For family’s sake – get your affairs in order
Make sure your wealth keeps working for your family after you’ve passed away.
2 min read
Nobody likes thinking about their own death, but at Coutts we find our clients often feel like a burden has been lifted once we start a conversation about the long-term future of their wealth.
As Coutts Wealth Structuring Director Irene Wolstenholme says, “In many ways it’s easier to start thinking about what will happen to your wealth when you die while it’s still a bit academic. And some basic planning today can put more of your money to work for your family following your death, while also bringing certain tax benefits.”
With that in mind, here are six things we think you’ll find interesting.
1) Leave it to your spouse
Most people who are married or in a civil partnership pass much, if not all, of their wealth to their spouse. It’s not always appropriate of course, especially if there are children from other relationships. But it can provide peace of mind knowing that someone you trust is in charge of distributing your wealth to your children and grandchildren. Crucially, leaving your money to your spouse or civil partner generally means it is exempt from Inheritance Tax (IHT).
2) Give it to your children early
Giving your children money while you’re still around to see them enjoy it, and guide them in the best way to manage it, can be very fulfilling. And if you give them a financial gift at least seven years before you pass away, it can again bring tax advantages.
3) Consider who will take over the family business
It’s not just about the money you pass on to your family. You should also think about any other assets you own, such as any businesses you run. It’s worth considering who will manage such an enterprise when you are no longer around and, if you built it from scratch, how much of its success depends on you being at the helm. If you want your children to take it over, is it worth starting to show them the ropes now?
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4) Donate to charity
As you think about your legacy, you may want to leave some of your money to a cause you care about. This could be a one-off donation or you could consider setting up a family charitable trust to encourage your children to continue supporting it when you no longer can.
IHT does not apply to charitable donations made when you die, and if you leave at least 10% of your estate to charity, the relevant tax rate on the rest of your wealth falls from 40% to 36%.
5) Set up a trust
A trust can be an effective way to pass on your money to your children while retaining control over how it is used – either during your lifetime or after your death.
Trusts can also be used within a will to make them much more flexible and tailored to your needs. They will typically be accompanied by a ‘letter of wishes’ which gives the trustees guidelines on how to distribute the assets – including, for example, at what age children or grandchildren will inherit lump sums.
Trusts can also play a big role in keeping the details of your will private, because a will is actually a public document whereas a ‘letter of wishes’ is not.
6) Get a good pension
Don’t overlook pensions when considering the long-term future of your wealth. While the government has reduced many tax reliefs on them in recent years, they remain one of the most efficient ways to make long-term investments for the future. For example, the savings involved can be left to your loved ones when you die without incurring IHT.
The information provided in this article is based on our understanding of the laws and regulations as at the date of publication but it is not exhaustive and does not constitute legal or tax advice.
Some careful planning now can help ensure your wealth continues to support your family beyond your lifetime. Your will is the most important document for this, but other things to think about include trusts, pensions and charitable donations. Getting everything in order for the future not only gives you peace of mind but can lead to some tax benefits too.
About Coutts Investments
With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.Discover More About Coutts Investments