Five steps to passing on your wealth


In the final blog in our wealth management series, tax partner Tony Medcalf discusses the issue of passing on your wealth and what you’ll need to consider.


Individuals build their wealth for the benefit of loved ones, but passing it on requires meticulous planning and considerable foresight. Here we have pinpointed five ways of ensuring your wealth ends up where you want it.


1. Assess your estate and your lifestyle needs


Evaluate the value of your estate as the sum of all your assets and relate this to your lifestyle requirements.
Ask how your needs might be covered by your sources of income and capital drawdown. Only then are you in a position to start your inheritance tax planning.


2. See your Will as an end-product, not a starting point


Make a Will and keep it updated, taking into account the state of your assets and broader economic factors. Your Will is clearly vital to the transfer of your wealth, but a Will should be the end-product of all other planning activity, not a starting point.


3. Consider the impact on your children


Many individuals are concerned about how their children will be affected by a sudden influx of wealth, especially the impact on their work ethic. As a result, the financial education of children is increasingly common. This involves them developing relationships with advisors, and is one of the main reasons why trusts are used so widely.


4. Write your life insurance and pension in trust


Placing your life insurance policy and/or pension fund ‘in trust’ takes the insurance cover or pension out of your estate, and avoids pushing the overall value closer to the inheritance tax threshold. Also, because the insurance policy or pension fund is not part of your estate, the assets are immediately available to your loved ones, without being delayed by legal procedures.


5. Gift property to your children – or grandchildren


Gifting your property to your children is an effective way of passing on your wealth, although the seven-year rule means you must survive for this period before the gift becomes tax-free. Grandparent settlements or trusts are also an efficient wealth transfer tool. These enable you to gift any assets, including property, to grandchildren under 18, tax-free.