Claire Trott, divisional director of retirement and holistic planning at UK wealth manager St. James”s Place, outlines how to tackle wealth transfer plans.
Research conducted for St James’s
Place shows that 41 per cent of UK adults plan to pass
on wealth in their lifetimes, yet for many the process of wealth
transfer after they die isn’t always straightforward.
The research was carried out by Opinium between 13 and
26 January 2023 for 1,000 UK adults aged between 55 and 85
with £50,000 ($62,000) or more in investable assets.
Dealing with the death of a loved one is an incredibly
emotionally time, and managing with the transfer of assets can
often be a source of stress and conflict. “There are a
number of common issues people face when wealth is transferred
after someone has died, and so it’s important to understand how
to navigate them and seek advice to help,” Claire Trott,
divisional director – retirement and holistric planning at
SJP, said.
Below, Trott outlines how to tackle the most common issues faced
in the transfer of wealth when a person dies.
Uncertainty surrounding the division of
assets
“Deciding who gets what after your death can be a really
difficult decision. However, you should not let such concerns
prevent you from making a will. If you are struggling to decide
how to best split your assets, you can build a discretionary
trust into your will which will pass on the final decision-making
responsibilities to trustees appointed by you,” Trott said.
“If there are factors that you would like trustees to consider in
allocation of assets, you can leave a letter of wishes, outlining
any guidance you may have,” she continued. This can be amended
throughout the person’s lifetime without requiring the services
of a lawyer. However, it is important to note that a letter of
wishes is not legally binding. “Whilst trustees should hopefully
take your wishes into account, they can act according to their
own discretion when determining the final division of assets,”
she added.
Young beneficiaries and their ability to manage money
responsibly
The age of beneficiaries, and the ability of younger recipients
to handle assets responsibly is a common concern in estate
planning. “In this scenario, it is possible to set up a trust for
the recipient which allows you to leave the funds in the hands of
allocated trustees, until the recipient reaches an age at which
you think it is appropriate for them to receive the full amount,”
she said. “In the meantime, guidance can be left for the trustees
to distribute funds on your behalf, for instance, in the form of
maintenance and education costs,” she continued.
Vulnerable beneficiaries
“In a situation where a beneficiary is disabled or has a
long-term condition requiring someone to take care of them after
you die, a discretionary or vulnerable person’s trust can be set
up,” Trott said. A vulnerable person’s trust in particular will
serve as a tax-efficient tool to ensure that assets are invested
in a way that will allow the beneficiary to be looked after for
the remainder of their life. “This is something that can also be
set up in your lifetime should you wish not to wait until after
death,” she added.
Excluding somebody from a will
“It is normal for individuals to have a particular person they do
not wish to include in a will and you have complete freedom to
specifically write out anyone from your will,” she said.
“However, this does not prevent individuals from making claims
against an estate. Indeed, someone could argue that you meant to
include them but were badly advised or that you were not in a
sufficient mental state when making the will,” she
continued.
“Whilst such cases are unlikely to succeed unless that person had
a longstanding financial dependency on you, they can be extremely
timely and costly, so it is important to take advice before
deciding to remove somebody who is likely to expect to receive
inheritance from you,” Trott said.
“It is also important to bear in mind that there is no legally
binding contingency controlling who people pass the money to or
how they spend their assets after you have transferred it to
them.”
Beneficiaries dying before you do
“Unfortunately, situations can arise where an individual’s
expected beneficiaries die before they do. Unexpected things
happen, and it may be the case that you choose to amend your will
or letter of wishes at the time,” she said.
“Alternatively, you could prepare for this and ensure the gift
does not fail, by giving additional instructions in your will,
for someone else to inherit if an expected beneficiary dies
before you do. This could be the beneficiary’s own children for
example,” Trott added.
Not having any descendants to leave an estate
to
“Beneficiaries of your will do not need to be your descendants –
you can leave assets to whoever you want. People without
descendants often choose to leave their wealth to a charity. This
has an added bonus of being a tax-free wealth transfer, and if
you leave 10 per cent or more to a charity the rate of
Inheritance Tax chargeable on your estate will drop from 40 per
cent to 36 per cent,” Trott said.
Ensuring that any pets are looked after
“Whilst you can’t leave money directly to a pet, you can leave it
to an individual with the guidance that they use it to look after
a pet. If you don’t wish to give the money directly to the person
looking after the pet, you can set up a trust where your chosen
trustees allocate funds to the person responsible for the pet
after you die,” Trott concluded.
