News
Estate planning during Covid-19: What you need to know
Guest Author:
Svenja KellerWhen it comes to inheritance planning, the rules and regulations can be tricky to navigate – and may change due to the pandemic. Here’s how to approach putting your financial affairs in order amid the coronavirus crisis.
It’s been hard to avoid the alarming news and statistics developing over the last few months, as we were forced to retreat indoors away from extended family and friends. The lockdown period has given a lot of people time to think and plan for when we start to return to the ‘new normal’.
Sadly, people have also been confronted with their own mortality, and we have seen a rise in the number of enquiries regarding wills and estate planning. Both areas are not just about mitigating Inheritance Tax (IHT); they also ensure that your ‘estate’ (your property, money and possessions) is passed to your beneficiaries in the way that you have chosen.
Drafting a will
It all starts with the drawing up of a will or with reviewing your existing will. Many people think that once a will is in place it doesn’t need to be looked at again. This is incorrect. As your circumstances and / or legislation changes, you should adjust your will accordingly.
This can be through a codicil (an addition to modify) or drafting a new will. You should ask a professional to review the will with you and provide advice on whether any changes are necessary.
It currently requires two independent witnesses to be present when a will is signed. The process of drafting a will can be somewhat daunting as it forces you to think through your worst-case scenarios – not something that anyone really likes to face up to.
Wellness and wellbeing holidays: Travel insurance is essential for your peace of mind
Out of the pandemic lockdowns, there’s a greater emphasis on wellbeing and wellness, with
Sponsored by Post Office
However, it is very important as it ensures your wishes are followed, and the administrative and financial burden is lightened for your executors and your beneficiaries in times that will undoubtedly be difficult emotionally. Now is not too late to put the wheels in motion. Make a start and engage somebody to take instructions and draft a will.
Estate planning
Estate planning is a much wider exercise. It takes into account the provisions of your will, how you can pass wealth on during your lifetime, ensure family wealth is protected – even in cases of future divorces – and mitigate inheritance tax.
It is important to ensure gifts are made at the right time; it provides meaningful financial help to the younger generation when they really need it without taking away their motivation to generate their own wealth.
Depending on your and your family’s circumstances, we would look at a number of different solutions including outright gifts, gifts into trust and investing in assets that qualify for Business Relief.
Some may argue that the easiest way to mitigate IHT is to spend the money, but this would not help with other objectives for the family. When making outright gifts, you can potentially make use of various exemptions, such as the annual gift exemption of £3,000 per donor and the small gifts exemption of £250 per recipient. There are also various exemptions for wedding gifts.
Estate planning rules have not significantly changed in the midst of Covid-19, but now more than ever, you should talk to your family about your plans: starting a conversation is the first step and it is probably also the most important step in the process. And if seniors need help with estate planning, make sure to contact estate planning professionals.
Some families find it difficult to talk about mortality and wealth transfer. This is understandable. The older generation finds it hard to think about their own demise whereas the younger generation don’t want to be seen as financially driven or greedy. In some cases, an adviser can help. They may not be part of the actual conversation, but they can arm you with the right questions to ask and the topics to consider.
The one rule the government has recently changed is to exempt emergency workers in certain circumstances from IHT. While this is a welcome move, some practitioners have pointed out the difficulties with this legislation.
In addition, many people are now starting to focus their attention on how the government will recoup the costs of this crisis and the question is whether a change in IHT legislation may be part of the plan.
Regardless of whether this is the case, it is always important to review your plans on a regular basis. Even if the outcome of the review is not to change anything, it provides the peace of mind that you are still on track.
Svenja Keller is head of wealth planning at Killik & Co