Wills: Britons reminded of ‘key’ document to help save thousands | Personal Finance | Finance

With inflation surging and energy bills on the rise, many Britons may feel a lot of stress as the financial impact takes hold, however an expert has explained how one can minimize this stress and limit their tax exposure at the same time. Les Cameron, financial expert at M&G Wealth spoke exclusively to Express.co.uk about the importance of having a Will.

A will or testament is a legal document that expresses a person’s wishes as to how their property is to be distributed after their death and as to which person is to manage the property until its final distribution.

He said: “Making a will is vitally important. Practically, it makes things easier when you’re gone as it makes your wishes known to your descendants.

“If you die without a will your money is distributed according to the laws of intestacy meaning your money could go to people, you don’t want it to.

“For some people, creating a trust in their will is key so that they can retain control of their money once they’re gone.

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“This is useful perhaps where there are complex or blended family situations. It’s good practice to review your will every five years, or sooner if you have a significant life event such as getting married or divorced.

“It’s also a good idea to keep any pension ‘expression of wish’ forms alongside your will as if something has happened to make you change your will you might also want to send an up-to-date expression to your pensions scheme.”

In most cases, any pensions people may have can be passed outside of their estate meaning it won’t be subject to inheritance tax.

However, for this to be the case, the pension scheme administrator would need to have discretion as to who the benefits are paid to.

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Mr Cameron continued: “Ultimately making a financial plan is important to ensuring that your money goes to whom you want it to and at a timing of your choosing in a way that minimizes your tax exposure.

“With around 30-50 percent of inheritance tax (IHT) paying estates comprising of cash, shares and life assurance policies, much of the IHT people pay is simply down to a failure to financially plan in advance.

“The amount of IHT collected in the UK is not an overly large amount compared to other taxes such as Income Tax and National insurances but, for the around four percent of estates that pay IHT, the average bill is just under £ 200,000.”

Inheritance tax receipts jumped to £ 5.5billion between April 2021 and February 2022 according to recent data released by HMRC. This is £ 0.7billion higher than in the same period last year.

The increase may be attributable to rising property prices pushing more estates above the threshold for inheritance tax, however, it should also be a “wake-up call” for anyone putting off their estate planning.

Mr Cameron suggested that Britons make the necessary arrangements to avoid falling into the IHT trap, and spend time planning how to give assets out in the most tax efficient way.

He continued: “The way to minimise IHT bills is to make sure your estate is either within your tax-free IHT allowance, is given to someone who is exempt such as your spouse or a charity or to hold assets that qualify for IHT exemption ( business relief schemes).

“Often a combination of these things will be desirable.

“For all of these things to happen, forward planning is essential as, in some cases, it takes seven years for financial gifts that are made to leave your estate.”

The good news is that there are a number of ways that people can legitimately reduce, or even potentially wipe out an estate’s inheritance tax liability.

This means that more can be passed on to loved ones without the government taking a sizeable cut and without losing control of assets during the person’s lifetime.

He concluded: “Given the size of potential IHT bills, the value in many cases of paying for suitable financial advice is clear.”

He explained that whatever people do, they should make sure to make a Will. “If people don’t, the law will decide how their estate is distributed and it certainly won’t be the most tax efficient way.”

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