Whilst we probably don’t like thinking about it, the possible loss of mental capacity and the inevitability of death could leave your family or beneficiaries with challenges if you haven’t taken steps to put your personal affairs in order.
There are some key steps you can take that will assist your attorneys or executors to manage your personal and business affairs, your assets and your property.
Our expert team regularly help people put their affairs in order and they have put together some points to consider.
1. Have a will professionally drafted for you
A surprisingly large proportion of the UK population do not have a will in place and those that do have a will in place may not have updated it for many years.
Your will is your final statement and will set out your wishes following your death. It may include instructions for your funeral, the division of assets or care arrangements for any of your dependants. Without a will, you will die ‘intestate,’ which brings its own challenges. Our website explains the laws of intestacy in more detail, so please visit hethertons.co.uk for information.
It is very important to review your will on a regular basis, particularly if your circumstances change, for example, if you marry or have children.
2. Set up Lasting Powers of Attorney
A lasting power of attorney (LPA) allows you to give another person or persons (the attorney or attorneys) the right to make decisions for you, either with your agreement or if should you lose mental capacity.
You can create an LPA which gives your attorney(s) the authority to make decisions regarding your finances and property.
You can also create an LPA which gives your attorney(s) the authority to make decisions regarding your health and welfare, care and treatment. Your attorney(s) can only make decisions regarding your health and welfare if you no longer have the capacity to make those decisions for yourself.
If you have not set up an LPA, your family may need to obtain a Deputyship Order from the Court of Protection, which takes a long time and is very expensive.
3. Business Planning
If you own or hold shares in a business, it is worth considering what will happen in the event of your death and discussing this with a professional adviser.
You may also wish to set up an LPA for business decisions, appointing one or more persons with knowledge of your business, to act on your behalf and make business decisions should you lose the capacity to make those decisions for yourself.
4. Key Person Insurance
Key person insurance is designed to help a business insure itself against the financial loss it may suffer if a key person in the business died, was terminally ill or was diagnosed with a specific critical illness.
Proceeds from the insurance policy can be used for recruitment of replacement employees, or, if necessary, to pay off debts, distribute money to investors, pay severance to employees and may also be used to close the business down in an orderly manner.
As part of wider planning around the loss of a key person, the insurance can be used to buy shares from family members who may inherit them, but have little interest in the business itself.
5. Inheritance Tax
Although the UK now offers a fairly generous allowance, which means that many people do not have to pay inheritance tax, for a significant number of higher value estates tax is still payable.
Individuals have an inheritance tax allowance of £325,000. This is known as the nil rate band. In addition, for those individuals who own or have owned a home and leave their home or their share in their home to direct descendants, there is an additional allowance of £150,000. This is known as the residential nil rate band.
Any unused allowances can be transferred to the surviving spouse or registered civil partner, which could mean that a couple could pass on assets worth up to £950,000 free of tax.
Seeking professional assistance with your personal affairs can be invaluable.
To find out how Hethertons Solicitors can help you, call 01904 528200 and ask to speak to one of our solicitors in our Private Client department.