End of Life Planning

As unpopular as the topic might be, end of life financial planning is crucial – and the further out you can plan the better. Here are the key factors to consider when looking at end of life planning.

Most people are uncomfortable discussing their mortality, even more so the death of family members, however end of life planning is essential to ensuring life is as easy as possible for you and your loved ones when you are approaching and eventually reach that stage.

It isn’t uncommon to see that many clients do not want to discuss what they might inherit from the death of a loved one at the risk of sounding morbid or insensitive, but doing so is equally important to preserving your hard-earned savings and maximising your legacy.

Making a Will

It is always important to have an up-to-date will in place as it serves a vital purpose in ensuring your wishes are carried out when you die. Without one, the process of sorting out your assets can be more stressful and time-consuming for your loved ones, and your inheritance might not go to who you want.

Leaving your estate to the whims of the intestacy rules or, even worse, a beneficiary whom you would rather no longer benefited, is highly undesirable. Without a will, the process of arranging and passing on your assets can be stressful on your family, in the worst case even giving rise to legal disputes.

Unlike many financial planning issues which can be time consuming and expensive, will writing for most people is a simple process if your affairs are relatively straightforward. A will can also ensure your estate is inherited in the most tax efficient way, protecting your legacy.

You should also ensure that you have in place Lasting Powers of Attorney for both Finance and Property and Healthcare and Wellbeing as later life can involve the loss of capacity and capability to deal with things, sometime years before you actually die.

Property and Resident's Nil Rate Band

Inheritance tax is a 40% charge on the value of everything you own beyond a nil rate band of £325,000, payable by your beneficiaries within six months of your death.

For most people their most valuable asset is their home, which is why in 2017 the government introduced an additional nil rate band for homeowners called the Residence Nil Rate Band (RNRB).

What is the Resident’s Nil Rate Band?

The RNRB gives homeowners an additional nil rate band of £175,000 if their home is inherited by their children or grandchildren when they die. This would mean your total nil rate band becomes £500,000, or up to £1 million if you are widowed and inherited any of your spouse or civil partner’s nil rate band when they died.

Relation between Property and Resident’s Nil Rate Band

As with all government giveaways, the devil is in the detail. The beneficiary must be a direct descendent of the deceased, so nieces, nephews et al. will not be able to benefit from the RNRB. Meanwhile, multi-million-pound estates will start to lose the nil rate band at a rate of £1 for every £2 the estate is valued over £2 million.

If you can benefit from the full £1 million allowance, this can mean a significant windfall for your beneficiaries, so we continually try to arrange assets during end of life planning for our clients to meet the criteria needed where possible.

Inheritance Tax

Death is both inevitable and unknowable. With increasing numbers in need of care homes and state provisions stretched to breaking point, end of life care planning is becoming increasingly important. Without careful end of life planning, the cost of care can erode your retirement and inheritance pots.

Those with the means to do so want to ensure they have the best possible care at the end of their life, should that be required. However, clients would also often prefer for their beneficiaries not to be clobbered with an enormous inheritance bill if they never needed such end of life care provisions.

With a little planning, IHT is an eminently avoidable tax, perhaps more so than any other. Indeed a former Chancellor of the Exchequer (Roy Jenkins) once said "Inheritance Tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”; The use of trusts, gifting, IHT exempt investments (such as Business Property Relief qualifying holdings and pensions), utilising full allowances (such as gifting from income or gifts at weddings etc.) and accurate record keeping can add huge value to your end of life planning and minimise the tax office’s share – both in life and in death.

Though avoiding IHT is typically one of the largest concerns for our clients, it is often accompanied by its counterpart: ‘How much is enough?’

Cash flow modelling

Trying to calculate what the cost of care, as well as general living costs, will be in the future is a challenging barrier to planning effectively for retirement and end of life, but Ascot Lloyd has effective modelling tools which are able to adjust for tricky variables such as inflation and to reforecast the impact on your wealth.

Cash flow modelling and planning with other family members gives the client the best tools to visualise the future both for themselves and for their descendants and, although nothing is guaranteed other than death and taxes, we can at least create the best plan possible.

Get in touch Get in touch with an Ascot Lloyd adviser who can discuss a personalised end of life plan with you, and is most suitable to your needs. Book a call with one of our experts.