asking in-depth questions and double check they have appropriate professional indemnities in place.
We have a £2 million minimum indemnity for each client to cover the estate’s losses if anything should go wrong. Many providers don’t have such indemnities to cover them, so buyer beware. It is, after all, a guarantee that the work will stand up to scrutiny.
Consider the value of what you’re buying and not just the price. I’m confident that we can save some of our clients four hundred times our fee, in what could be future costs without our service, so you need to think further than the initial payment.
Badly written Wills end up incurring unnecessary legal fees when it comes to probate, so instead of fixating on how much a Will costs to write, think about how much you will lose your family if the Will is contested or held up further down the line.
There is interaction between different legal specialties and you need to make sure you’re working with somebody who understands how familial law and inheritance law will impact on your wishes.
Ultimately, find somebody who provides a bespoke service, and never be afraid to ask further questions and trust your instinct as to who is the best advisor for your own situation.
Sticking your head in the sand and avoiding the topic isn’t the best solution despite the fact inheritance tax is not an easy subject. At Edmunds and Eve, we pride ourselves on helping our clients to find their way through the inheritance tax maze in as painless a way as possible, cutting through the off-putting legal terminology to explain all the issues you need to think about in the most human and down-to-earth way.
It’s not just about getting the cheapest, one-size-fits-all Will and assuming the issue is dealt with – it’s about considering the whole picture, the things you’ve worked hard to achieve through your life and the loved ones you want to benefit through your legacy.
Making the right, informed decisions now, will save your loved ones time, hassle and money and give them a secure inheritance.
At the end of the day, surely that’s the legacy you’d rather leave?