Don’t Overlook Your Beneficiaries!



Posted on: 18th April 2024

Estate planning is not something you look forward to doing, but it is necessary to get things set for the day when your will has to be read. One thing that may get overlooked in the entire process is sitting down with your beneficiaries and speaking with them about inheritances.

Over 50% of people in the UK have never discussed with their family members regarding inheritance, leaving them somewhat unprepared for the inheritances they receive. Many may feel they stand to inherit a substantially different amount than is intended. It may also place far more of your estate liable for inheritance tax (IHT).

It could be a case of shifting generational attitudes around finances, but there are benefits to discussing with your beneficiaries when setting things up with independent financial advisers Cheshire.

Life Goals of Your Beneficiaries

Even though you will be gone, your loved ones will have their goals and ambitions – some that you may not even be aware of. Speaking with them when setting up your estate plan allows for adjustments to help them attain their life goals.

Many young beneficiaries may aspire to start their own business, or pursue a degree. You could invest in their future now rather than leaving them a lump sum for after you pass. You could also choose to keep money in a fund for when the children are old enough to chase further education.

Maybe your beneficiaries want to boost their pension fund or buy a property. In each case, there are better ways to use your wealth and align your beneficiaries’ goals from your estate with a little planning with independent financial advisers Manchester.

Reducing Liabilities

In the 2023/24 tax year, individuals can pass up to £325,000 on their death without IHT taking a cut. The threshold can increase by £175,000 if a direct descendant inherits your main residence.

With married couples or civil partnerships able to transfer any unused allowance, you could potentially leave up to £1m before IHT is due. If your estate is valued above the nil-rate bands, beneficiaries could find themselves paying IHT on everything they inherit above that figure. Gifting to your beneficiaries at least 7 years before your death can prevent them from paying IHT on their value, known as a ‘potentially exempt transfer’.

Talking about transferring wealth intergenerationally can present the opportunity to make gifts sooner, possibly gifting in the 50s until waiting until you are closer to 80.

Preparing your estate is a task to do with independent financial advisers Cheshire, but helping your beneficiaries understand their inheritance and the various ways you look to aid them in getting ahead and avoiding taxes after your death is a real conversation to have.

Contact the team at Haven IFA today to discuss more on estate planning.