Advising clients on their legal problems and estate planning can be very varied. Whilst attitudes and priorities differ between individual clients, their age and family circumstances can offer similar themes.
The early years
The purchase of a first house is an ideal time to consider making a will. First time buyers often have some financial assistance from parents to get onto the property ladder. A will can ensure that, in the event of death, the property will revert back to the parents or other family members. Care should be taken to reflect contributions to the property and whether these should be structured as a gift or a loan given by the parents.
Getting together
Moving in or sharing property with a partner can raise some awkward questions. Will the person moving in or co-habiting pay towards the mortgage? Will they contribute to a joint account? What happens if one partner moves out? A straightforward co-habitation agreement detailing how financial contributions are made could resolve any issues that may arise in the future. If home improvement is funded by the co-habitee they should insist on some form of Declaration of Trust being drawn up to set out how their contribution to the property is determined and how any sale proceeds are divided.
Settling down
On marriage any existing wills are revoked. If property is purchased in joint names advice should be taken as to how this should be structured. When a marriage breaks down the division of assets is treated very differently from co-habitees breaking up. It may not be romantic but couples should consider a pre-nuptial agreement. If there is a great inequality of wealth, they may wish to set out how the finances are divided on any breakdown. Although pre-nuptial agreements are not legally binding, family courts are giving them more and more weight. Both parties will need to provide full disclosure of their assets and take legal advice. Nominations for death in service benefits and retirement pension plans should be considered.
Starting a family
The arrival of children should prompt a review of wills. Guardians should be appointed and life insurance and income protection insurance should be considered. Whilst children are young, a stakeholder pension policy can be opened and contributions made for the children which will allow a healthy pension pot to grow. Although they will not earn an income, any contributions to their pensions will attract basic rate tax relief.
Building a nest egg
As the family matures hopefully your income will increase and your assets grow. Inheritance tax may become an issue and wills should be amended to allow assets to pass down to the children in the most tax effective manner. Death in service and pension lump sums should be reviewed and structured to pass to the surviving spouse tax efficientiently. Life policies should be held in trust to provide flexibility. Business owners should consider appropriate succession planning. If they were to die, is there appropriate planning in place for their share of the business to be bypassed to the family or bought out by the other shareholders or partners? If one partner is the major earner, ownership of assets can be structured to ensure income tax liabilities are minimised. Assets can be transferred between spouses to produce greater income for the lower income earner and to utilise Capital Gains Tax annual allowances.
Silver surfers
Once the children have grown up and flown the nest, it is time to live a little! Hopefully incomes will be maximised and mortgages will be (almost) paid off. Although you may be busy enjoying yourself, you ought to review your will and make a Lasting Power of Attorney in case your health or mental capacity deteriorate. Your assets can be protected from being used towards long term care fees. If you want to help your children or grandchildren financially, any gifts should be considered carefully. Gifts may be vulnerable should your child or grandchild become divorced or suffer any financial difficulty. Payments can be structured either by gift or by loan to apply protection. To ensure this does not have any adverse tax implications, a gift into trust can achieve protection while dealing with it in the most tax efficient manner.
In the Autumn years
As time rolls on you need to ensure that your affairs are in order. If you lose your loved one, you need to decide how their estate is dealt with. Their wills may set up a life interest trust or nil rate band discretionary trust for inheritance tax mitigation purposes and you will need advice on how best to structure these trusts to provide protection for your assets. Long term care may be a possibility and assets should be reviewed to ensure you have planned appropriately. Joint accounts should be avoided for older couples whose health may deteriorate. If your loved one goes into care, your will should be reviewed to ensure that any inheritance you leave to them will not be used in care fees. Appropriate advice can avoid expensive disputes and reduce the anguish at critical times during your lifetime. The right planning at the right time invariably pays off in the long run.
For more information on planning for your future please contact
John Rouse on 01926 880743.
First published in summer 2010 edition of Legal News For You
