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5 Financial Planning Conversations for you and your Family

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Discussing finances can evoke anxiety or discomfort, and this tension doesn’t ease when family members are involved..

How can you make financial planning conversations go smoothly?

  • Your Estate

Discussing who will inherit will help you avoid future disagreements, ensure your Will is up to date and minimise inheritance tax liabilities

  • Succession Planning

Building a succession plan that suits your needs ensures you have laid the firm foundations for your family’s future

  • Lifetime Gifting

It’s possible to gift tax-efficiently during your lifetime using various allowances and exemptions

  • When I’m gone Information

Discuss where you’ll safely leave basic details of your bank accounts, savings, investments, and utility providers

  • Power of Attorney

You can put in place a power of attorney, a legal document enabling you to name one or more people to look after your affairs if you lose capacity

If you would like to discuss your family’s financial future and how we can help, please get in contact

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After Retirement – helping your loved ones

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Your financial adviser will have helped you plan a secure retirement lifestyle and naturally your thoughts will now be turning to how you can help your family now and in the future. Your adviser will guide you through key stages including 

  • Estate planning 
  • Legislation changes and their impact 
  • Tax implications 
  • Gifting 
  • The role of Wills, Trusts and Lasting Powers of Attorneys 

Your adviser’s role is to ensure you enjoy your retirement and bring expertise into successfully passing on your wealth in the right stages. 

If you would like to discuss your and your family’s financial future, please get in touch.

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Financial Planning conversations you need to have

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Protecting your legacy and boosting your children’s financial security

Discussing finances can evoke anxiety or discomfort, and this tension doesn’t ease when family members are involved. Nevertheless, parents of adult children are responsible for discussing their financial future – particularly retirement and estate planning. Doing so ensures their children can provide support or fulfil their wishes as needed.

Open conversations can provide financial planning opportunities and improve your loved one’s future finances. The sooner you talk about money, the better your chances are of protecting your legacy and boosting your children’s financial security.

How can you make financial planning conversations go smoothly?

Your Estate

Let’s begin with inheritance, which is a hugely emotive subject. While discussing who will inherit a portion of your estate after you have passed away might seem difficult, doing so could prevent future difficulties or disagreements.You can explain your plans and why you have made certain decisions. This could also provide an opportunity to consider if your will needs updating. For example, you might need to amend your will to ensure your estate can benefit from the residence nil-rate band, which could reduce your estate’s Inheritance Tax (IHT) bill.

Lifetime Gifting

Although you’ll want to avoid giving away money that you might need in the future – towards care costs, for example – you might wish to consider passing on some wealth to future generations within your lifetime. Using pensions,Trusts, and life assurance are just some ways you can do this.This can be complicated, but we can work with you to give you peace of mind that you’ve laid the firmest foundation for your family’s future.

It’s possible to gift tax-efficiently during your lifetime using various allowances and exemptions. For instance, you can give away up to £3,000 per year free from IHT. Additionally, you can make small gifts, such as potentially exempt transfers (PETs), become exempt from IHT if you live for at least a further seven years after making the gift.

Power of Attorney

Dealing with a deterioration in mental capacity can be particularly tough on your family. If you can no longer make decisions for yourself, you’ll want to ensure someone you trust is legally in this position. You can put in place a power of attorney, a legal document enabling you to name one or more people to look after your affairs if you lose capacity.Without this document, an application must be made to the Court of Protection (the sheriff court in Scotland), which can be a complex, costly, and lengthy process for your loved ones.

“When I’m gone” Information

Discuss where you’ll safely leave basic details of your bank accounts, savings, investments, and utility providers. Compiling a list of this information is time well spent and could be invaluable to your family if you lose capacity or pass away. Talking to your family about inheritance might seem difficult, but we can help start the conversation and guide your through what may be an emotional process.

Succession Planning

Building a succession plan that suits your needs ensures you have laid the firm foundations for your family’s future. It’s crucial to regularly review and update this plan to adapt to any changes in your personal circumstances or legislation. The planning process leads to understanding each family member’s motivations and personal drivers. This will enable you to assess the direction of your vision and the options available to your family to create a plan for your family’s future.

Will you have a financially secure and fulfilling retirement?

Please contact us for more comprehensive advice on managing your family’s financial future, including estate planning, lifetime gifting, and setting up a power of attorney. We’ll assist you in navigating these challenging discussions and ensuring your financial legacy is secure.

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Why have a Lasting Power of Attorney?

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Lasting Powers of Attorney (LPA)

Setting up an LPA is vital to ensure that you have a trusted individual who can manage your affairs when you are no longer able to do so yourself

  • 33% of of UK adults know how to use an LPA effectively, despite the fact that 95% of UK adults are aware of LPAs
  • 37% of Britons have put an LPA in place, despite the fact that 74% deem LPAs necessary
  • 41% of married couples have put in place an LPA, but 24% have no plans for doing so
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Free Guide: Estate Planning

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What is the importance of estate planning?

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.

Wealth preservation and wealth transfer are becoming an increasingly important issue for many families today.

Your estate consists of everything you own. This includes savings, investments, pensions, property, life insurance (not written in an appropriate trust) and personal possessions. Debts and liabilities are subtracted from the total value of all assets

There are various ways to legally avoid paying inheritance tax and we have produced a free Estate Planning guide to support you with Inheritance Tax Planning: Download Here

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What is a Lasting Power of Attorney

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Allowing someone to make decisions for you, or act on your behalf

A Lasting Power of Attorney (LPA) enables individuals to take control of decisions that affect them, even in the event that they can’t make those decisions for themselves. Without an LPA, loved ones could be forced to endure a costly and lengthy process to obtain authority to act for an individual who has lost mental capacity.

An individual can create a LPA covering their property and financial affairs and/or a separate LPA for their health and welfare. It’s possible to appoint the same or different attorneys in respect of each LPA, and both versions contain safeguards against possible misuse.

Own Financial Affairs

It’s not hard to imagine the difficulties that could arise where an individual loses the capacity to manage their own financial affairs and,  without access to their bank account, pension and investments, family and friends could face an additional burden at an already stressful time. LPA and their equivalents in Scotland and Northern Ireland should be a consideration in all financial planning discussions and should be a key part of any protection insurance planning exercise. Planning for mental or physical incapacity should sit alongside any planning for ill health or unexpected death.

Losing mental capacity

Commencing from 1 October 2007, it is no longer possible to establish a new Enduring Power of Attorney (EPA) in England and Wales, but those already in existence remain valid. The attorney would have been given authority to act in respect of the donor’s property and financial affairs as soon as the EPA was created.

At the point the attorney believes the donor is losing their mental capacity, they would apply to the Office of the Public Guardian (OPG) to register the EPA to obtain continuing authority to act.

Similar provisions in Scotland

Similar provisions to LPAs apply in Scotland. The ‘granter’ (donor) gives authority to their chosen attorney in respect of their financial and property matters (‘Continuing Power of Attorney’) and/or personal welfare (‘Welfare Power of Attorney’).

The latter only takes effect upon the granter’s mental incapacity. Applications for powers of attorney must be accompanied by a certificate confirming the granter understands what they are doing, completed by a solicitor or medical practitioner only.

LPAs don’t apply to Northern Ireland. Instead, those seeking to make a power of attorney appointment over their financial affairs would complete an EPA. This would be effective as soon as it was completed and would only need to be registered in the event of the donor’s loss of mental capacity with the High Court (Office of Care and Protection).

Concerning medical treatment

It’s usual for the attorney to be able to make decisions about the donor’s financial affairs as soon as the LPA is registered. Alternatively, the donor can state it will only apply where the donor has lost mental capacity in the opinion of a medical practitioner.

A LPA for health and welfare covers decisions relating to an individual’s day-to-day well-being. The attorney may only act once the donor lacks mental capacity to make the decision in question. The types of decisions covered might include where the donor lives and decisions concerning medical treatment.

Life-sustaining treatment

The donor also has the option to provide their attorney with the authority to give or refuse consent for life-sustaining treatment. Where no authority is given, treatment will be provided to the donor in their best interests.

Unlike the registration process for an EPA, registration for both types of LPA takes place up front and is not dependent on the donor’s mental capacity. An attorney must act in the best interest of the donor, following any instructions and considering the donor’s preferences when making decisions.

They must follow the Mental Capacity Act Code of Practice which establishes five key principles:

  1. A person must be assumed to have capacity unless it’s established he or she lacks capacity.
  2. A person isn’t to be treated as unable to make a decision unless all practicable steps to help him or her do so have been taken without success.
  3. A person isn’t to be treated as unable to make a decision merely because he or she makes an unwise decision.
  4. An act done, or decision made, under the Act for or on behalf of a person who lacks capacity must be done, or made, in his or her best interests.
  5. Before the act is done, or the decision is made, regard must be had to whether the purpose for which it’s needed can be as effectively  achieved in a way that is less restrictive of the person’s rights and freedom of action.

Legally binding duties

A donor with mild dementia might be provided with the means to purchase items for daily living, but otherwise their financial matters are  undertaken by their attorney. The code of practice applies a number of legally binding duties upon attorneys, including the requirement to keep the donor’s money and property separate from their own or anyone else’s.

Anyone aged 18 or over who has mental capacity and isn’t an undischarged bankrupt may act as an attorney. A trust corporation can be an attorney for a property and financial affairs LPA. In practice, attorneys will be spouses, family members or friends, or otherwise professional contacts such as solicitors.

Replacement attorney

Where joint attorneys are being appointed, the donor will state whether they act jointly (the attorneys must make all decisions together), or jointly and severally (the attorneys may make joint decisions or separately), or jointly for some decisions (for example, the sale of the donor’s property) and jointly and severally in respect of all other decisions.

An optional but useful feature of the LPA is the ability to appoint a replacement attorney in the event the original attorney is no longer able to act. The donor can leave instructions and preferences, but if they don’t their attorney will be free to make any decisions they feel are correct. Instructions relate to things the attorney should or shouldn’t do when making decisions – not selling the donor’s home unless a doctor states the donor can no longer live independently or a particular dietary requirement would be examples.

‘Certificate provider’

Preferences relate to the donor’s wishes, beliefs and values they would like their attorney to consider when acting on their behalf. Examples might be ethical investing or living within close proximity of a relative.

The following apply to both forms of LPA. A ‘certificate provider’ must complete a section in the LPA form stating that as far as they are aware, the donor has understood the purpose and scope of the LPA. A certificate provider will be an individual aged 18 or over and either, someone who has known the donor personally well for at least two years; or, someone chosen by the donor on account of their professional skills and expertise – for example, a GP or solicitor.

Concerns or objections

There are restrictions on who may act as a certificate provider – these include attorneys, replacement attorneys, family members and business associates of the donor. A further safeguard is the option for the donor to choose up to five people to be notified when an application for the LPA to be registered is being made.

This allows any concerns or objections to be raised before the LPA is registered, which must be done within five weeks from the date on which notice is given. The requirement to obtain a second certificate provider where the donor doesn’t include anyone to be notified has now been removed as part of the Office of the Public Guardian (OPG) review of LPAs.

Court of protection

A person making a LPA can have help completing it, but they must have mental capacity when they fill in the forms. Otherwise, those seeking to make decisions on their behalf will need to apply to the Court of Protection for a deputyship order. This can be expensive and time consuming and may require the deputy to submit annual reports detailing the decisions they have made.

There are strict limits on the type of gifts attorneys can make on the donor’s behalf. Gifts may be made on ‘customary occasions’, for example, birthdays, marriages and religious holidays, or to any charity to which the donor was accustomed to donating. Gifts falling outside of these criteria would need to be approved by the Court of Protection. An example would be a gift intended to reduce the donor’s Inheritance Tax liability.

For more help and guidance on Lasting Powers of Attorney, please get in touch.

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Why have a Lasting Power of Attorney?

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Lasting Powers of Attorney (LPA)

Setting up an LPA is vital to ensure that you have a trusted individual who can manage your affairs when you are no longer able to do so yourself

  • 33% of of UK adults know how to use an LPA effectively, despite the fact that 95% of UK adults are aware of LPAs
  • 37% of Britons have put an LPA in place, despite the fact that 74% deem LPAs necessary
  • 41% of married couples have put in place an LPA, but 24% have no plans for doing so
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Lasting Powers of Attorney

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Lasting Powers of Attorney

Figures show that only 14% of UK adults have some form of Lasting Power of Attorney (LPA) in place. Estate Planning Specialist, Michelle Barker, explains what an LPA is and what could happen if you do not have one in place.

For more information on the benefits of putting an LPA in place, read our article on “Why do I need a Lasting Power of Attorney?”

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Why do I need a Lasting Power of Attorney?

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It is critical to consider the potential consequences of not having a Lasting Power of Attorney (LPA) in place. Many people assume that their loved ones or close relatives will automatically have the authority to make decisions on their behalf. However, this is not the case, and without an LPA, those close to you will not have the legal authority to handle your financial affairs, health decisions and welfare.

Setting up an LPA is vital to ensure that you have a trusted individual who can manage your affairs when you are no longer able to do so yourself. It is essential to think about these scenarios in advance and plan accordingly by setting up an LPA. This legal document will ensure that your wishes are respected and carried out, regardless of your capacity to make sound decisions.

What is an LPA?

Despite the fact that 95% of UK adults are aware of LPAs, a recent study has revealed that only one in three (33%) actually know how to use it effectively, leaving a considerable proportion at risk of costly and time-consuming measures if they were to lose their spouse [1].

An LPA is a legal document that enables you to delegate decision-making authority to one or more trusted individuals to manage your financial matters, property affairs, health and welfare. You can set up an LPA at any time, provided you meet the age requirement of 18 years and have the mental capacity to make sound decisions.

LPA benefits

There are several benefits to having an LPA, including assistance in temporary situations such as hospitalisation or travel abroad, where you may need help with daily tasks like paying bills. It is also beneficial in long-term situations where you want to plan for the unexpected or have been diagnosed with an illness like dementia that may affect your decision-making abilities in the future.

According to the research, although three-quarters (74%) of Britons deem an LPA necessary, only 37% of them have actually put it in place. In contrast, around three-quarters (76%) of people in relationships have discussed Wills and Trusts with their spouse.

Same-sex married couples

The research also highlighted that less than half (41%) of married couples have enacted LPA, and a quarter (24%) have no plans for doing so, which suggests that many couples view this measure as unnecessary, and often mistakenly believe that LPA is automatically granted to married couples.

Notably, this issue disproportionately affects same-sex married couples, where awareness of the importance of LPA is higher than the population average (87% compared to 76%), but uptake is lower (30% compared to 41%).

Estate Planning Services

Do you need advice and expertise on every aspect of your estate? We understand the importance of putting the right planning in place for the future. We’ll help you organise your affairs and plan for the future. To find out more, speak to us today.

Source data: [1] https://adviser.scottishwidows.co.uk/assets/literature/docs/2023-03-power-of-attorney.pdf

Important information: This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. Powers of attorney/will writing and trusts are not regulated by the financial conduct authority.

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What does Lasting Power of Attorney mean

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Putting a Lasting Power of Attorney in place whilst you have full capacity to make your own choices and decisions gives:

  • Both you and your family clarity
  • The ability to take action
  • Complete peace of mind

For more help and guidance on creating a Lasting Power of Attorney, please get in touch.

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