Threats To Your Estate

Inheritance Tax   (Impact: 40%)

Most married couples, and civil partners, who make Wills simply leave everything to each other. However, that is not always the best thing to do, and it could mean that long term beneficiaries end up paying far more Inheritance Tax than is necessary.

If your estate (your savings, house, possessions, any insurance policy payouts, etc) is worth over £325,000, then Inheritance Tax is charged at the rate of 40% on any amount above this figure. That may sound a lot of money but just add up the value of your house, your life insurance etc. Many people exceed the current Inheritance Tax threshold of £325,000 who would not have done so a few years ago simply due to the high rises in property prices in recent years.

If a husband and wife make Wills leaving their estates to each other, there’s no tax payable on their estate when the first one dies. However, a tax liability arises when the second partner dies. Often a large inheritance tax bill is inevitable when the estate is finally passed on to the children. This means that your family and loved ones could lose a sizeable part of their inheritance.

Divorce/Separation   (Impact: 50%+)

A divorce treats former spouses as if they were omitted from the Will. No gift will pass to them, and even if they are named as executors they cannot act as such. However, the rest of the Will remains valid.

Marriage and remarriage are somewhat different. A marriage usually cancels any previous Will. As a result you could find you have no Will at all and the intestacy rules would apply.

If you are married and co-habit with a new partner without getting divorced, it is essential that you make provision for your new partner and any children. Otherwise, the legal spouse might be able to inherit under a Will you have made and not cancelled, or under the intestacy rules.

It is also important to be aware of the impact of divorce within your family tree, if any of your children found themselves in a divorce situation, their ex-spouses would be entitled to 50% of any inheritance. However with some simple planning you can maintain the bloodline of an estate for that bloodline.

Long Term Care   (Impact: Up to 100%)

Most of us work very hard over the years to buy our own homes and build up our savings for our retirement and would like to leave a “little something” for our children and grandchildren after we are gone.

Unfortunately, the costs involved in moving into a Care Home can literally wipe out your entire savings and your home may have to be sold to pay for care fees. This could mean that your loved ones could receive very little, or even nothing at all of what you originally intended them to have.

When someone enters care they are automatically “means tested” and ALL of your assets, including your home are taken into account. Only those who have very few assets will escape the costs of care.

So what can be done?

Firstly, it is important to safeguard your home and the first step is to look at the way you currently own your home.

The majority of people own their homes Jointly which means that on first death, the survivor would then own 100% of the full property value and this is when your home becomes vulnerable to attack from Care.

By simply changing the way you own your home to what is known as Tenants In Common, combined with the appropriate Trust planning, will effectively ensure that your property is fully protected should either of you enter care.

Similarily, by changing the way your assets are invested and held, can ensure that your cash or liquid assets are also fully protected from Care.

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