Top 10 Private Client New Year's Resolutions
Top 10 Private Client New Year’s Resolutions
It's that time of year again to make a fresh start and sort out everything you were avoiding in December. Here are our 10 top tips for getting your affairs in order in 2019:
- Make or review your Will
If you have a Will, you should review it every three to five years, or when there is a significant life event which means you would like to change who benefits; such as if you get married or divorced, begin a new relationship, or fall out with a family member. You should also update any addresses if possible. If you have not yet made a Will, 2019 is the time to think about who to appoint as Executors to sort out your estate and whom you would like to benefit. You should consider registering your Will with Certainty, the national will register, so your Executors know where your most recent Will is stored.
- Prepare Lasting Powers of Attorney
A Lasting Power of Attorney (“LPA”) is a legal document appointing one or more people as your attorneys to help you make decisions or make decisions on your behalf. The Health and Welfare LPA can only be used to make decisions for which you no longer have the capacity to do so and allows your attorneys to decide about your daily routine, medical care, moving into a care home, and life-sustaining treatment. The Property and Financial Affairs LPA allows your attorneys to manage your bank account, pay your bills, collect your pension, decide about your business, and sell your home if necessary. The best time to make an LPA is now so that you can be sure your affairs are in order.
- Appoint Guardians for your children
If you have children under 18, you should nominate a Guardian for them in your Will. This should be someone you trust as they will have legal responsibility for your children and will care for them when you pass away. They will manage any money left to your children on their behalf and will decide about your children’s welfare, health, education, and housing. If you do not appoint a Guardian, your children may be placed in care until the court appoints someone to care for them.
- Nominate your pension death benefit
Make sure you nominate someone to receive your pension when you pass away. This should reflect your current family circumstances. If your estate exceeds the Nil Rate Band (“NRB”), currently £325,000, and therefore may attract Inheritance Tax (“IHT”) when you die, consider setting up a trust and preparing a letter of wishes for any death benefits to be paid into the trust.
- Make use of the gifting allowances
You have a £3,000 annual gift allowance which means you can give away £3,000 worth of assets or cash each year without incurring IHT when you die. You can carry over any leftover allowance from one tax year to the next, but only for one year. You can also give as many gifts of up to £250 to as many people as you want, IHT-free, as long as they have not already received a gift of part of your £3,000 annual exemption.
- Make gifts to charity
If you make a charitable donation through gift aid, charities can claim an additional 25% of the donation. If you are a higher or additional rate taxpayer, you can claim the difference between the rate you pay and the 20% basic tax rate on the amount donated. Charitable donations in your Will are not considered part of your estate for IHT purposes and your estate will benefit from a reduced 36% IHT rate if you leave 10% of your net estate to charity.
- Sort out your paperwork
Have a clear out of your paperwork and shred old bank account details, collate any share certificates you hold, and make a list of your assets and date it so your Executors have an idea of your current assets. Make sure they know where to find details about your assets and make a list of details for bank accounts, pensions, and life assurance policies.
- Plan ahead for your business
If you have a business, make sure you have a shareholders agreement and key man insurance in place which covers the main individuals so that their lives are covered by an insurance policy. If you are considering selling your business in the near future, take early advice to ensure that, if appropriate, you reinvest the proceeds into assets which qualify for Business Property Relief (“BPR”).
- Maximise your Individual Savings Account (ISA) allowance
You can receive a certain amount of savings interest tax-free depending on which Income Tax band you are in; which means that basic rate taxpayers receive £1,000 of interest tax-free and higher rate taxpayers receive £500, but additional rate taxpayers do not benefit. If this affects you, make the most of the interest you can receive tax-free by saving in either a cash, stocks and shares, innovative finance, or Lifetime ISA (you can only pay £4,000 into this type of ISA each tax year). You can save up to £20,000 each tax year in one or several types of ISA and you will not pay tax on the interest on cash or income or capital gains from investments in an ISA.
- Set up a trust for your life assurance policy
If you nominate your life assurance policy to be paid into a trust on your death, the pay-out will remain outside your estate for IHT purposes and will therefore reduce the amount of IHT to be paid on your estate. Setting up a trust also allows you to specify who should benefit from the money and how it should be paid.