At this stage, your financial priorities will probably involve childcare costs and/or current or future school or university fees, paying off your mortgage (and perhaps your own student loans) and saving for a comfortable retirement.
But there are also some important estate planning steps you can take that make sense now as well as for the future.
- Put in place a well-drafted and flexible will that makes best use of the tax-free threshold for inheritance tax, currently £325,000 per individual. Above this figure, inheritance tax is levied at 40 per cent. A new main residence nil rate band will be phased in from 2017, which will reach £175,000 by 2020-21 and sit on top of the £325,00 allowance, but it only applies when a home is left to direct descendants (children or grandchildren).
- If you and your partner are not married or in a civil partnership and you die without making a will, under the laws of intestacy your partner will inherit nothing from your estate. The only way you can ensure your partner inherits is to make a will.
- Making a will is less expensive than you might think and provides valuable peace of mind for you and your family that everything possible has been done to make life easier for your loved ones, in case you are no longer around. Once your will is in place, it’s a good idea to review it at least every five years and in the event of significant family or financial events, such as the birth of another child, a separation or divorce or the receipt of an inheritance.
- You will want to give your family financial stability if anything happens to you so you will almost certainly have in place a life insurance policy. Making sure that this is written in trust will take its value out of your estate for inheritance tax purposes, potentially saving £40,000 on a £100,000 policy if your estate is worth more than £325,000.
- You can also use your will to set up trusts to protect assets for your children, and provide for them financially, choosing appropriate trustees to look after any inheritance until your children reach an age when you feel they will be old enough to manage it wisely.
- Trusts can also be useful where there are children from a previous relationship, helping you to strike an appropriate balance between your different family members.
- You can also use your will to appoint guardians to care for and make decisions regarding your children in the event that both parents die before their 18th birthday.
- Alongside your will, it’s sensible to set up a Lasting Power of Attorney (LPA). This enables you to appoint a trusted person or persons to make decisions on your behalf about your health and welfare and your property and finances in the event that you lose the capacity to do so for yourself.
- While it may never be used, an LPA avoids the need for costly and time-consuming legal proceedings to unfreeze the assets of someone unable to manage their own affairs in the event of a debilitating illness or injury.
For more information on our estate planning services, please contact us.
