Now is the time that ‘baby boomers’ - those born between roughly the mid 1940s and mid 1960s - should begin to think about their estate planning.
This article will focus on the 10 key points which all baby boomers should be thinking about.
It will also cover what action can be taken on a practical level to deal with each point, as well as setting out examples of some planning opportunities which can be explored further in order to mitigate exposure to inheritance tax (IHT).
None of this planning is in any way controversial and is prudent estate planning taking advantage of statutory exemptions, allowances and reliefs.
Perhaps your clients already have a will; perhaps you do not. Our advice to clients is to make sure that they have a will in place and ensure that they keep their wills continually under review.
This is to ensure the will reflects your current wishes, takes into account their family’s particular circumstances (which naturally will change over time) and continues to be tax efficient.
There have been several important changes to the inheritance tax rules in recent years:
The Residence nil-rate band
The introduction of the new residence nil-rate band (RNRB) from 6 April 2017 offers the opportunity for individuals to pass £100,000 (rising to £175,000 from 6 April 2020) to children and descendants free of tax provided certain conditions are met.
This represents a tax saving of £80,000 (rising to £140,000 from 6 April 2020) per married couple and so it is important to ensure that the relief is captured where circumstances allow.
The Transferable Nil Rate Band
The introduction of the transferrable nil rate band enables the nil rate band (currently £325,000) to be transferred to a surviving spouse.
Previously, nil rate bands were not transferrable and so it was important to "use it or lose it".
This often involved incorporating a legacy of the nil rate band on discretionary trust in wills, however, the introduction of the transferrable nil rate band has rendered this kind of planning unnecessary and often expensive as there is a cost to administering a trust.
It is therefore important to review your clients' wills in light of the above and consider whether these need to be updated.
2) Lasting powers of attorney
Thanks to advances in healthcare and improvements in standards of living, we are all living longer, which is a fantastic thing.
However, the sad reality is that the Alzheimer’s Society calculates currently one in six people over the age of 80 (or 850,000 people) have dementia, and predicts this number is set to soar in coming years.
Those are stark statistics and push us to consider what would happen if the worst were indeed to happen to us?
If an individual loses capacity, their bank accounts are effectively frozen and it would be necessary for a close relative (such a spouse or child) to make an application to the court for an order to access those accounts in order to pay bills and day to day living expenses.