Finance Monthly. 67 • Divorce or bankruptcy of a main beneficiary. An absolute gift to a child on the second death is just that; the inheritance immediately becomes intermingled with the existing assets of that child. Any subsequent divorce or bankruptcy could see some or all the inheritance disappear. • Generational IHT. Are you cascading the IHT problem down the generations alongside the wealth? These potential problems can be overcome using suitable Trusts in the Will, accompanied by a severance of the joint tenancy on the matrimonial home, meaning that a half-share of the property falls into the Will Trust on the first death rather than passing by survivorship. With the Trust including all subsequent generations of the family, it is easy to skip a generation or two if a beneficiary already has their own IHT problem, which will only be exacerbated by an inheritance. In your opinion, when should someone start thinking about their will, and what are the key factors to consider? As soon as you have something to leave – cash in the bank or equity in a property – it is never too soon. My eBook, “Will Writing the dos and don’ts” has a link to a cost-effective, professional starter Will. Having written a Will, remember it isn’t a “tablet of stone” that will stand the test of time. Your circumstances are constantly changing, and so should your Will; at minimum, it should be reviewed every 5 years. Whilst you have young children, your Will should appoint Guardians and probably make those Guardians the Executors. Generally, Guardians will be from your generation but, as you get older, they age with you, and you really need someone from a younger generation as Executor(s). Equity release is another term often associated with estate planning. Could you explain what it means and when it could be a suitable option? Equity release is the process of unlocking some of the money tiedup in your home without having to downsize. The most common reasons for accessing equity release are: • Paying off debts, especially interest-only mortgages. • Home improvements • Helping family and friends • Gifting Generally, this is achieved by way of a lifetime mortgage, which is only repayable on the sale of the property, death, or earlier entry into residential care. In the meantime, interest rolls-up on the loan, so is compounding until the loan is repaid. At the time of writing, interest rates are over 6% per annum, fixed for the duration of the loan. At this rate, a loan of just £10,000 with interest compounding over 10- years, increases to some £18,200. Over the years, I’ve come across numerous families who have discovered that parents have responded to a television or newspaper advertisement for equity release, gone ahead and not consulted the family and/or taken fully independent advice. In some cases, the parents had other savings or investments which should have been accessed first. In others, children or grandchildren would have been only too willing to help to protect their eventual inheritance. Equity release is a legitimate tool in the Estate Planner’s kit but something that should only be used as a last resort. Lastly, do you have any general advice or important points that you think everyone should know when it comes to estate planning and managing their financial legacy? Seek professional advice; estate planning is a broad and complex area of financial planning. Preferably, seek the views of someone you know and find out who their trusted adviser is. If you don’t know anyone who can make a recommendation, then a great starting point is the Society of Later Life Advisers (SOLLA). SOLLA is a not-for-profit consumer protection organisation set up to protect potentially vulnerable individuals from unscrupulous or inadequately qualified financial advisers. Their robust accreditation process is the most arduous test of knowledge, skills, and attitude I’ve undertaken in my 53 years in financial services. Also, it isn’t a once and for all “tick in a box”; the entire accreditation process must be undertaken every 5 years. Banking & Financial Services
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