1 Set financial goals and do an annual check up
Consider your personal financial priorities:
• What do you want to achieve in your lifetime?
• What lifestyle would you like in retirement?
• What would you like to be able to leave your family?
• What can you do now to help you prepare and get there?
Your plans and priorities are likely to change throughout your lifetime. Review your finances and goals annually and adjust accordingly to keep on track.
2 Write a Will and keep it up to date
If you have not written a Will, now is the time to do so. If you have young children, you may wish to appoint guardians in your Will.
For those who do already have a Will - when did you last review it? Have you had any changes to your personal circumstances since it was written?
3 Consider a Lasting Power of Attorney (LPA)
An LPA is a legal document and is a safe way of maintaining control over decisions should you no longer be able to make them yourself.
There are two types of LPAs, ‘Property and Financial Affairs’ and ‘Health and Welfare’. We recommend you sign both versions as it is vital your finances and future welfare are covered to protect your best interests.
4 Review, update and invest in your pensions
Review your state pension
A large proportion of individuals are unaware of how much they may be entitled to under the current new state pension or previous entitlements and what date they would qualify for it. Check this for free at: www.gov.uk/check-state-pension.
Collate your old pension arrangements
Many individuals have old pension policies, perhaps from previous employers, to which they no longer contribute. These accumulated benefits could make a real difference towards funding your retirement – you can track these down using the government’s free ‘Pension Tracing Service’.
Update your pension beneficiary forms
Where the benefits under a pension are paid at the discretion of the pension trustee they do not usually form part of your estate for inheritance tax purposes and are not usually inherited under your Will.
A tax advantageous beneficiary’s pension may be obtained by ensuring funds remain in the pension wrapper and an ‘Expression of Wishes’ form should always be kept updated.
Invest in your pension
Investing in company and/or private pensions throughout your lifetime is one of the most effective and reliable ways to plan for and fund your retirement. Review your pension fund regularly. Will this enable you enough funds for the retirement you are aiming for? If not, consider investing more or finding alternative funding methods.
5 Review and consider your insurance policies
Review your existing policies regularly to ensure you are adequately covered in the event you have to claim. If you cannot locate your original policy documents, contact your insurance provider.
Check if they are written in trust. Where they are it may mean that when funds
are paid out, they may not automatically form part of your estate and may not
be subject to inheritance tax.
If you do not already hold life insurance, critical illness or income protection these could serve to protect you and your family.
6 ‘Future plan’ your role in a business
We recommend that those who own all or part of a business consider its future plans, their ambitions as part of the business, and how a future exit might be structured. This will help ensure that both the business and you are ready for the exit, maximising value where appropriate, and minimising the various tax exposures.
Business owners should also consider the formalities associated with the
business (for example a partnership agreement or shareholders’ agreement) and how this interacts with their personal affairs, in particular their Will. There are significant tax exemptions for qualifying business assets, and these should be considered when drafting your Will and business documents.
You may wish to consider a Business Lasting Power of Attorney and Key person insurance to ensure your business interests are protected.
7 Understand your inheritance tax (“IHT”) exposure
Complete a periodic review of your financial position from an inheritance tax (IHT) perspective and understand your current potential exposure. Consider lifetime giving as a way to mitigate your estate’s liability sooner rather than later to start the seven-year period for a gift to be exempt from IHT, bearing in mind your ongoing financial needs. You may also wish to consider the tax benefits of making charitable donations whether during your lifetime or on death.
Make sure you understand the tax implications before gifting assets to family or friends. IHT, capital gains tax and stamp duty land tax may all be relevant on a non-cash gift. For cash gifts only IHT needs to be considered.
Contact us today so that together we can discover what steps you need to take to achieve your personal financial goals whether you are accumulating or distributing wealth.
The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice. You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.
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