A friend of mine asked me about making a Will at my 40th birthday last week! He asked me when I might be making a Will as clearly time was ‘getting on’. I had made one some 19 years before and have changed it more than five times.
I reminded him of the story of the two old men at the bar, when one stunned the other with the comment that he was glad he was old. ‘Well, you see, given my date of birth, if I wasn’t old, the alternative isn’t pretty’. Another chap beside us added ‘well you are only old when you sleep in separate rooms……from your teeth’. Parties!
Many people have commented to me that there is no need to make a Will until much later in life. This is not true. If you have a family you will need to consider who should look after them should something happen to you. If you have a reasonable estate, the laws of intestacy will simply decide who gets your money rather than you.
I can see how difficult a decision it is. These choices will bring up issues in your mind you didn’t know existed. How do you decide who should look after your children!
The excellent aspect of making a Will is that it can be changed as much as you want. That was my simple motivation, as you can easily fret and consider too much now what impact the decision you will make now will have later – serious boomerang thinking, which will lead to procrastination.
Another reason given for not making a Will was that the new Inheritance tax rules meant you now don’t have to give away the first nil rate band of £300,000 on first death.
Well, that too, is a common mistake.
Faced with the opposition claiming they were going to increase the nil rate band to £1 million, the current government decided they needed to do something quickly.
But why would a government who needs money give it away, I thought? Clearly the opposition didn’t have it to give away and would probably have altered the capital gains rules on death to regain the estimated £4 billion revenue loss.
It is when you look a little closer you can see that the issues are more in relation to long term care or future reliance on the state. Inheritance tax only attacks 40% of your assets in excess of the nil rate band, but care costs attack almost 100%.
My (cynical but probably very accurate) view is that care costs, or any costs where we can become more reliant on the state could easily be the target. In a nation where we are living longer, the ratio of workers and taxpayers to retired people is shrinking. It would appear that the burden of maintaining benefits at retirement could fall in the hands of those who are retired but who have resources.
The changes to the Inheritance tax rules can easily allow you to become apathetic about your planning but my view is that you should consider using your trust planning as before.
Consider that on first death you can give your tenancy in common in your house into trust for example. Your surviving spouse would now be able to live there as normal.
What is the surviving spouse’s value of the house worth? In the open market, a house is worth what someone is prepared to pay for it. What would you pay for a half share in a house when you have to share the property with someone else forever?
How would you ever sell that ownership on? Exactly, it’s virtually valueless. This simple planning is a method of reducing your estate by using the options available within a will. There are countless other methods that allow you to achieve the same outcome without really losing control of your estate. Doing nothing is not an option.
If you have a query on inheritance tax or estate planning calWorldwide on 0800 0112825 or e-mail info@wwfp.net and take a look at our section on Inheritance Tax
The value of shares and investments can go down as well as up
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