Inheritance TaxApr 29 2020

Time to talk about estates

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
comment-speech

Estate planning is never the easiest topic to broach with a client; after all who really wants to think about their own mortality, or force a client to face it in a meeting?

The current situation may make most advisers even more squeamish about bringing the topic up, especially if the client has had relatives or friends who have been taken by Covid-19.

Many may think it is in bad taste for me to even talk about it at present. But I disagree.

Even before the pandemic advisers had been reluctant to bring the topic of mortality up with their clients

In fact, when we are all faced with such a massive change to our lives as the result of the pandemic, it is possible to argue that now is the perfect time to discuss it.

Those people who have been very ill but have since recovered will undoubtedly appreciate how lucky they have been.

Whether someone has been ill or not, we all have a much greater appreciation of our own mortality with the number of deaths we have seen in the UK from Covid-19 alone.

However, even before the pandemic advisers had been reluctant to bring the topic up with their clients.

A relatively small survey – 207 advisers – by Co-operative Legal Services found that even though three quarters of the advisers who responded felt that providing advice on wills and other legal estate planning would improve their clients’ satisfaction, only one in 10 clients are encouraged to make a will by their adviser.

More than half said it would make it easier to retain clients and 67 per cent said it would increase the number of referrals.

Given that response, it begs the question as to why advisers do not discuss this with clients?

There is clearly a plus for both parties because there is no benefit to those left behind if someone dies intestate.

If the adviser is a part of the discussion with the family as the original client looks to make a will, then when they pass away, the family is more likely to come to the adviser for assistance in dealing with the assets left to them.

This succession planning means the adviser is less likely to lose the assets being managed, and may increase the number of clients as more than one person is usually named as a beneficiary.

Added to that, the better care an adviser takes of the family as a whole both before and after the original client departs, the more people there are who can sing his or her praises and potentially recommend other clients to come on board.

Now, there is, of course, the ethical element here of no one wanting to profit from another’s misfortune.

But when it comes to helping your clients pass on assets to their loved ones, no matter what their cause of death or when it happens, there is little question they would want you to make sure you take care of their beneficiaries as well as you took care of them.

The current situation creates a need for action to ensure your family’s financial wellbeing.

Tilney, for example, has highlighted the fact that as many children of wealthier clients have been doing very well for themselves, the desire or urgency to consider using the gifting rules under estate planning may not have been a priority.

But with many people finding their personal finances now more stretched than at any other time, with large numbers of businesses struggling to survive during the lockdown period, now could be the optimal time to gift assets.

Whether to make any gifts to struggling relatives via a trust to maximise the benefit of inheritance tax planning, or to give it as a simple gift, is a consideration that depends on individual circumstances and should not be done without specialist advice.

The donor has to be confident, if using the latter, that he or she will survive that gift by seven years to ensure it is free of IHT if the estate is big enough to fall within the IHT net.

There is one other consideration that people who are looking at their IHT planning should think about too, which is writing any life insurance into a trust so it remains outside of the estate on death for IHT.

It also means this money is accessible straight away for those who are left behind, without having to clear probate.

Unsurprisingly, the HM Courts and Tribunals Service has most of its staff working from home, causing delays with processing probate.

The extra strain brought about by the additional number of deaths during this period due to Covid-19 is adding to delays. The turnaround time for grants to be issued is expected to be longer than the typical four weeks, according to the Institute of Chartered Accountants in England and Wales.

Delays in the grant of probate causes considerable problems for those left behind, with expenses – other than funeral costs – often needing to be paid out of a relative’s pocket until probate is granted.

With finances stretched to the absolute limit for many people, even for those who were previously earning well and comfortably off, it is going to be very hard to deal with.

The more advisers can bring themselves to discuss the financial implications of passing on, even at this difficult time, the more help they will give their clients and their loved ones when the time comes.

Let’s hope for all of us that is still some way off yet.

Alison Steed is a freelance journalist