Coronavirus: Tax and Estate Planning Guidance
May 05, 2020 | Meg Wilton
The coronavirus pandemic has highlighted the unpredictability of the future but has also given many people the time and mental space to deal with the mundane tasks that so often get ignored in the fast pace of ordinary life. We are currently more aware than ever of the need to look after our loved ones both now and in the future, and we have more time than ever to make these essential preparations.
There are several steps relating to tax and estate planning that you should be thinking about during these unprecedented times.
Make a Will or review your existing Will
It is important to regularly review your Will to make sure it is up to date. You should ideally review your Will every five years, at a minimum, but in reality, you should do so whenever you experience a significant life event such as marriage or having children, or if the value of your estate changes significantly.
Updating your Will may be more difficult while the current lockdown is in place in the UK, particularly when it comes to witnessing and signing your Will. With a little creative thinking, this can still be accomplished, just as long as social distancing rules are observed.
Set up a trust
If you want to take your estate planning a step further, you could consider setting up a trust. Trusts help to safeguard your assets for future generations and can be a useful way to ensure you maintain control over the distribution of your assets even after your death.
Setting up a trust is a complex legal procedure that requires carefully prepared paperwork and a great deal of forethought. Choosing trustees and administrators is a decision that should be made with care. Similarly, once you have transferred assets into a trust they cannot be reclaimed, so you must be certain about your decision before you begin. However, with the help of qualified legal professionals setting up a trust can be a great way to deal with your estate.
Preserve your estate
A big part of estate planning is making sure you are aware of inheritance tax (IHT) and how it will affect you. If the total value of your estate exceeds the threshold of £325,000, any portion of the estate above that figure will be subject to 40% IHT tax. On an estate worth £1,000,000, this means £675,000 will be taxed at 40%, for a total tax bill of £270,000.
There are plenty of ways to mitigate the effect of this tax. Gifting portions of your estate during your lifetime is a great way to limit the impact of IHT, provided your gifts do not exceed the various annual limits put into place by the HMRC. If you are concerned about inheritance tax, we would advise discussing your options with a solicitor experienced in estate planning.
Review your pension
One upside to the lockdown for a lot of people is that, with no bars, restaurants, shops or attractions open, their personal spending has gone down. If you have found yourself with some extra cash over the past few months now might be a good time to review your pension, and perhaps elect to top up your pension pot while your money isn’t being spent on anything else.
Put lasting Powers of Attorney in place
Lasting powers of attorney (LPAs) are a means of granting someone the authority to make decisions on your behalf on either a short or long-term basis. There are different versions of LPAs that grant decision-making powers in different areas of your life – from personal finances and property to healthcare and welfare.
Should you lose the capacity to make decisions yourself, having a nominated attorney who knows your wishes will prevent decisions being made on your behalf by medical staff or Social Services, and it can also prevent your assets being frozen while a family member goes through the lengthy application process necessary before they can administer your estate.
How Elite Law Solicitors can help
In these uncertain times, it is more important than ever to ensure that you have measures in place to protect your assets and provide for your loved ones. Luckily, with few distractions now is an excellent time to review these measures.
Meg Wilton is a Chartered Legal Executive and the Head of our Private Client Department. She can provide specialist legal advice in relation to any aspect of estate planning, preparing/amending a Will, setting up a trust or nominating an attorney.
If you have any queries relating to any of the issues mentioned in this article, please get in touch with Meg by calling 0800 086 2929, emailing email@example.com or completing our Free Online Enquiry Form.
The content of this article is for general information only. The information in this article is not legal or professional advice.