The importance of planning for your family’s financial future

Almost a third of adults in the UK have not made financial arrangements to protect their families upon their death, according to research by Lycetts. Furthermore, 34% lack an understanding of how Inheritance Tax (IHT) could impact their loved ones.

Now is an opportune time to evaluate your financial assets and plan for the future. Lycetts Financial Services advise on the key considerations:

Asset analysis: The fundamental starting point for comprehensive financial planning is to conduct an audit of your assets. With support and guidance from an experienced financial adviser, it’s an opportunity to ensure you understand your full financial circumstances.

Inheritance Tax: The current “Nil Rate Band” (NRB) allows for the first £325,000 of an estate to be exempt from Inheritance Tax. If a family home is passed to a direct descendant, the NRB is enhanced by an additional £175,000, totaling £500,000. For married couples passing assets to each other, the NRB can potentially reach up to £1 million on the last to die. However, rising property values often exceed these thresholds, subjecting assets to a 40% tax rate.

Pensions for long-term financial support: Pensions are tax-efficient and remain unaffected by Inheritance Tax. Starting early is key, ensuring a substantial fund to support spouses and families. Professional guidance will maximise the benefits of pension planning.

Potentially Exempt Transfers (PETs): These enable unlimited financial gifting without Inheritance Tax liability, provided the giver survives for seven years. However, gifts may be subject to Capital Gains Tax (CGT) on transfer. Careful consideration is crucial, taking into account future financial needs, life expectancy, and the unpredictability of young beneficiaries.

Life Insurance: This serves as a crucial short-term protection measure. Inexpensive and providing financial security in unexpected circumstances, it safeguards loved ones. As your children mature and financial needs become clearer, exploring PETs or other Inheritance Tax planning strategies becomes more viable.

Act now: Securing your family’s financial future requires a proactive approach. With careful consideration of Inheritance Tax, Potentially Exempt Transfers, Life Insurance, and Pensions, you can navigate the complexities of financial planning.

A 2023 YouGov survey revealed only 31% of resolutions were kept, but arranging your finances is one resolution worth sticking to.

Lycetts Financial Services provide expert support and specialist guidance that will ensure a robust strategy tailored to your unique circumstances. Please contact us and one of the team will be happy to help you.