Planning ahead after a death... A practical guide

Transcription

1 Planning ahead after a death... A practical guide With compliments Practical Probate 1A Victoria Park Bristol BS16 2HJ info@practical-probate.co.uk Tel:

2 This guide is designed to help you work through the various financial issues the recent loss of your loved one may have presented you with. We will look at what to do with any inheritance you may have received. Losing someone close can often make you think about the preparations you ve made for your loved ones should the worst happen to you. That is why Practical Probate are here to provide you with guidance on planning ahead after you have inherited from an estate. This includes making a Will, completing an Asset Locator (see our free download) and giving more information on the complexities of Inheritance Tax. Handling any inheritance The best place to start is by looking at your current financial situation. If you re paying off loans and credit cards, it will make financial sense to use any inherited money to settle these now. This way, you will have a huge potential interest savings and be more financially secure in the event of an unplanned event, such as a disability, or losing your job. If you have been left property, the solution may not be so straightforward. You will be faced with options, such as do you sell it, or receive a regular monthly income from leasing, or renting? Should you opt to sell, have you planned what to do with the money? Whatever you decide, please come in and talk to us. Our investment advisers will look at your complete financial situation and help you to decide what options are best for you to receive the best possible returns. These are potentially big financial decisions, so you do not have to rush them. Your decisions may have long-term impacts, so you are advised to take your time. Above all, it will be in your best interests to seek the best possible help and advice you need so that you can make a qualified, quantified decision. The following are a few helpful recommendations to assist you. 2

3 Savings and investments Instant Access Accounts: a perfect short term solution. If it s important to get your hands on some of your money instantly, an Instant Access account is worth thinking about. You can withdraw from it whenever you like without charges and your investment will earn a good rate of interest. Reward Savings Accounts These are ideal for saving for the nottoo-distant future and reward you with a higher rate of interest the longer you leave your money untouched. You can still get access your money instantly, but you will earn more interest if you don t, or if you save regularly each month. If you want to save for a deposit, holiday or big event, these accounts are worth considering. Fixed Term Savings This is a longer term, risk-free savings plan. If you are happy to leave some of your savings untouched for at least a year, fixed term savings bonds could be a viable option for you. By investing a fixed sum at a fixed rate of interest, you will benefit from growth, but with no risk. Tax-free making the most of your money As from 06 October 2009, the annual ISA allowance increased to 10,200 per tax year for customers aged 50, or older. Of this, up to 5,100 can be contributed to a Cash ISA. From 06 April 2010, the increased allowance will apply to all customers. Bear in mind that all payments you make into your ISA count towards your ISA allowance. This means if you use up your allowance and then take money out of your ISA, you cannot pay that money back in until the start of the next tax year. Investments the potential of better returns than a basic savings account Don t mind putting your money away for more than five years? Our investment products may be just what you re looking for. Because investments are usually linked to the stock market, their value isn t guaranteed and as such, rise and fall with the market s performance. Savings accounts are different from investments, as your money is normally easily accessible. Capital and interest once earned is guaranteed. Talk to us and we ll guide you through the savings and investment ranges in more detail and help you to work out the best option for your savings. There are two types of Individual Savings Accounts (ISAs) a Cash ISA and a Stocks and Shares ISA. You can choose one or the other. Alternatively, you can choose a combination of both. You can invest anything up to 7,200 this tax year (a tax year runs from 06 April to the 05 April the following year), putting cash aside just as you would with a savings account, or investing in stocks and shares. You can pay up to 3,600 of this into a Cash ISA and the remaining 7,200 into a Stocks and Shares ISA; or you can invest the full 7,200 in a Stocks and Shares ISA. 3

4 Inheritance Issues There are many different dilemmas surrounding inheritance and the issues that can arise from it. One of the more common is the predicament that Sarah found herself in. She was the eldest child and when her dad died, she had the responsibility of attending to the estate. Sarah soon discovered that finding information and the steps she needed to take was not as easy as she assumed it would be. Conflicting advice from various bank personnel as to what forms were needed, what to send and to where differed from bank to bank. This created much anxiety and wasted time. Sarah expended so much energy on sorting out the estate that she didn t have time to thinking about her legacy and what she should be doing with it. The cash assets were simply left in an account, which she accessed from time when needed to pay the outstanding bills due on her dad s estate. Two years after her father passed away, she still didn t know what to do with her share of the inheritance, so simply left it in the bank. Sarah didn t seek advice and as such, did not know what investment options were available to her. The institutions where the money was deposited did not come forward and offer her any advice either. Upon finalising the estate, Sarah eventually sought professional financial advice. However, her lack of understanding of the different ranges of savings and investment options just left her undecided and completely confused. One of the many options Practical Probate would have tabled are risk-free savings bonds. These will allow Sarah to access it for a period of time and enable her to have a lump sum in years to come. Alternatively, Sarah could have invested the money in a second property, giving her future income during her retirement years. Instead, she lost a 24-month opportunity to increase the value of her inheritance, leaving it instead in a low-return savings account. The above illustrates the importance of seeking sound and practical inheritance advice. This is more so during very trying and difficult times for all involved in a deceased s estate. 4

5 Planning ahead You are probably all too aware of the mountains of paperwork involved if you have recently suffered a bereavement. Sorting through bills, notifications, locating Wills, collecting asset and investment information, all takes a tremendous amount of time and effort. To make sure your family doesn t face any additional distress, it s worth putting your own paperwork in order now. You could start by listing all your personal information in our Asset Locator, a free download that will save your administrators and beneficiaries months of work and will ensure that all information regarding your entire estate is covered. If you do not have a Will, you are urged to make one as soon as possible. If you die without one known as dying intestate - your family may face unnecessary financial complications, including Inheritance Tax, which can be avoided. A vast amount of paperwork, time and stress is also generated if you have no official record of your last wishes. The importance of a Will, combined with your Asset Locator, cannot be over-emphasised. Why you must make a Will It is the best way to ensure the people you wish to inherit your assets do so. This is especially important for people who have a second family, step-children, or persons they specifically do not wish to benefit from their estate If you have children, you can name legal guardians for them If carefully thought out and planned, it will help to minimise the impact of Inheritance Tax on your beneficiaries It facilitates the expedient management of your affairs and estate You can give money to the charities of your choice, tax-free. Did you know that by letting you make the most of your tax allowance, Wills are one of the most effective ways of minimising Inheritance Tax for your family? 5

6 Making a Will If you ve already written a Will, it s important to keep updating it every few years, especially if your circumstances change. This applies specifically to situations where you are divorced, have a child, live with someone without a Civil Partnership; or happen upon a sudden windfall, such as winning a lottery, or becoming a beneficiary of a deceased estate yourself. It is therefore critical that with each changing situation you update your Will. If you have not yet written one, there are a number of options open to you, as listed below. DIY Wills You can draw up your own Will as long as it s signed in full and witnessed by two independent witnesses. Pre-printed Last Will and Testament packs are available from various stationers and you ll find a number of companies that offer a Will writing service online. Always make sure someone knows where your Will and personal records are kept. Once again, our Asset Locator will be of immense value after your death. Please ensure that your Will is error-free, as any mistakes can render it worthless. Solicitors If you d like professional help with writing a Will, a solicitor can help. You can ask family members or friends to recommend one, or alternatively, go through our list of helpful contacts at the end of this guide for alternative options. Will Writer These are specialist in Will writing. To find one local to you, contact the Institute of Professional Will Writers. See our Useful Contacts section at the end of this guide for contact details Storing your Will There s no point making a Will if nobody can find it, so make sure your Executors know where it is kept. Some Will writers and solicitors offer a storage option for a small fee. You can keep your Will at home, but that carries the added risk of it being lost or destroyed through theft, fire, flood, or any other disaster. Always make copies of your Will and issue them to people you have appointed to manage your estate, as well as to people you trust. If you download and complete our Asset Locator, you will note the section on where your Will can be located. We further recommend that copies of your Asset Locator are as widely distributed as you deem fit. Make a list of your financial relationships List all the companies/organisations that you have a financial relationship with, together with account details and keep this with your Will, or somewhere else that s safe and accessible. It will make it easier for your family to sort out your affairs when you pass away. Our Asset Locator has dedicated sections in which you can detail this important information. 6

7 Executor It s best to ask two people to carry out your wishes after your death. That way, if one person is unable or unwilling to do so, the other person can take sole responsibility. People handling your estate are known as Executors, or Personal Representatives. Many choose their spouse/civil partner, or children, plus a professional and/or close relative or friend. It is worth naming these people in the Will. Dealing with Inheritance Tax As of 2011/2015, Inheritance Tax now applies to any estate with a nett worth greater than 325,000. At the moment, anything over this amount will be taxed at 40%, which may sound like a great deal of money. Over recent years, house prices have risen far more sharply than increases in the Inheritance Tax threshold, so more peoples estates potentially have become liable. This is a general guide to Inheritance Tax and for more specific information relating to your own particular circumstances, you should contact HM Revenue and Customs, or seek professional advice. Contact details can be found towards the end of this guide. Can Inheritance Tax be minimised? It may be possible to minimise the impact of Inheritance Tax. One example is to ensure your Will is drawn up in the most appropriate way. Another recourse is to secure the services of a solicitor, an any professional specialising in estate planning. They will be able to give you advice on drafting the most appropriate Will for you. Use your Nil Rate Band, also referred to as the Inheritance Tax Allowance, or Exempt Amount, wisely. The Nil Rate Band is the amount which can be passed on to your beneficiaries without it being subject to Inheritance Tax. For individuals domiciled in the UK, the first 325,000 (2011/2015) of their estate is not subject to Inheritance Tax. When someone dies and their Nil Rate Band is not fully used, any balance can be added to the exempt amount of their spouse, or civil partner, providing both are domiciled in the UK. Using the exempt amount for any assets not left to a spouse or civil partner can offer opportunities to minimise the amount of the estate subject to Inheritance tax. This is because assets left to a UK-domiciled spouse or civil partner are exempt from Inheritance tax. However, it should be borne in mind that rules allowing any unused exempt amount to be transferred to the surviving spouse, or civil partner, offer more flexibility in estate planning. 7

8 Other Inheritance Tax exemptions Gifts you don t have to pay tax on: You can give any number of gifts, each up to 250 a year, as long as they re not to the same person You can give away up to 3,000 each year. If you don t use the full 3,000 in one year, any surplus can be carried forward to the next year Certain wedding gifts are exempt from Inheritance Tax. Parents can give 5,000 as a wedding present to their children. Grandparents can give 2,500 as gifts. You can also give a wedding gift of 1,000 to anyone else without it incurring tax upon your death Trusts A Trust is a way of holding assets, such as money and property, on behalf of another person. The main purpose of establishing a Trust is to restrict the access the beneficiary has until sometime in the future, for example, only allowing a beneficiary to full entitlement when they turn 21. Trusts can be used in estate planning to ensure assets are paid straight to a beneficiary without including them in the estate. Gifts out of your income after tax, providing proof can be shown that these are part of normal expenditure Gifts that you might have to pay tax on. As well as the tax-exempt gifts listed above, anything else you give as a gift is Inheritance tax-free as long as you survive for more than seven years after bestowing the gift. These gifts are called Potentially- Exempt Transfers, or PETs. If you die within three years, the person(s) who received the gift may have to pay the full 40%. If you die within four to seven years, the recipients may still be taxed, but the rate of tax reduces. This will depend on the value of the deceased s estate. Contact Practical Probate to find out more information about Inheritance Tax, or seek advice on how to plan for this. You can also check with the HMRC if you need more information. They have a publication called Customer Guide to Inheritance Tax. This document explains Inheritance Tax in more detail. Alternatively, you can call them on: Ask us for advice - we are here to help you! Practical Probate 1A Victoria Park Bristol BS16 2HJ info@practical-probate.co.uk Tel:

9 Useful Contacts Benefits Department for Work and Pensions Formerly the DSS, this department now deals with all state and work pensions; as well as a range of other benefits. Public enquiry office: Website: Jobcentre Plus Your local Jobcentre Plus now handles benefits for bereaved people and families. There is no central Jobcentre Plus, so to contact your local office, look them up in the phone book. Website: Pension Service Part of the Department for Work and Pensions, the Pension Service can help with any pension claims you may be making. Tel: Website: Counselling and Advice This charity specifically helps bereaved people to understand and cope with their grief and loss. It is the largest bereavement counselling charity in the world. Bereavement helpline: helpline@crusebereavementcare.org.uk Society of Trust and Estate Practitioners (STEP) Worldwide STEP can help with issues relating to estates and trusts by putting you in touch with experts. Tel: Website: Funerals National Association of Funeral Directors Contact the NAFD for a list of associated funeral directors in your area and for advice on how best to arrange a funeral. Tel: Website: Natural Death Centre Offers advice to dying and bereaved people on environmentally-friendly funerals. Tel: Website: Institute of Professional Will Writers Contact them for details of professional Will writers in your area, or for advice. Website: Law Society They can help you find an accredited solicitor in your area. Tel: Website: Scottish Law Society They can help you find an accredited solicitor in your area. Website: Legal, administration and expert advice HM Revenue & Customs offers help and advice concerning the practicalities and legalities of Probate and Inheritance Tax. They can also give you the number of your local Probate Registry and advise you on the laws surrounding a Grant of Representation. Tel: Website: The Bereavement Register Operated by the Direct Marketing Association to help prevent companies sending mail to people who have died. Tel: Baby Mailing Preference Service Operated by the Direct Marketing Association to help prevent mail about baby products being sent to parents of children who have died. Tel: Website: 9

10 BASIC GLOSSARY OF TERMS Administrator (Executor Dative in Scotland): Person handling the administration of an estate where there is no Will, or where no Executors have been appointed. Codicil: A schedule or amendment to an existing Will. Deed of Variation: Deed changing the terms of the deceased s Will. Discretionary trust: A trust where the payment of capital or income is at the discretion of the trustees (see Trust). Estate: The assets of the deceased. Executor (Executor Nominate in Scotland): A person appointed by a Will to handle the administration of an estate. Grant of Probate: Authority given to Executors to administer an estate in accordance with the proven Will. Grant of Representation: A collective term for Probate, Letters of Administration and Certificate of Confirmation. HMRC: Her Majesty s Revenue and Customs Inheritance Tax: A tax paid to HMRC on the part of an estate above the value of the Nil Rate Bond. Intestacy: Where there is no valid Will, the estate is passed in accordance with the rules of intestacy. Letters of Administration: Authority to administer an estate where there is no Will. Next of kin: The deceased s closest living relative. Nil Rate Bond: The amount up to which an estate is not liable for Inheritance Tax ( 325,000 for the 2011/2015 tax year). Pecuniary legacies: Gifts of cash. Personal Representative: General term for Executors and Administrators of an estate. Registrar - The Registrar of Deaths: Where the death needs to be registered. Residue: The remaining assets of an estate after debts have been paid and specific and cash gifts distributed. Specific legacies: Non-cash gifts, for example, jewellery, artworks and heirlooms. Testator: A person making a Will. A female is known as a Testatrix. Trust: Holding property for the benefit of another person, or class of persons (beneficiary). Trustee: A legal owner of a trust responsible for administering the trust in line with the aims of the trust and in the best interests of the beneficiaries. Please note there are a vast number of glossary terms. Ask us for an explanation. 10

11 ABOUT PRACTICAL PROBATE - A QUICK OVERVIEW We understand that you need to deal with a Will, or Grant of Probate quickly and efficiently. Practical Probate operates across all of the UK and specialises in probate service. We can arrange to visit you at home, if required. We can give you a probate quote simply by making a free phone call to us. We will give you all the assistance needed to make an informed decision. We re all about dealing with probate practically during a time of loss when you may need our friendly and professional support. We are here to help you deal with the Grants of Probate as easily as possible. Our Probate Costs Explained Before commencing any work, Practical Probate will assess the work involved. We will then prepare a quote of a fixed fee probate service rather than an hourly rate, or a percentage of an estate s value that is charged by most banks and high street solicitors. Payment for the probate service is made only once the estate has been distributed and the beneficiaries are in receipt of funds from the estate. What Practical Probate will do once the Grant of Probate/Letters of Administration have been obtained: Research and list all assets, property, savings and other investments of the deceased Get the estate professionally valued, if required Ensure the Will is probated correctly Gather information on outstanding debts and bills Calculate what income and inheritance taxes are due and make any necessary tax returns and payments Complete and submit all necessary probate registry forms Recover any assets Ensure all assets are bestowed to the correct beneficiaries Settle any outstanding debts from the estate Account for the estate, including demonstrating the distribution of the estate to the beneficiaries Probate practically unlike other probate services. Call us today for your obligation-free, fixed fee probate quotation. Please feel free to download our other publications, with our compliments: Before the Funeral, a Practical Guide After the Funeral, a Practical Guide Asset Locator Keep visiting our website to download more future guides, booklets and useful information. COPYRIGHT NOTICE Whilst Practical Probate offer its publications free of charge for personal use and to share with others, it retains all copyright of its material and contents. No publication, in part or entirety, can be claimed as one s own work; nor can it be sold for personal, or commercial gain. 11