DURING & POST
Leaving a legacy
You can’t take it with you…
It is said there are two things in life you cannot avoid
– death and taxes. Yet if you want to leave a legacy
for loved ones, a little careful planning can ensure you
minimise the tax man’s cut when you finally check out.
Once you have taken care of the main business
writing a will – what is there left to do? You will probably focus on the big things, such as inheritance
tax (IHT) liability on your house.
Other major assets – art or classic car collections, for
example – may have some tax exemptions, but
they all count towards a slice for the tax man.
You may have taken out a whole-of-life insurance
policy to meet any liabilities and if you’ve been
sensible, used gifting rules to pass on some of the
ready cash, but what about those investment
portfolios? Bare and discretionary trusts offer an
excellent and relatively simple method of protecting
investments for named individuals. Each have their
own wrinkles, but they effectively shelter investments
for their beneficiaries.
If trusts aren’t for you, consider opening a Junior ISA for
your children. They have the same benefits as other
ISAs, so no capital gains or income tax liabilities, and
you can pay in up to £4,080 (2015/16) a year. When
they reach 18, it will convert to a standard adult ISA.
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Don’t forget your pension. The new rules introduced
this year allow investors to leave their pension to a
loved one after their death. How much tax they pay
will depend upon your age and how they access it,
but it transforms a pension into a true inheritance
planning tool.
Making provision is all very sensible, but don’t be too
hasty to give everything away. We are all living longer
and are likely to spend a lot more of our money keeping
us in long term care before we finally say goodbye.
Key points
A little careful planning can ensure you
minimise the tax man’s cut when you die
New rules let you leave your pension to a loved
one after your death, transforming it into
an inheritance.
Don’t be too hasty in giving everything away we are all living longer and you may need the
money for care costs