Estate Planning – Making Plans to Protect Your Family’s Financial Future

In addition to organising your finances to ensure your assets are protected for your loved ones on your death, estate planning also encompasses ensuring you have enough money to live on; it is a tenuous balance for many. A good starting point is obtaining a comprehensive view of your assets, to assess the value of your estate and ensuring you have the right documentation in place, such as Wills, Lasting Powers of Attorney (LPA) and the formation of any relevant trusts.

To establish the value of your estate; calculate the total worth of your assets, including your home, any other property, money and savings, shares and investments, business equity, cars, jewellery and other personal possessions. To determine the value of non-monetary assets, apply a realistic market value. Then deduct debts and liabilities, including any outstanding bills, mortgage debt, loans, credit cards, overdrafts, and funeral expenses.

Wills, trusts and LPA

Once you’ve valued your estate, outlining a clear plan detailing your wishes about how you want your estate managed upon your death, will ensure that when the person looking after your estate applies for probate they will know what your wishes were. Vital
components of successful estate planning include having a valid Will in place and setting up trusts to manage money or other assets on behalf of beneficiaries. There are various types of trusts which provide an alternative to direct inheritance or transfer of certain parts of an estate, giving you control over who receives what and when. Lasting powers of attorney, covering ‘health and welfare’ and ‘property and financial affairs’ are worth establishing at an early stage.


Estate planning can reduce the amount of IHT payable, enabling you to pass on assets to your family as intended. For individuals, the current IHT nil-rate threshold is £325,000 and £650,000 for a married couple or civil partners. Any unused portion of the nil-rate band can be passed to a surviving spouse or civil partner on death. Beyond these thresholds, IHT is usually payable at a rate of 40%.

A main residence nil-rate band applies if you want to pass your main residence to a direct descendant. For the current tax year, this allowance is £175,000 for individuals and £350,000 for a married couple or civil partners. Added to the existing threshold of £325,000 this could give rise to an overall IHT allowance of £500,000 for individuals, or £1m for those who are married or in civil partnerships. It is important to note that larger estates will find that residence relief is tapered, reducing by £1 for every £2 by which the net estate’s value exceeds £2m.

Gifting from surplus income is a simple way of passing money to the next generation. Conditions apply, and advice would be needed to ensure that the gifts are made in the right way.

We can help

We can advise you, to ensure your money ends up with the people you want, for the reasons you choose. We can help you to pass on assets in the most effective way, and work with you to reduce your IHT liability.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily
be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

Focus on the horizon

Investors will understandably be pondering their portfolios as economic challenges endure. You may have heard the age-old investment dictum – time in the market, not timing the market. If so, recent research1 has explored the concept, with some very compelling results.

In March 2000, during the height of the dot-com boom, if an investor made an investment of £1,000 in the average investment company and reinvested the dividends, the original investment would have been worth £3,665 as at 6 April 2020, a return of 267%, (here ‘investment company’ includes investment trusts and other closed-ended investment companies but excludes venture capital trusts and 3i Group plc.) This 20-year period includes the dot-com crash, the global financial crisis and the more recent COVID-19 related market falls.

Commenting on the findings, Annabel Brodie-Smith of the Association of Investment Companies said: “The bursting of the tech bubble and the global financial crisis saw huge falls in markets... However, investors who were able to stay invested or even invest during the downturn would have been richly rewarded over the long term. No one has a crystal ball, but these returns show the power of long-term investment and why it can often pay to have one eye on your portfolio and the other on the horizon.”

1AIC, April 2020