THERE’S no point in being the richest man in the cemetery. Oh, and there’s no pockets in a shroud. And by the way, you can’t take it with you . . .
When I can conjure up three clichés that all mean the same thing, you know I’m on to something - something that brings a frisson of joy to financial advisers’ hearts.
Yes, we’re all going to die. And when we do, many of us want to pass our wealth on to our children.
Despite this, less than half of parents who want to leave something to their family have actually got up off their assets and done something about it, for instance writing a will. The rest have done what our dear cousins across the pond endearingly call ‘diddly’ – nothing, according to insurance giant LV= in its latest Wealth and Wellbeing Monitor.
If you do not leave a last will and testament, you die ‘intestate’. In that case, your wealth will be distributed according to intestacy law, which may be close to, but not exactly what you wanted.
It can also cause headaches for your family, perhaps even fall-outs and squabbles over who should get what. If you leave a will, however, there are no arguments, because they know this is what you wanted.
At this point we remember global rock superstar Prince, who died on Thursday April 21 2016 at the tender age of 57, with no will in place. By the following Manic Monday (yes, he wrote that for the Bangles), the extended family, including one hitherto unknown half-sister, were queuing round the block with their begging bowls, claiming their right to just a nibble at his £300m fortune. As his lawyers struggled to establish who had a right to what, they said the situation was ‘one hell of a mess’.
Or, as we say in these parts, ‘a whole handlin’’.
Making a will puts you in control of your money, even from beyond the grave - it’s the classic definition of thinking outside the box.
More to the point, a little forward planning on your part can save your family a hefty whack of inheritance tax (IHT) that they might otherwise have to pay. It’s relatively easy to arrange, which is why they call IHT ‘the most avoidable tax of all’.
Despite this ‘avoidability’, that crazy taxman lifted £5.4 billion in IHT in 2020/21, and it’s been rising – that was up four per cent on the previous year. This shows that people just aren’t taking the proper steps to pass their wealth on properly. LV= confirm this: they say that 87 per cent of those already working on, or intending to work on transferring their wealth are not bothering to seek the help of an expert adviser.
You have an IHT tax-free allowance of £325,000 (double that if your spouse is with you). Anything you are passing on – your ‘estate’ - that is non-exempt and exceeds that amount is liable for inheritance tax at 40 per cent. That’s hefty.
What can be done? Well, an adviser has many tricks up his sleeve that can move parts of your estate to a place where they are no longer part of your estate, for tax purposes. This reduces the likelihood that your family will be liable for IHT. Just one example: any insurance policies you have can be removed from your estate for inheritance tax purposes by placing them ‘in trust’.
Wealth transfer is a complex area of financial services, with many different elements.
To sum it up with a comparison: you couldn’t put your car engine together yourself, so why try to put your will together yourself?
You might want to reflect on that for a moment.This side of the grave.
:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice or at www.mkennedyfinancial.com
