After your property has been dealt with in your planning you should then consider your other assets. Are you going to make specific or pecuniary bequests to your beneficiaries? Are there heirlooms or even a specific shareholding that you might want to pass down?
If so, that’s fairly simple – you either give those things to them while you’re alive or make a specific instruction in your will. Remember that gifts made while you’re alive are potentially chargeable to inheritance tax if you die within seven years of making the gift.
The calculation is fairly simple for most of us. When you die, your executors will need to look back seven years to ascertain the value of any gifts made which are not covered by the various exemptions.
Those gifts will use up the nil rate bands first, leaving more of your estate on death to be taxed. If you die between four and seven years after making the gift, the amount of tax is reduced on a sliding scale, which helps, but again, you really must think through the implications of making lifetime gifts, not only when you make them, but the impact on your wider estate if you die too soon after.
You can take out a simple life insurance policy called a gift inter-vivos policy which last for seven years and is designed to pay the tax on any gifts you make should you die within the seven years.
Not enough of these are taken out, in my opinion, but that’s probably because life insurance isn’t cheap for those making lifetime gifts, because usually those people are older and hence higher risk and probably with medical conditions. If you do take one out, make sure it is written in trust to keep the proceeds away from the taxman.
Probably your plans will be fairly simple – divide everything equally between by three kids, say. But if you have a child with additional needs who will need looking after when you’re gone, you might need to provide for them by putting money into a trust that can be used for their upkeep.
Doing so can sometimes help with benefits they may be receiving, because it keeps the money out of their personal ownership. They may not be able to personally own assets because they don’t have the mental capacity to do so, so a trust can be useful there.
Or maybe you have a property which you could allow them to live in for the rest of their life, and when they’re gone, the property could be sold and the proceeds left to your other descendants.
Legacy planning can sometimes be the process of decades. In that example, you could die with a 40-year-old ‘child’ needing care for another 30 or 40 years, after which your grandchildren will probably be in their 50s or 60s. It really is a long term thought process.
Or maybe there’s nothing like that going on, and you simply want to leave a legacy whereby you make a bit of a dent in the universe, so that people will remember your name. This is why people endow educational awards, or sports club prizes, or libraries and theatres. If you like that idea, then you’re going to need to plan for it ahead of time, and think about which assets might be used for that purpose.
Maybe you ringfence some money and say, “That money goes to the cricket club for the upkeep of their pavilion, and I’d like them to put a plaque up with my name on.” Think it through – it really is quite a process to think it all through and hold all the threads together and then to try to think long-term.
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