Do you need to spring clean your legal affairs?

Do you need to spring clean your legal affairs?

Spring is finally here, and whilst traditionally a time associated with spring cleaning your house, it is also a good time to check that your legal affairs are in order. When was the last time you updated your Will? Do you have Lasting Powers of Attorney? Jessica Pointing explores the various steps you can take to spring clean your legal affairs below.

Update or make a Will

A Will is one of the most important documents you will ever make. The intestacy rules will determine what happens to your estate if you do not make a Will, and these will often have undesirable consequences.

If you already have a Will, it is important to review it regularly and especially after any major lifetime event, such as getting married or divorced, having children or inheriting assets. It is also sensible to review your Will around every three to five years even if no such event has taken place, to ensure that it does still accurately reflect your wishes.

Put in place Lasting Powers of Attorney (LPAs)

LPAs are legal docu­ments which allow you to choose a trusted person or persons to make decisions for them when they lack the mental capacity to make the decisions themselves.

Although often considered as not necessary until older age, anyone over 18 can (and indeed should) put LPAs in place. Capacity can be lost due to a whole range of events that can happen at any age, such a car accidents or strokes.

If you need someone to act on your behalf and you do not have LPAs in place, the alternative is for an application to be made to the Court of Protection for a Deputyship order which is a lengthy and costly process and can result in your loved ones being in ‘limbo’ and having no ability to manage your affairs for you for many months.

Obtain tax planning advice

With the freezing of inheritance tax (IHT) allowances, and the reduction of capital gains tax exemptions, capital taxes are impacting an ever-increasing number of people. There are ways to reduce exposure to these taxes, but early advice and planning are crucial.

For example, are you using your annual exemption and making the most of the other lifetime exemptions available? Do you understand how the nil rate band and residence nil rate band allowances work and how they will apply to your estate? Many people simply do not take advice early enough to take advantage of the allowances and exemptions available.

Another key time to consider tax planning is on receipt of an inheritance. If you have inherited in the last two years and you do not require all of the inheritance you have received, you can execute a deed of variation to redirect your inheritance (or a share of it) elsewhere which prevents it from forming part of your estate. This must be done within two years of the date of death of the person from whom you have received the inheritance, so taking early advice is essential.

Other practical steps

• Check your nominations – there are assets that do not pass via your Will, such as death in service benefits and pensions. You are generally able to nominate who should receive these on your death, and you should ensure that your nominations in respect of both of these are up to date.
• Consider your life insurance – if you have life insurance, it should ideally be written into trust to prevent it from forming part of your estate for IHT purposes. You should take advice on whether this is an appropriate option for your situation.
• Keep a schedule of your assets – would your loved ones know where to look for details of your assets if you were to lose capacity or pass away? It is a good idea to keep a schedule of your assets listing account numbers and other identifiable information that would assist your loved ones with locating and dealing with the asset. This schedule should be reviewed regularly to ensure it is up to date, and stored in a location known to your loved ones. You could also store a copy with your Will and LPAs.
• Discuss your wishes with your loved ones – although it is difficult to think about, you should have conversations with your loved ones about uncomfortable topics such as your funeral wishes and your wishes in respect of end of life care. Knowing that they are acting in accordance with your wishes will help to ease the burden on your loved ones of making these difficult decisions in the future.

Contact us

If you have any questions about the points raised above, or any other aspect of Wills or tax planning, please get in touch with Jessica Pointing at e. jessicapointing@rixandkay.co.uk or t. 01825 745 361.