The importance of keeping wills and intergenerational planning up to date

In a world where legislation is changing at an alarming rate, we are seeing an increasing number of clients coming to us, who are facing significant problems and/or financial loss due to ineffective or out of date death planning.

There are substantial risks in not reviewing financial and estate planning documentation regularly. Keeping your documents up to date, valid and relevant (and in a safe, accessible place) is essential. If your overall planning is also not thought through and arranged in a logical, sensible and effective way you could be opening your estate to a number of unintended consequences and difficulties and in some cases your legacy may not even end up where you intended it to go.

We have summarised below just some of the very real and costly examples that we (and others in our industry) have encountered. All of these could have had a better outcome with proper planning, sense checking and regular review:

Not putting life insurance policies and pension arrangements under appropriate trust or nomination

Mr X had sensibly taken out life cover to protect his family in the event of his death. He had however not put the policy in trust (not because he hadn’t been advised to do so but because he had not got round to filling the form out).

As a result, the life assurance benefits were paid directly into his estate, suffering a 40% Inheritance Tax (IHT) charge which could have been avoided. Had the trust been in place, the proceeds could also have been paid out much quicker (no need for probate) putting the funds in the right hands at a time when they were needed the most.

No pension nomination

Since April 2016, on death before age 75, beneficiaries are able to draw down the benefits of a personal pension plan tax-free. Where the beneficiaries are not a spouse or aged over 23 however, they need to be named and nominated. Failure to do this has led to payments being paid into an estate, again suffering an unnecessary 40% IHT charge.

Personal pension- return of contributions only on death

Whilst modern, personal pension plans allow for the return of full value to be paid out on death (tax-free before age 75) some older plan rules only offer return of premiums, thereby potentially depriving the beneficiaries years of significant investment growth. Transferring the fund to a modern plan before death can prevent this (taking care to weigh up any attaching benefits that the older plans may include).

Incorrectly signed will

A solicitor accidentally allowed a husband to sign a wife’s will (and vice-versa). Although the matter was ultimately resolved, the family had to go through a lengthy legal process at significant cost and delay to distribution of assets.

Safeguarding important documents

A will was lost (or possibly accidentally destroyed) because it was not kept in a safe place. The surviving spouse is now embroiled in a complicated and lengthy legal process to try and validate an unsigned copy of the will to prevent the estate from being treated as intestate (which will result in large tax liabilities and a large part of the estate passing to the wrong people).

Home-made will or content not thought through

We have come across a number of problems where people either get their Will wrong due to lack of knowledge, change of circumstance and/or legislation or by not thinking through potential scenarios. Over the years we have seen many cases where outcomes could have been far better if things had been thought through and arranged a different way. We have also seen cases where badly worded wills have led to a lot of difficulties.

No guardians appointed

For those with dependent children it is essential that guardians are appointed. The only way to do this is through a valid will. Without this, orphaned children can be placed into protective care for months (or even longer) whilst guardianship is argued through the courts.

Talk to your loved ones

No one can take away the upset and distress when someone close to you dies but you can help your survivors with some of the dilemmas that they face. Such simple things as telling them what your funeral wishes would be or which of your personal possessions  are important to you (and which aren’t) can help with what, otherwise, can be agonising decisions.

No power of attorney

We would recommend that everyone over the age of 18 considers setting up power of attorney (POA). We hope that you will never need it but none of us know what might happen or when. In the event capacity is lost (through illness or accident) continuing to run financial matters becomes extremely difficult and problematic without an appointed Attorney. Even joint accounts are now being frozen by banks and financial institutions, where only one party is affected.

Whilst there is a cost to setting up a power of attorney, this is nothing in comparison to the fees charged by the Office of the Public Guardian to agree and administer transactions where no POA exists (not to mention the time and aggravation).

Summary

We strongly recommend that you review your wills, trusts and any other similar planning on a regular basis. A little care and forethought now can make all the difference should the worst happen. It is very easy to get things wrong even for the silliest of reasons.

CBW wealth

We would be happy to help you review whatever arrangements you have and use our experience to advise you how you might structure or restructure these to best deliver what you want to achieve in an effective, workable and sensitive manner.

About the Authors

Tony Lesser

Partner & Managing Director of CBW Financial Planning +44 (0)20 7309 3843

Chris Clayton

Partner & Director of CBW Financial Planning +44 (0)20 7309 3821