A third of 24-45 year olds expect to rely on inheritance for financial security

12 September 2018



According to a recent survey conducted by Sanlam UK, 64% of 25-45 year olds expect to receive an inheritance from parents and grandparents. Of the people surveyed, 34% say they will rely on this inheritance to fund themselves in later life.

 

Almost a third of these individuals expect an inheritance with an average value of £233,000, with the lowest value expected to be £50,000. This has encouraged 31% of 25-45 year olds not to save and to ‘live in the now’ as they expect the inheritance windfall to fund them throughout their later years.

 

However, 38% haven’t haven’t spoken to the relative providing them with the inheritance. This is a worrying indication that some 24-45 year olds are unprepared for later life. The concerns raised by Sanlam UK state that some expectations may not come to fruition.

 

Jonathan Polin, CEO of Sanlam UK, commented: “Overreliance on inheritance could be risky, especially if it affects the younger generation’s level of engagement with savings and investments today. As a first step, families need to have full and frank conversations about inheritance – this will help ensure younger generations have realistic expectations of what they are to receive and can prepare accordingly.”

 

So why are so many 25-45 year olds prepared to take a risk and assume they can use their inheritance to fund themselves in later life? Experts claim the reasoning behind the reliance on inheritance could be a remedy for low disposable income, debt, sluggish wage growth and ever-increasing house prices.

 

The older generations are fast-becoming aware of this strategy - 61% of over 55s believe younger people aren’t getting sufficient financial advice. Around 40% were concerned about how their heirs would spend their inheritance. Only 9% of inheritance donors have urged their children to see a financial adviser.

 

Jonathan Polin said: “Our report highlights the scale of intergenerational wealth transfer that the UK is set to see over the next few decades. This level of inheritance is unprecedented, and its transfer presents both opportunities and challenges for the financial services industry and society more generally. That it comes at a time of societal, political and economic upheaval simply adds another element of complexity and uncertainty to an already extraordinary picture.”

If you'd like to discuss your Will or any family concerns about inheritance, please get in touch on 01603 865220 or email phil.taylor@anglianwillwriting.co.uk.

 

6 ways civil partnerships affects estate planning

22 August 2018

 

Civil partnerships were reserved for same sex couples only. However, in recent years opposite sex couples have been campaigning for civil partnerships for heterosexual couples. The Supreme Court of England and Wales ruled in favour of civil partnerships for all, as the Civil Partnership Act 2004 was seen as an infringement of the European Convention of Human Rights. The legislation will be changed, though this is thought to take some time.

So how does a civil partnership affect estate planning? Firstly, it’s important to determine what ‘estate planning’ actually is. Your estate covers everything you own including property, finances, material possessions and even your social media accounts. An estate plan is how you wish to distribute your assets and possessions among your loved ones.

Here are six ways a civil partnership changes estate planning for all couples:

1. If you die without making a will your partner will still inherit your assets

If you’re in a civil partnership and you die intestate (without making a will) then your partner will automatically inherit a portion, or all, of your property. For example. if you and your partner own and live in a house together, they will stand to automatically inherit it after you die  - unless there are special circumstances.

2. If you die having made a valid will your wishes will be carried out

If you or your partner dies after making a valid will, then all wishes will be carried out as they would be for a will from a marriage. For example, if you want to pass down your home to your partner and your holiday home to your children then the wishes will be carried out as specified.

3. Civil partners are exempt from Inheritance Tax

Neither you or your partner will pay Inheritance Tax if the value of your entire estate is below £325,000. You will also be exempt from Inheritance Tax if you leave all your estate to your civil partner, community sports club or a charity.

4. The Inheritance Tax increases to £450,000 if children are the heirs

If you want to leave your property to your birth children the Inheritance Tax exemption threshold increases to £450,000. This also extends to foster, adopted and stepchildren.

5. You can add surplus Inheritance Tax threshold to your partner’s threshold.

If your estate is under the threshold, the ‘unused’ threshold can be added to your partner’s threshold when they pass away. This pushes the maximum Inheritance Tax threshold to £900,000.

6. You can pay a reduced Inheritance Tax rate in some circumstances

The standard rate for Inheritance Tax is 40% but you can reduce it to 36% if at least 10% of your net assets are left to charity in the will. If you and your partner owned farmland or woodland you may be eligible for Agricultural Relief on your Inheritance Tax bill.

If you'd like to discuss your Will and take advice on civil partnerships and inheritance please get in touch on 01603 865220 or email phil.taylor@anglianwillwriting.co.uk.

 

 

Most over 50s don’t understand Inheritance Tax

7 August 2018


According to the latest research, the majority of over-50s don’t understand essential Inheritance Tax terminology. Furthermore, this lack of financial education could result in them passing on less than they expect.

 

The research - conducted by the Alan Boswell Group - found that, of the over-50s surveyed:

 

·       Fewer than 30% understood key Inheritance Tax terminology

·       Only 27% were able to correctly identify that ‘nil-rate band’ referred to the threshold at which an estate became liable to Inheritance Tax and that this threshold is set at £325,000

·       Only 44% were aware that the current rate of Inheritance Tax was 40%.

 

With the Government announcing record Inheritance Tax receipts of over £5bn in 2017/18 (that’s an increase of over 50% since 2014), there are fears that people could be failing to minimise their tax liability correctly.

 

Rising property prices are impacting Inheritance Tax liability

 

An increase in property prices across the UK has meant that more and more people are now liable for Inheritance Tax.

 

Since 2009, the tax has been set at 40% on all assets over the £325,000 threshold; despite the fact that house prices have rocketed over the past ten years. What this means is that Inheritance Tax now hits an increasing number of estates. Before 2009, the threshold was set each year to reflect inflation and rises in overall asset prices.

 

As such, it’s perhaps no surprise that forecasts from the Office for Budget Responsibility (OBR) show that the number of estates on which Inheritance Tax is paid has more than quadrupled over the last seven years.  

 

It’s also important to note the introduction of the residence nil-rate band (RNRB) last year, providing an additional inheritance tax allowance for individuals who leave their main residence to lineal descendants. 

The additional allowance is to be brought in gradually, increasing by £25,000 on an annual basis. The amount began at £100,000 in 2017/18 and eventually grow to £175,000 in 2020/21.

 

In total, as this is on top of the current threshold, this amounts to an allowance of £1 million for a couple.

 

The problem facing the over-50s

 

With Inheritance Tax affecting more people than ever before, it is vital that the over-50s are fully informed about this topic. Worryingly, however, the latest research shows that this is not the case. As a result, it is likely that families will lose out while the Government benefits.

 

But there are ways to reduce a person’s Inheritance Tax liability (e.g. by using ISAs, a deed of variation, discretionary will trusts, etc.). So, it is vital that careful and professional estate planning is carried out to ensure assets are left to family members rather than the taxman.

 

To find out how you can pass on your estate in a tax-efficient way, speak to one of our expert team by calling 01603 865220 or email phil.taylor@anglianwillwriting.co.uk.


You can now inform banks of a death in just a single step

24 July 2018



A pioneering new service which lets you report the death of an individual to multiple financial institutions, all at the same time, has been launched.

There are approximately 500,000 deaths registered in the UK each year. And, people rarely have an account only with one bank or building society. So, when someone dies, letting these institutions know can be both time-consuming and stressful. 

The new online Death Notification Service aims to make the process of contacting banks, and closing the accounts of a loved one, easier for people who have suffered a bereavement.

In the past, people have had to contact each bank individually, and this could be highly stressful due to different institutions having different reporting procedures. What’s more, when someone is grieving, it can be difficult to repeat the same conversation with several different organisations. Also, it was not uncommon for financial institutions to subject families to insensitive questions and treatment; often because they were not put through to the right department straight away. 

As such, the creation of a secure and straightforward way to let financial institutions know about the death of a customer is long overdue.

How does it work? 

The Death Notification Service  - which is free to use – aims to reform the way banks treat bereaved customers.

The system is similar to (but separate from) the Tell Us Once notification tool which can be used to report a death to most government departments.

With the new service, people fill in a form online, at a time that is convenient for them. The notifier simply selects which banks they want to be informed about the death. 

Barclays, HSBC, Lloyds Bank, Nationwide, RBS and Santander UK have all signed up to the initiative, and it is expected that other banks and building societies will be encouraged to join.

Once the process is complete, the selected institutions will update their records and contact the person who filled out the form to let them know what needs to happen next. This communication should happen within ten calendar days. 

To access the service go to deathnotificationservice.co.uk. Once an account is created, people have three months to update the form if they find more bank accounts.

The service can be used by anyone, including family members, carers, friends and professionals. 

For those who prefer not to use the internet, there is also the option to access the service by telephone.

Speak to one of our expert team by calling 01603 865220 or email phil.taylor@anglianwillwriting.co.uk.

Do you need to update your Will after getting married?

11 July 2018


In England and Wales, your Will is automatically revoked when you get married. As such, it is vital to review, and if necessary, update your Will after marriage. Despite this, many people fail to do this. Often because they are not aware of the need to do so.

Unless your Will makes specific reference to your intended marriage (“in contemplation of marriage”), your Will will be automatically revoked after you get married or enter into a civil partnership. So, if you don’t take steps to protect your family and your estate, you could find that the law dictates who will inherit your money, property and possessions once you are gone.

What do the rules say?

A person who dies without a valid Will is said to die ‘intestate’. Under the rules of intestacy:

·       If you are married and your estate is worth less than £250k, your spouse will inherit everything, even if you have children

·       If you are married with children (not including stepchildren), and your estate is worth more than £250k, your spouse will inherit the first £250k plus personal belongings. Anything remaining is then split 50/50 between your spouse and your children. Your children will all inherit an equal share of this remaining 50%.

What about divorce?

While getting married automatically invalidates a Will, getting a divorce does not. But, if you end a marriage or civil partnership, your Will carries on as if your spouse has died. This means that they will not receive anything you have left to them in your Will, unless you expressly state that you still want this to happen. Likewise, if they are listed as an executor, they will no longer fulfil this role.

Getting remarried

If you are planning to remarry following a divorce, the effect of your new marriage on your Will is the same as if you were marrying for the first time. So any Will becomes invalid as soon as your marriage takes place.

It is important to update a Will following marriage. But where second families are involved, the potential for dispute increases, so it becomes even more crucial.

The birth of children and grandchildren should also instigate a Will review, as well as the death of any beneficiaries. Changes to your finances, fluctuations in property values, tax amendments and a whole range of other factors could also mean that your carefully drafted Will no longer reflects your situation and wishes. This is why experts agree that, as well as reviewing your Will after any significant life event, it’s also worth doing every five years.

Drawing up a Will is not a one-time task. Speak to one of our expert team by calling 01603 865220 or email phil.taylor@anglianwillwriting.co.uk to ensure your Will is updated, and your wealth is passed on in line with your wishes.

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