Melanie Wright
AUTHOR Melanie Wright| CREATED 15 Jan 2016
Print Share

How an adviser helps… preserve your legacy for your loved ones

Woody Allen had it about right. He once said: “I'm not afraid of death. I just don't want to be there when it happens.”

There are, however, inevitabilities that we all have to accept. So knowing our loved ones will be provided for after we’ve gone is a comforting thought.

A professional adviser can help you achieve this, while reducing any painful tax bills for those you leave behind.

What a financial adviser can do

An adviser will usually ask you to fill in a questionnaire about your current financial situation.

They will use this to work out how much inheritance tax (IHT) would need to be paid on death and look at ways to reduce this potential liability.

Martin Bamford, of advisers Informed Choice, says: “The most effective tax reduction can be achieved by giving away control of assets or income, which not all clients feel comfortable doing – especially with the prospect of residential care fees in the future.

“Solutions occasionally include the use of trusts and we work with experienced solicitors to put these in place alongside wills.”

There is another way

Alternatively, an adviser may suggest a protection policy to pay a lump sum on death to cover tax bills.

Rowena Griffiths, financial planner from Female Financial Management, says: “Protection policies can ensure that a lump sum is paid, so that clients don’t need to sell assets to pay the bills if the main earner should die or suffer a serious illness.”

IHT is a tricky business and policies can be arranged to take into account complex rules.

“They can be written on a ‘joint life second death’ basis, in order to mitigate IHT. Under current rules, on the death of the second spouse, the estate is aggregated to calculate the total value and anything over the nil rate bands of £325,000 per spouse, is taxed at 40%.”

This approach is better for many people. “Clients often prefer to pay the bill with a life assurance policy rather than have their beneficiaries dispose of assets.”

Don’t give it all away

An adviser will also make sure you don’t end up on the breadline because you’ve been over-generous. IHT planning may be important, but it’s essential to secure your own financial future first.

Scott Gallacher, of financial advisers Rowley Turton, says: “It is important that IHT planning follows on from financial planning as I have seen cases of people gifting significant assets to their children in order to save IHT and then finding themselves with insufficient income or capital for their own needs.”

It could be money well spent

You will pay for advice but it could well be worth it. “While cost is a consideration, the potential savings to the family are arguably much more important,” says Scott Gallacher. “In one of my favourite cases, I was able to save a family around £600,000 in IHT from day one by careful planning.”

Ready to find out what an adviser can do for your legacy planning? Ask your adviser, if you have one. If not you can find one using our tool here.


Melanie Wright

Financial journalist Freelance

Melanie Wright is an award-winning freelance financial journalist, and former Deputy Editor of the Daily Telegraph's Your Money section. She contributes regularly to the Sunday Times, Daily Telegraph, Times and Observer, and wrote the Sunday Mirror's Money pages for more than a decade. She is also a regular commentator on television and radio, having been interviewed on BBC Breakfast, BBC News Channel, Channel Five News, ITN News, GMTV and LBC Radio.