Why the perfect future is all in the planning…
Retiring is one of life’s milestones. As well as planning ahead to ensure you can sustain the lifestyle you seek for this new, exciting chapter, it is crucial that your estate and succession plan is up to date and appropriate so you are sufficiently prepared for the years ahead. What should I consider?
1) Your wIll
This is the foundation of your succession plan. While many people have a will, it should be regularly reviewed to ensure it caters sufficiently for you and your families’ changing financial and personal circumstances. Your will should be as inheritance tax (IHT) efficient as possible and contain appropriate protections and control in the event of wealth passing to younger generations. Your will can also be used for long-term care planning, if this is of concern.
Additionally, if you own property abroad, it is crucial you seek professional legal advice in that country to be clear whether you need a separate will there. Importantly, your legal advisers must work together to ensure there are no contradictions between these documents.
2) power of aTTorneY
This allows you to appoint an individual(s) to act on your behalf should you lose capacity and are unable to look after yourself or your affairs. Make sure this is updated if circumstances change so your named attorneys are those you trust to manage your affairs and make decisions for you.
You can only put a power of attorney (POA) in place while you have capacity, so it is not something to put off.
3) IHT and esTaTe plannIng
If you have an IHT liability, the value of your estate on death exceeding your personal allowance will usually be taxed at 40%.
Seeking financial and legal advice early to formulate a bespoke estate plan is imperative to reduce any potential liability. Gifting (whether outright or into trust) is one of the most effective planning methods, and, provided you survive seven years from making the gift, the gifted value falls out of your estate for IHT purposes. Spending will also reduce your estate so is an important part of any planning – and the most enjoyable! Taking out a life insurance policy to cover anticipated IHT and writing it in trust is another approach favoured by some.
4) pensIon plannIng
Finally, do not forget about the ability of your pension to now be ‘inherited’. This is not via your will but a separate pension nomination which must be kept up-to-date – it will usually be IHT free.
Pensions have become a popular estate planning tool as they do not typically form part of your estate and therefore it may be an option to leave your pension untouched and fund your retirement with other savings or assets. As in all successful ventures the foundation of any good retirement is planning ahead, both for your future and future generations.