4 important things you need to consider for Dying Matters week

Discussing your mortality with friends and family is never easy. That said, explaining what you would like to happen with your wealth after you pass could make the process of dealing with your estate more straightforward.

This in turn could reduce stress for your loved ones at an already challenging time. Just as importantly, talking about your wishes could also help to reduce any arguments between friends and family over your belongings when you pass away.

As this is Dying Matters week (6-12 May 2024), which promotes talking to family and friends about your wishes when you pass away, read on to discover four important topics you should consider before discussing your wishes with those closest to you.

1. Gifting to mitigate your Inheritance Tax liability (if you have one)

Often referred to as the most unpopular Tax of all, Inheritance Tax (IHT) is usually charged at 40%. The tax is not liable on assets up to the value of your nil-rate band (NRB) threshold, which in 2024/25 is between £325,000 and £1 million, depending on your circumstances.

This means that assets over and above your NRB are likely to be exposed to the tax, which could significantly reduce the amount you’re able to leave to loved ones. The good news is that the Government provide ways for you to reduce your estate’s IHT, and one way it does this is by allowing you to make gifts to reduce the value of your estate.

In 2024/25, you’re allowed to make the following gifts:

  • up to £3,000, which can be given to one person or split between many
  • £250 to everybody you know, although you cannot combine this with other gifts
  • any amount from your income as long as doing so doesn’t reduce your standard of living
  • £5,000 to a child or £2,500 to a grandchild if they’re getting married. You can also gift £1,000 to anybody else as a wedding gift
  • As much as you want to charities or good causes.

Talking to your loved ones about the gifts you would like to make will help them understand your reasoning, and allow you to explain how you would like your gift to be used.

2. Who could inherit your pension

As pensions don’t normally become part of your estate, they ‘re not liable to IHT. This means they can be a very tax-efficient way of passing your wealth to family and friends.

To leave your pension, or what’s left of it, to someone, you’ll need to contact your pension provider to complete an “expression of wishes” form. If you don’t, the person you would want to receive your pension may not do so.

Worse still, if you had previously filled in an expression of wishes and left your pension to someone else, and have since changed your mind, your pension will still go to them. This could be a particular risk for those who were in a marriage and are now living with someone else, as not changing the expression of wishes will result in the ex-spouse receiving the pension.

3. Creating a list detailing your assets

In order to deal with your estate, your family will need to understand what investments, assets and cash savings you have, and where they all are. Without a central list, this could be difficult.

By cataloguing your assets and putting it in one place, you’ll be making life easier for those who’ll be dealing with your estate. That said, ensure you store it in a safe and secure place, something your solicitor or financial adviser may be able to help with.

Creating a list also reduces the risk of assets being missed and lost forever. The assets you’ll need to record include:

  • bank accounts
  • art or valuable collectables
  • pensions
  • investments
  • trusts
  • any life cover that you have.

Once you have created the list, tell loved ones where it is and how to access the information. Always remember to update it whenever your assets, investments or cash savings change significantly.

4. Don’t forget to create a will 

While you might assume your wealth will go to your nearest and dearest if you don’t have a will when you die, the reality could be very different. Without an up to date will, your wealth will be subject to ‘intestacy rules’, which means your assets will be distributed using strict criteria.

As a result, your wealth may not go to the people you would want it to even if they’re dependent upon you financially. Indeed, the intestacy rules may mean that your assets go to someone that you’d rather they didn’t go to.

This risk is particularly real for couples who have chosen not to marry, as they don’t enjoy the same rights as married couples or those in a civil partnership. If you don’t have a will that names your partner, it’s likely that they won’t be entitled to anything from your estate.

Get in touch

Discussing your death with loved ones, and what you would like to happen to your assets, may be something you would like to do, however fear it could be difficult. This might be something a financial adviser can help with, as they can act as a third party who will find it easier to explain your thinking and how it could benefit family and friends.

As all of AFH’s advisers are also estate planners, they’re best placed to help you with this. In addition to this, they can assist you in creating a will or setting up trusts to ringfence your assets for future generations.

If you would like to find out more about how we could help you, please contact us on 01527 577775 or speak to one of our advisers, as we’d be happy to help.


Friday 10 May 2024