General Housekeeping
We take a holistic approach to financial planning which means making sure every aspect of our clients’ financial requirements are considered and advise on each aspect of this where possible. We are the first to hold our hands up however to say we are not experts in everything and there are times that we need to refer our clients to other professional services firms to help complete the full service they require. At Five Wealth we have an extensive network of professional contacts that we work with and trust to provide our clients with a high quality service in their areas of expertise, including (but not limited to) solicitors, accountants and mortgage brokers.
Below are some of the main areas we look at as part of our clients’ financial planning “housekeeping”.
Wills
Creating a Will is one of the most important steps in ensuring that your assets pass on to those you wish to benefit from your wealth after your death. If you die without a Will in place, the estate is distributed under intestacy rules – more often than not this means that assets are not divided up as you would have wished or there are unintended tax consequences which could easily be avoided with proper planning.
A properly written Will can also help to protect family wealth or business assets through the use of trusts. A conversation with a solicitor that specialises in these areas can be worthwhile and can help ensure your wealth is passed on in the way you want it to be.
Where large estates are involved, a Will can help to distribute assets tax efficiently, making the best use of the available tax allowances such as the Nil Rate Band for Inheritance Tax. This could help maximise the value you are able to pass on to your heirs.
We have strong relationships with a number of Private Client teams and are always happy to put our clients in touch with a suitable solicitor if they wish to create or review their Wills.
Lasting Power of Attorney
A Lasting Power of Attorney (LPA) is a legal document that allows you (as the “donor”) to appoint one or more “attorney(s)” to make decisions on your behalf. Many people associate LPAs with taking control over a person’s assets when they are elderly and perhaps no longer able to make their own decisions, for example if they suffer from dementia. LPAs however can provide control and peace of mind over who takes control of your property in the event of an accident or illness that means you are no longer able to make your own decisions at any time in your life. An LPA provides the ability to appoint someone you trust to look after your affairs should you need them to – without this in place, you have to apply to the Court of Protection who can then appoint a “deputy” to act for you. This can however be a long and costly process so it is preferable to put an LPA in place whilst you can.
There are two types of LPA and you can choose to make one type, or both:
In both cases, the LPA must be registered with the Office of the Public Guardian (OPG) before it can be used.
It can be difficult to think about what might happen if you have an unexpected accident or illness and many people put off doing anything to prepare for an unexpected event. An LPA can provide peace of mind should you lose the capability to manage your own affairs and we consider it to be an important part of our clients’ financial planning “housekeeping”.
Pension Death Benefit Nomination
Whilst a Will is important to set out how you would like your assets to be distributed on your death, it does not apply to pension funds. A separate Death Benefit Nomination, or Expression of Wishes, needs to be completed for each pension you hold to make sure that the funds can pass on to your chosen beneficiaries.
The nomination provides guidance to the pension provider of who you would want your pension funds to be paid to on your death. This can be anyone you want including family or friends, and can be changed at any time. Many providers now also allow you to give additional details of who you wish to receive the funds if they are unable to pay out to your chosen beneficiaries (for example if they have pre-deceased you). This allows for greater flexibility in passing on your pension death benefits in as tax efficient a way as possible.
We always make sure to cover this within our clients’ pension planning and will review their chosen nomination regularly to ensure it is up to date. It is often the case however that no nomination is set up on their existing or old pension schemes, or on workplace pension schemes. Many providers allow you to update your beneficiaries’ details online – it is worth checking your death benefit nomination regularly to make sure you have one in place and it is in line with your current wishes.
Tax
If you are self-employed or a high earner, chances are you already complete a tax return. There may also be a need to report tax to HMRC if you have rental income or taxable dividends on shares or an investment portfolio. If you are doing your tax return yourself, it is important to be aware of the deadlines for submission to HMRC – 31st October after the tax year end for paper returns, and 31st January if you complete a return online.
Sales from investment products can result in a tax charge meaning you have to complete a tax return where you may not normally do so. This includes sales from shares/investment funds that exceed the Capital Gains Tax (CGT) allowance (£12,300 for 2022/23), and withdrawals from investment bonds that result in a chargeable gain.
If you are married or in a civil partnership, it may be worthwhile restructuring investments before making a sale to maximise the use of your tax allowances – assets can be passed between spouses or civil partners tax free, which can mean you are able to use both partners CGT allowances or unused income tax allowances.
You should also make sure you are claiming tax relief on your pension contributions if you are a higher or additional rate taxpayer as you could be due a rebate of 20% – 25% of your gross contributions each tax year.
Whilst we have a broad working knowledge of legislation, Five Wealth Ltd are not specialist tax advisers and you should speak to your accountant if you require any specific tax advice. Our professional network includes a number of tax advisers and accountants, and we are always happy to refer clients to one of our contacts if they are looking for advice in these areas.
Mortgages
We often get asked if we advise on mortgages when clients are reaching the end of their current fixed term or looking to buy a new home. Unfortunately the answer to this is no, but we work with a number of mortgage brokers to help our clients find the best mortgage products for them.
It can be helpful to speak to a mortgage broker to find out how much you could borrow or how much your monthly repayments might be. Many brokers have access to lower mortgage rates and products that are not available on the open market, so you could benefit from applying through them.
Reviewing your mortgage regularly could help save you money on your monthly repayments, with some brokers offering an ongoing service to keep you updated on the latest rates and products available.
The information featured in this article is for your general information and use only and is not intended to address your particular requirements. Five Wealth Ltd offer independent financial advice to a wide variety of clients, at various stages throughout their financial planning journey. If you feel that our expertise would be beneficial to you, please get in touch.
The information contained within the article is based upon our understanding of HMRC legislation and practice at the current time. Allowances, reliefs and other tax legislation is subject to change and depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Will Writing, Tax Advice or Legal services.