Finance Monthly. 64 Banking & Financial Services is oversimplifying it. Although it is the case for most families, it also encompasses using some of the accumulated wealth for altruistic purposes. Most of my clients consider estate planning to be crucial because they feel they’ve already paid enough tax whilst amassing their nest-egg and don’t want to pay any more. The old business adage, “Failing to plan is planning to fail”, applies equally to estate planning. The first obstacle to achieving someone’s intentions is the loss of capacity. The recent, tragic case of Derek Draper, Kate Garraway’s husband, who had a dreadful reaction to Covid-19 in his early 50s, serves to illustrate it is never too early to be thinking of a Lasting Power of Attorney. In the absence of a Lasting Power of Attorney, the only alternative is an application to the Court of Protection for a Deputyship order which is costly, laborious, and onerous. To be fair, Attorneys under a Lasting Power of Attorney for Property & Financial Affairs are limited in the scope of the estate planning they can undertake. However, with a robustly drafted document, Attorneys can certainly continue what has already been started. The second obstacle is failing to make or update a Will. In the absence of a Will, the Laws of Intestate Succession dictate who has what and when. It is inappropriate to discuss all the ramifications in this article, but in the case of a married couple with young children, the spouse would get the first £322,000 (increased from £270,00 on 23 July 2023) and half of the balance. The remaining half-share goes to the children at the age of 18. Ask yourself what the 18-year-old you would have done with a substantial inheritance at that age. Would the answer have been different at 21 or 25? The third obstacle is potential care costs, especially following the first death. At least with Inheritance Tax, there’s a reasonable tax-free threshold (see later comments), but in England, the lower means-tested threshold is just £14,250. According to Lottie, in May 2023, the average cost of a care home in the UK is £928 per week, and a nursing home £1,025, so it doesn’t take long for a king-sized hole to be made in any inheritance. Inheritance tax can be a complex topic for many people. Can you simplify it for us and highlight the most important aspects people need to be aware of to legally mitigate tax liabilities? Simplify it? The HMRC Inheritance Tax (IHT) Manual runs to 40 volumes alone, so it isn’t easy to summarise, but I’ll give it a go. I’ll use the words “couple” and “spouse” by which I mean people who are married or in a Civil Partnership, so it doesn’t include unmarried people living together, regardless of whether they have children together or not. The average cost of a care home in the UK is £928 per week, and a nursing home £1,025, so it doesn’t take long for a king-sized hole to be made in any inheritance.
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