In the UK, we live busy and full lives; working more and generally doing more than any other generation. Getting your affairs in order is easily put off for another day. Leaving it can cause stress and financial loss for your family.
Ask yourself a few simple questions:
Do you have a will and is it up to date? Do you know where the original is?
Have you got an Enduring Power of Attorney (POA) or the newer Lasting POA? Do you understand their importance?
Is there a safe and shared place for all of your important documents and passwords?
People often say they don’t have time to get their affairs in order. However, according to a recent survey, car buyers took 16 weeks to decide which make and model to choose. Another survey showed that Londoners spend 4 full working days a year booking holidays. Time can be found in a busy life to choose holidays and cars. and yet it only takes a short while to get your personal, financial and legal affairs in good order, which will last a lifetime.
If your affairs are in a scramble, make 2019 the year you get organised.
Four key things which will get your affairs shipshape
1. Write or update your will
According to research by Unbiased, in 2018 60% of UK adults did not have a will. If you are in this 60%, maybe it’s time you got one. Wills document your final wishes for your estate (your entire wealth in the UK and overseas and the value of any gifts made in the previous 7 years, minus all debts). This gives you peace of mind that your loved ones will receive their rightful inheritance.
Having a will helps to avoid any legal challenges that could mean joint accounts and assets being frozen until the dispute is resolved, causing lots of additional stress for those left behind.
It’s important that your will is up to date and remains valid. You should review your will at important life events such as:
- Getting married (any existing will is usually revoked)
- Getting divorced/separated (any existing will is not automatically voided)
- Having children
- Change of career or redundancy
- Children becoming adults
- Moving to a new house or beneficiaries moving to a new address
- Purchasing or receiving new significant assets
- The death of an executor, trustee or beneficiary
- Receipt of an inheritance yourself
If you have a will and any of the events have happened, make it your resolution to update it.
2. Get both forms of Lasting Powers of Attorney
Fewer than 1% of UK adults have a Lasting Power of Attorney. Lasting Powers of Attorney (LPOA) allow you to choose someone you trust (called an Attorney) to make decisions on your behalf if you are unable to make decisions for yourself. This means if you develop dementia, brain damage or anything that could impact your ability to make rational decisions, your chosen attorney will be able to make decisions and act on your behalf.
There are two types of LPOA: Health and Welfare or Finance and Property.
What the Attorney can do: Finance and Property
Provided there are no restrictions within the lasting power of attorney (LPOA) they can usually do the following:
- Sell your home (at market value)
- Buy alternative property
- Maintain and repair your home
- Rent out property (although you do need to consider whether, once you have paid out income tax, management fees, insurances, and general maintenance and repairs, the amount is sufficient for needs)
- Manage your bank accounts
- Deal with investments
- Pay bills
- Claim benefits on your behalf
- Liaise with HMRC regarding your tax
- Make some gifts (there are strict rules around this so professional advice should be sought in individual circumstances)
What the Attorney can do: Health and Welfare (these can only be used when you are unable to make your own decisions)
- Make decisions about your daily routine, like washing, dressing, eating, etc.
- Arrange all your medical care needs
- Decide when to move you into a care home
- Agree on any life-sustaining treatment
What the Attorney can’t do:
- Make large financial gifts to people
- Manage discretionary funds with a fund manager
- Pay themselves a fee (unless authorised within the LPOA or EPA)
- Mix your finances with theirs: they MUST keep separate bank accounts
- Use your position to benefit themselves or make a personal gain
- Purchase something from you at a below market rate without the Court of Protection’s authority
- Tax Planning without the Court of Protection’s authority
It is vital to get the LPOAs early while you still have mental capacity. If you don’t have the mental capacity to make or communicate your own decisions, and you haven’t created an EPA or LPOA, it may be necessary for the Court of Protection to become involved. This can be time-consuming, complex and traumatic.
Your LPOA can be set up by completing the forms and registering them with the Office of the Public Guardian for £82 each (2018).
If you haven’t made your LPOA, no matter what age you are, this could be a new year’s resolution and bring peace of mind. If you would like more information about this read our blog: 5 reasons why you should have Lasting Powers of Attorney.
3. Minimise the inheritance tax payable on your estate
Most of us want our wealth to be left to our family, friends or charity. However, without careful planning a sizeable proportion of your wealth could land in the taxman’s pocket.
Fortunately, not everyone will pay inheritance tax. HMRC published a detailed report in August 2018. Their most recent data shows that only 4.2% of UK deaths were liable to inheritance tax.
Inheritance tax may apply to you if you are:
- not married or in a civil partnership and have an estate worth over £325,000
- married or in a civil partnership and have an estate worth over £900,000 (2018/2019)
You are likely to pay (40%) inheritance tax on assets over these thresholds. However, good financial planning can help you to minimise the tax bill you leave behind. For more information on how you can reduce your inheritance tax, read our blog: The 10 best ways to cut inheritance tax
4. Organise your documents and paperwork
You live in a digital age but are surrounded by paper. It’s a great idea to have all your important documents in a safe and secure place. This means they are quick and easy to find for you, and for future generations when the time comes.
If you haven’t done it already, invest in a documents folder or secure cabinet or safe. Try to streamline your files and clear out any old or unnecessary papers. Be sure to shred or burn them.
Saving your document digitally means they can be accessed anytime and anywhere, and they are fire, burglary and flood-proof. At Capital, our clients have access to a secure personal storage cloud called FileSafe, to store important documents digitally. There are plenty of other safe and secure storage clouds on the market you could use. When choosing, it’s vital that you select a cloud that is highly secure and encrypted to avoid your most important documents being accessible to cyber criminals.
Once you have chosen your cloud platform, you can start scanning or uploading your documents:
- Copies of property deeds
- Powers of attorney
- Pension papers
- Bank statements
- Health and medical information
- Insurance policies
- Credit card statements
- Mortgage information
- Copies of birth and marriage certificates
- Tax certificates, such as your P60
- Details of savings and investments – including: share certificates, Premium Bonds, etc.
- Divorce papers
- Passwords database
Let a trusted person know about your cloud and safe place and have the ability, if needed, to access it.
If you need help getting your finances in order or are planning for a big event like a business sale or retirement, contact us today to speak to one of our Chartered Financial Planners.
At Capital, we believe that planning and preparation is the key to your peace of mind.