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Five new year resolutions to protect your family wealth

Clarke Willmott’s private capital team suggests some strategic resolutions that will help protect your family and its wealth in 2017:

  1. Review your Will: you should review your Will every five years or when there is a significant change in your circumstances. For couples with estates in excess of £650,000, 2017 brings such a change of circumstances with the introduction of the inheritance tax residence nil rate band (RNRB) in April. The RNRB could reduce your inheritance tax liability by up to £350,000 when fully in force, but only if your Will is correctly drafted; so a Will review this year is timely.
  2. Draw up a Lasting Power of Attorney (LPA): if you become incapable at any point an LPA will enable a trusted person of your choosing to manage your financial affairs on your behalf so avoiding an expensive, time consuming application to the court. A professionally drafted LPA can also ensure that your affairs are managed in the optimum way by, for example, providing that your chosen attorneys must produce accounts each year to a third party such as your solicitor or accountant, so ensuring professional scrutiny over how your finances are being managed.
  3. Review the division of assets between yourself and your spouse or civil partner: your tax liability (to income tax, capital gains tax and inheritance tax) could be adversely affected if there is an imbalance of assets between yourself and your partner, For example, it can be advantageous to consider a trust in your Will to use the inheritance tax nil rate band (currently £325,000) but this will not be possible unless there are sufficient assets in each partner’s sole name (and not in joint names) to take full advantage of this.
  4. Consider using your annual exemption to reduce your inheritance tax (IHT) liability: Every person is entitled to an IHT annual exemption of £3000 per annum. This can be carried forward for one tax year so if you did not use your annual exemption in 2015/16 you have until 5 April to use both years’ exemptions totalling £6000 for an individual or £12000 for a couple. Gifts within the annual exemption are IHT free however long you survive them. In addition, if you have a larger IHT liability you might like to consider whether you should undertake further action. There are a number of valuable IHT reliefs but these can be lost if care is not taken.
  5. Consider whether your estate could benefit from asset protection: if you have been married before and wish to ensure your assets pass to your children from that marriage, if you are concerned about care fees eating into your assets or have a child whose nature or circumstances make it inadvisable for them to receive a large sum of money, you should give some thought as to what actions can be taken to ensure your estate is protected. Trusts can be used either during your lifetime or in your Will to ensure that your assets are distributed as you intended and to provide the maximum possible protection against third party claims.

If you would like help in implementing your resolutions, or in determining a personal plan to manage your family wealth in 2017, then please do not hesitate to contact us.