For many people, the legacy they leave behind isn’t just a list of achievements or a lifetime of hard-earned wealth, but rather the lasting positive effect they have on the lives of their loved ones.
Through working with an adviser, your clients can craft estate plans that not only improve the lives of their loved ones, but also reduce potential worries or conflicts arising from any inheritance.
Read on to learn about three practical ways your clients can prepare their estates for their loved ones to help boost their emotional and financial wellbeing, and ensure your clients leave behind a lasting legacy.
1. Consider writing a will
According to a study by Canada Life, among UK adults:
- 33% of those aged 55 and over don’t have a will
- 14% don’t ever intend on making a will
- 41% have no concerns about not having a will
- 50% across all age groups don’t have a will.
These are worrying statistics considering a will’s importance in determining what happens to your clients’ estate once they pass.
Royal London reports that a rise in DIY wills, as well as a lack of a will altogether, has led to a surge in estate disputes — up 37% between 2019 and 2021.
Many Brits mistakenly believe their wealth and assets will automatically pass to their loved ones once they’re gone (17% in Canada Life’s study).
However, if a will isn’t in place, your clients’ estate could be distributed according to the rules of intestacy. This could see their assets fail to end up with the intended recipients.
A will allows your clients to:
- Decide who gains their money, assets, and property once they’re gone
- Make provisions for the upbringing of their young children (under the age of 18)
It could help your clients influence the outcomes created by the wealth they leave behind and the associated benefits to their loved ones’ financial security could be immense.
2. Consider gifting their wealth before they’re gone
Gifting can be an incredibly tax-efficient way for your clients to pass on their wealth, as well as see it be put to good use while they’re still alive.
According to FTAdviser, UK families could end up paying £37 billion in IHT over the next five years – a 36% increase on the sum paid between 2017 and 2021. Fortunately, gifting could offer your clients a clever way to navigate a potential hefty IHT bill and ensure the gains of their lifetime of hard work lives on through their loved ones.
Your clients can make gifts up until the annual gifting exemption of £3,000 each tax year. These gifts will immediately fall outside your clients’ estates for IHT purposes and any unused allowance can be carried forward into the next tax year.
Your clients could also opt to:
- Make small gifts of £250 or less
- Make a wedding gift of £5,000 to a child, £2,500 to a grandchild or great grandchild, or £1,000 to an extended family member or friend
- Gift from their income — provided the gifts are regular, don’t affect their regular standard of living and come from income and not capital
- Gift an amount free of IHT as a “potentially exempt transfer” provided at least seven years pass between the date of the gift and your clients’ death. If they die before seven years have passed, their loved ones may have to pay IHT.
Through gifting before they die, your clients can see the boost their wealth gives to the lives of their loved ones, improving their financial security, helping them with the costs of major life milestones, and reducing financial worries.
Read more: 5 promising ways your clients can use gifting to reduce taxes and help loved ones
3. Your clients might want to sit down with their loved ones while they’re still alive and openly discuss their plans
The week of 8 to 14 May is Dying Matters Awareness Week, an annual drive to raise awareness about the importance of talking openly about dying, death, and bereavement.
They are difficult conversations to be had and are often left until it’s too late.
According to research reported by the Times, almost 6.5 million Brits refuse to discuss their will with their loved ones, primarily out of a fear of causing conflict.
If your clients take the time to discuss their estate plans with their loved ones, it might help better prepare them for the eventuality of their death and meet potential issues arising from any inheritance head on, ahead of time.
A loved one’s death and subsequent funeral can leave everyone involved in a heightened emotional state and more prone to petty squabbles and disagreements. These problems might become exacerbated by any ambiguity over estate plans or the contents of a will.
If your clients choose to sit down with their loved ones and discuss their plans, they could cover areas such as:
- How they’d ideally like their money put to use — for example, having a child or grandchild use their inheritance to support their education, or to help them set up their own business
- Why they’ve split their estate the way they have, so loved ones can understand the reasoning behind their decisions
- Any suggestions or thoughts from loved ones on their plans, so maybe amends can be made before it’s too late to help keep everyone happy.
Get in touch
If your clients are worried about their estate plans and want to ensure their loved ones are cared for once they’re gone, taking the time to reduce IHT and discuss how decisions might affect their loved ones could provide them with peace of mind.
A good first step could be to reach out for advice by contacting us at info@grey-parrot.co.uk or calling 02039 871782.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.