Estate Planning

6 benefits of a property protection trust

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There are several benefits to putting a Property Protection Trust in place. It allows you and your partner to own 50% of your property each, so when one of you passes their share can be passed to their chosen beneficiary, whilst protecting the surviving partner’s lifetime interest in the property.

If you would like to find out more about our inheritance tax planning services, then please get in touch.

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Property Protection Trusts

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You can establish a trust during your lifetime 0r; through your will, on your death. You can appoint trustees of your choice (this can include you and your spouse during your lifetimes) who will manage the trust on your behalf. Following your death, the trustees will act with consideration to your wishes.

Trusts offer several benefits:

  • On your death, the trust asset can pass to your chosen beneficiaries with no need for probate
  • In certain circumstances, trusts can protect your assets from creditors
  • You can control who benefits from your assets during your lifetime and on your death
  • Depending on how the trust is structured, it is possible to invest your assets into a trust to mitigate inheritance tax, income tax, and capital gains tax (principle private residence relief)
  • Protect your estate against potential future care fees

You may also wish to reserve some influence over your assets for the trustees to observe after your death.

For example:

  • You may want to delay the age at which beneficiaries inherit
  • You may want your heirs to receive their inheritance in stages
  • You may be concerned about your heirs getting divorced and want to protect the assets inherited from you being included in a divorce settlement

Trusts can also be useful in preventing assets reaching a beneficiary facing insolvency proceedings and those making poor lifestyle choices, such as involvement in alcohol and drugs.

Property Protection Trust

Owning your home as tenants in common rather than joint tenants provide additional planning opportunities. This can potentially protect inheritance in terms of residential care fee assessment and marriage following bereavement.

A property protection trust is put in place so that the half share of the family home belonging to the first person to die passes into the trust (also known as a life interest trust). This allows the surviving spouse to benefit from the share of the house during their lifetime. Following the surviving spouse’s death, the property can then be passed on to either children or loved ones. By putting this trust in place, you are ensuring your assets are going exactly where you want them to go and giving you total peace of mind.

The benefits of a property protection trust are:

  • Each spouse now owns 50% of the property
  • Each spouse grants the surviving spouse a ‘right to reside’
  • Allows you to pass your property to your chosen beneficiaries
  • Each spouse can gift their 50% as they see fit: (both halves of the property do not have to go to the same beneficiaries)
  • Allows you to nominate your chosen Executo1·s/ Trustees to handle the property on your behalf
  • Can be used as a tool for planning for care home fees

Please be aware that should the survivor remarry, not make a new will and then die, intestacy rules would see the new spouse taking a disproportionate amount of the estate. By severing the tenancy and creating a life interest trust in your wills (for the surviving spouse), this means your assets are going exactly where you want them to go and giving you total peace of mind. To preserve the residential nil rate band, property needs to pass to direct descendants.

Get in touch

For more guidance on the benefits of setting up a property protection trust and for more information on our inheritance tax planning services, please get in touch with us.

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Checklist for Protecting your Family’s Finances

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Checklist for Protecting your Family’s Finances

Create an estate plan

Estate planning isn’t only for the wealthy. There are various ways you can minimise Inheritance Tax like gifting or utilising pensions and trusts.

Protect against illness and death

We can help select the right products for you and your family’s needs.

Write or review your Will

Ensure your money and assets go to the people and causes you care about.

Get in touch

For more information on our inheritance tax planning services, please get in touch.

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Tax Planning Services

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Head of Estate Planning and Chartered Financial Planner, Mark Chandler, outlines our tax planning services including making a Will, trusts and probate.

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Financial Protection Planning

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Financial Protection

No ‘one-size-fits-all’ protection solution

Everyone should review their financial protection and estate plans. A solid plan will help you feel confident your family’s finances are secure.

The uncertainty of the past couple of years has shown how important it is to have a robust plan in place for securing your family’s finances. While no one knows what is around the corner, reviewing your protection, updating your Will and creating an estate plan will help you rest assured that the financial side of things is taken care of.

These are some of the main considerations:

Protect against illness and death

It is essential to make sure that you have adequate protection in place, depending on your particular circumstance. There is no ‘one-size-fits-all’ protection solution so receiving professional advice is important when considering the right products for you and your family’s needs. This will ensure that your finances remain secure if illness or death happens unexpectedly, giving peace of mind to you and your loved ones at what could otherwise be a difficult time.

A life insurance policy is one of the most important types of protection to have in place. It pays out a lump sum if you die during the duration of the policy, helping your family to pay o% their debts, maintain their lifestyle or cover any other expenses they may have.

Critical illness cover can also provide valuable financial protection in case you are diagnosed with a specified serious illness while your policy is active. This type of cover will pay out a tax-free lump sum if you are diagnosed with an eligible condition, allowing you to concentrate on getting better without having to worry about bills piling up.

Income protection is also worth considering when developing your financial plan. This type of cover provides regular payments should you become ill or injured and are unable to work. This can help you cover your regular outgoings, such as mortgage payments or rent, while you recover.

Write or review your Will

Writing or reviewing your Will is essential for making sure that your wishes are respected and carried out after you pass away. It ensures that your money and other assets go to the people and causes you care about, such as relatives, family friends, charitable organisations, etc. Additionally, it provides you with the opportunity to appoint guardians for any children in your life, so they can be looked after by people you
know and trust.

If you don’t have a Will in place when death occurs, then the rules of intestacy will be applied to distribute your assets and possessions according to legal guidelines. These might not always align with what you would have wanted. Therefore, it is important to obtain professional advice on how best to proceed with making a professional Will. Doing so can help to ensure that your wishes are appropriately recorded and respected, even after you’ve gone. With the right professional advice and guidance, making a Will or reviewing your Will provides peace of mind that comes with having your affairs in order.

Create an estate plan

Creating an estate plan is a step that can make a significant impact on the financial futures of your children and grandchildren. Despite common misconceptions, estate planning isn’t only for the wealthy. In fact, due to rising house prices and the freezing of the Inheritance Tax (IHT) nil-rate band until April 2028, IHT could now be more impactful than before.

Fortunately, there are various ways in which you can minimise this unexpected burden, ranging from making lifetime gifts to utilising pensions and trusts. To get the most out of these options, it’s best to seek professional financial advice. We can help guide you as you build a comprehensive estate plan tailored specifically to your needs, to ensure that your family is well-protected and their financial futures are secured.

Being prepared for whatever the future may bring

In uncertain times, receiving professional advice can help you feel confident you’re doing everything you can to secure your family’s
finances. We will look at your personal, family and financial circumstances to recommend the right solutions for your individual needs. You can focus on enjoying life today, safe in the knowledge that you’re prepared for whatever the future may bring. To find out more about our financial planning services or inheritance tax planning services, please contact us.

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How to Create an Estate Plan

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An image to show an inheritance tax uk checklist on how to create an estate plan

How to Create an Estate Plan

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Inheritance Tax & Will Planning

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Estate planning is about more than just tax. It is about making sure the people left behind are financially supported, that your assets are protected and that the tax your estate pays is fair.

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A hard-earned retirement

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Helping you look forward to a hard-earned retirement – with a whole of life financial plan

A potential client approached Ellis Bates with several clear goals in mind, namely to ensure she had cash to live on for her foreseeable future, that she invest and grow her long term savings and to mitigate her inheritance tax liability, and so protecting her daughter’s future position.

During the meeting, the client outlined that she wanted to focus on and achieve long-term growth on her cash savings, in excess of inflation but also needed access to and control over these liquid funds. The Adviser recommended she invest recent monies received from the sale of a buy to let property in an ISA and GIA as step one to achieve a much better return on her cash.

With regards to understanding the structure of inheritance tax (IHT), the Adviser worked with the client to fully understand all her property and land assets, including her smallholding of over 25 acres and for example the agricultural property relief available on her renting out of these facilities.

The Adviser recommended the client boost her pension funds with a SIPP (Self Invested Personal Pension), so that funds were moved outside of her estate from an IHT unfriendly environment to help further reduce her IHT liability.

Together they agreed an affordable monthly figure and budget (based on typical income and expenditure) and established a Whole of Life plan written in trust (within said budget), to provide her daughter with a tax-free lump sum to pay HMRC in relation to her future inheritance tax bill.

The client will meet with her Adviser every year, to review progressively moving more funds across to the SIPP and ISA each new tax year for example, thus utilising her annual pension allowance to boost her pension pot and progressively reduce her future IHT liability, whilst also being in control of all of her funds.

Like all clients, circumstances change and annual reviews of estate planning are vital, and this particular client is due to inherit further substantial funds from her mother at some point but will be able to seek expert and timely advice.

Following on from all the discussions, planning and reporting, our client expressed just how much happier she was and how in control of her finances she felt, giving her peace of mind that any complications due to future inheritance or unforeseen changes will be reviewed and assessed with her Adviser and she will be given options and solutions to meet her future needs.

She feels more relaxed about current income, her family’s financial future and is looking forward to a hard-earned retirement.

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7 Great Reasons Why You should Plan For Death!

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By Grant Ellis, Director Ellis Bates Group

In 1789 Benjamin Franklin said there are only two certainties in life – death and taxes. We all seem happy to talk about taxes, but less keen on discussing, or planning for our ultimate demise. It’s as if by talking about it we are somehow tempting fate. But it can bring tremendous peace of mind not only to the planner, but also to their loved ones to know that a well thought out programme is in place for their eventual departure. Here are 7 good reasons why you shouldn’t put off planning for it – old or young.

Dying without leaving a Will is not a good idea

If you haven’t made a Will, then when you die, everything you own will be shared out according to the law instead of in accordance with your wishes. This could mean your estate passes to someone you hadn’t intended – or that someone you want to pass things on to ends up with nothing. For example, if you’re not married and not in a civil partnership, your partner is not legally entitled to anything when you die. If you’re married, your husband or wife might inherit most or all of your estate and your children might not get anything (except in Scotland). This is true even if you’re separated. If you have children or grandchildren, how much they are legally entitled to, will depend on where you live in the UK. All of this can be avoided if you make a Will, setting out your wishes.

Oh, and if you needed any more persuading, if you do die without having left a Will, all your assets are likely to be frozen until the estate is sorted out, which can mean hardship for your loved ones in the meantime. And it’s much more expensive to use the courts to reconcile an estate, so there’ll be less left over for your family too. It really is a ‘no brainer.’

For more information visit https://www.ellisbates.com/individuals/inheritance/

Make provision for if you are no longer capable

A good number of us can expect to lose our mental capacity as we get older and this can be just as difficult for the family to deal with as death, if not more so. It’s therefore prudent to not only leave a Will but also Lasting Powers of Attorney for our finances and our health and welfare. These will give our family or trusted loved ones the capacity to make decisions on our behalf when we’re no longer able to, ensuring that bills get paid, and that any decisions about our health can be made by those who are closest to us.

Document your health preferences up front

You should also consider leaving a ‘Living Will’ which is a statement of your wishes intended to guide your family (when you are not able to make the decision yourself) about what treatment you might want in various scenarios. This will give them the confidence that they are acting in accordance with your actual wishes rather than trying to second guess you.

Don’t leave your young family in the lurch

All of this is especially important if you have dependants, but it’s not the only thing that needs to be addressed. Too many of us assume that if anything happens to us, the state will step in and look after our family. That may be the case up to a point, but it won’t be easy on those you leave behind. Much better to take out some low cost life assurance when you’re young, to pay out if anything happens to you. This will give your family a cushion to tide them over should your income be lost to them, or alternatively you have to pay for childcare if your partner is no longer around. It’s only really necessary whilst you have financial responsibilities to others, so can lapse once the mortgage is paid off and the kids have finished education. It is surprisingly inexpensive too.

For more information visit https://www.ellisbates.com/individuals/financial-protection/

Talk to each other about what you want to achieve with what you leave behind

We’ve all seen the TV dramas, where the family solicitor reads out the deceased’s Will, and everyone is shocked by what it contains. Unless you’ve a vindictive streak, that is not really how it should be. It’s much better to talk to your loved ones openly and candidly about your assets, and what you’d like to do with them when you pass on. Often there are 3 generations to consider, and an open and frank discussion, perhaps aided and abetted by your financial adviser will help to make sure everyone understands what your plans are. It may be for example that you initially expect to leave your assets to your children, but they may prefer it if you left them to their children instead. Discussing such things up front helps set everyone’s expectations, and avoids any conflict and disappointment later on.

Plan early to leave more to your family and less to the taxman

Inheritance tax is a tax on the estate, and is potentially payable at a rate of 40% once the estate has a value of over £325,000. So if you are leaving behind a substantial estate, you could be leaving your loved ones with a large tax bill too. However, with some simple planning you can significantly reduce the amount of tax payable. It’s a complicated area so you should seek some specialist advice from a financial adviser, preferably one who is affiliated to the Society of Trust and Estate Practitioners.

Make a plan for your funeral

The last thing your family will want to do in the days following your demise is argue about what they think you may have wanted for your funeral, so leave them some instructions. Things like burial or cremation, whether you want a religious service or not, what songs or music you’d like to have played, and whether or not you want it to be a celebration of your life or a more sombre affair. All these decisions can be taken up front and take away any pressure on the family at what will be a difficult time.

Hopefully I’ve persuaded you that there are at least seven really good reasons why you should plan for your death now rather than put it off into the future. So, what are you waiting for?

Ellis Bates Financial Advisers are independent financial advisers with offices across the United Kingdom. They specialise in Estate Planning and manage over £1 billion of assets on behalf of clients, who have given them a 4.9/5.00 score with Trustist https://www.ellisbates.com/reviews/

For more information please visit their website www.ellisbates.com

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Wealth transfer and the next generation

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How to secure your family’s financial future.

We spend a lifetime generating wealth and assets but not many of us ensure that it will be passed to the next generation – our children, grandchildren, nieces, nephews, and so on. Intergenerational wealth transfer is the passage of wealth from one family generation to the next.

It’s becoming increasingly important for more people to consider succession planning and intergenerational wealth transfer as part of their financial planning strategy. As the baby boomer generation reaches retirement age, we’re on the brink of a vast shift in assets, unlike any that we have seen before.

Wealth transfers

By 2027, it is expected that wealth transfers will nearly double from the current level of £69 billion, to £115 billion[1], coined as ‘the Great Wealth Transfer’ of the 21st century.

Intergenerational wealth transfer can be a huge issue for all family members concerned. If done well and executed properly, it can make a real difference to the financial position of the recipients. If misjudged or poorly handled, it can cause enormous issues, conflicts and resentments that are never forgotten nor forgiven.

Financial implications

One aspect that hasn’t been widely considered is the impact on other family members, and in particular children, as their parents think about selling their business or retiring from their career, perhaps selling their family home, and starting life in retirement.

It is important that children are prepared to deal with this process, not least so they are aware of the financial implications and how they may be affected. For instance, children may be expecting to receive a certain amount of money from their parents – particularly those who are selling a business – and end up disappointed. Conversely, they may not be expecting to receive anything, and are therefore not equipped to deal with a windfall.

Contributory factors

According to the King’s Court Trust, £5.5 trillion will move hands in the United Kingdom between now and 2055, with this move set to peak in 2035[2]. Why? Well, there are a number of contributory factors that account for this. The two main reasons are increased net worth and rising mortality rates.

For those approaching, or in, retirement, it’s important to have frank and open conversations with children about expectations and also whether children have the knowledge and understanding to manage financial matters.

Approaching retirement

This is not an easy exercise, as you may not want to discuss your financial affairs with your children. You may find your children’s eyes are opened when they see what their parents have been able to achieve financially. They may even want to know how they can do that themselves and change their own habits.

Everyone works hard to provide for their family, and perhaps even leave them a legacy. However, parents approaching retirement shouldn’t feel that their family is solely reliant on them, or that they need to be responsible for their children’s financial situation.

Expressing wishes

A good approach is to help your children establish their own strong financial footing and be ready for intergenerational wealth transfer. For instance, introducing them to your professional advisers can provide comfort that there is someone they can go to for advice.

Having open conversations with your children and expressing wishes and goals will also ensure that your family are all on the same page, which can help reduce potential conflict later when managing intergenerational wealth transfer. These are some questions you should answer as part of your intergenerational wealth transfer plans:

  • When did wealth enter my life and how do I think this timing influences my values and family relationships?
  • What impact does affluence have on my life and the lives of my next generation?
  • What was the key to my success in creating wealth and how might telling this story to my future generation be helpful?
  • What is my biggest concern in raising my children or grandchildren with affluence?
  • What conversations (if any) did I have with my own parents about money and wealth growing up?
  • How did my parents prepare me to receive wealth?
  • What lessons did I learn from my parents about money and finance that I would like to pass on to my heirs?
  • What family values would I like to pass down to the next generation and how do I plan on communicating this family legacy?
  • What concerns do I have about my adult children when it comes to inheriting and managing the family wealth?
  • How can I help prepare my beneficiaries to receive wealth and carry on our family legacy?

Between generations

Despite the vast amount of wealth likely to be passed down between generations, those in line for inheritance could end up being over-reliant on their expected windfall. The key will be to ensure younger generations are able to get involved and understand how to handle the wealth they will be inheriting, as well as being able to make good decisions about the wealth that they generate themselves.

You need to consider who will receive what and whether you want to pass your wealth during your lifetime or on death. These decisions then need to be balanced by the tax implications of any proposed planning. This is especially important at what can be a highly stressful time. By making advanced preparations, the burden of filing complicated Inheritance Tax returns can be reduced. It’s worth noting that UK Inheritance Tax receipts exceed £3bn from 17,900 estates[3].

Source data:
 [1] Kings Court trust, ‘Passing on the Pounds – The rise of the UK’s inheritance economy’.
[2] Resolution Foundation, Intergenerational Commission. ‘The Million dollar be-question’.
[3] Prudential 2019.

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