Will advice

beeza650 · 8 March 2018 at 5:39PM

I'm in my early 40's and have no will. I'm unmarried but do live with the mother of my 2-year-old daughter. Assets comprise a loan to my partner of £225k that she used to buy her previous home outright. £250k in my house (half its value), around £150k ISAs/shares etc, £150k pension and death insurance worth around £320k ...If you add it all up it's close to a million.

I can't see myself marrying my partner while I'm healthy, but it's something I'd consider for tax reasons if I knew I was terminally ill.

What I'm asking for help with is to understand how people tend to divide up their assets / or rather what they would hypothetically do in my shoes.

I want to make sure my daughter is well taken care of but don't have huge faith that my partner would use my assets wisely if I left them all to her. My thoughts were to write off the loan on her house (she's made it clear she doesn't want to stay in our 5-bed place if there's just the two of them) then I'd like to drip feed money to my daughter / partner on the possibly flawed assumption that would drive some discipline to their spending.

I've got a classic motorbike (£5k) that I may leave to a friend but the rest would go to my partner and daughter. My parents are well off, my brother has already had a lot of help in his life (from my folks) and my sister, who I'm not that close to, appears to be ok or would be taken care of by my folks if something happened.

It looks like there'd be no tax benefit to donating to charity (if a charity does help me though then I'd make some provision for them anyway - not sure how I'd word it in the will... £10k to the charity most "relevant" to my death). From the few articles I've read, it looks like inheritance tax relief on my main residence doesn't apply as my daughter is too young?

P.S. I took some advice from an IFA on inheritance tax and his genius idea was to take out an insurance policy to cover the tax knowing I already have £320K of insurance from my employer.....hmm!

Anyway - welcome your thoughts. Thanks

Yorkshireman99 · 8 March 2018 at 5:48PM

beeza650 wrote: »

I'm in my early 40's and have no will. I'm unmarried but do live with the mother of my 2-year-old daughter. Assets comprise a loan to my partner of £225k that she used to buy her previous home outright. £250k in my house (half its value), around £150k ISAs/shares etc, £150k pension and death insurance worth around £320k ...If you add it all up it's close a million.

I can't see myself marrying my partner while I'm healthy, but it's something I'd consider for tax reasons if I knew I was terminally ill.

What I'm asking for help with is to understand how people tend to divide up their assets / or rather what they would hypothetically do in my shoes.

I want to make sure my daughter is well taken care of but don't have huge faith that my partner would use my assets wisely if I left them all to her. My thoughts were to write off the loan on her house (she's made it clear she doesn't want to stay in our 5-bed place if there's just the two of them) then I'd like to drip feed money to my daughter / partner on the possibly flawed assumption that would drive some discipline to their spending.

I've got a classic motorbike (£5k) that I may leave to a friend but that's about it for "gifts" outside my partner and daughter. My parents are well off, my brother has already had a lot of help in his life (from my folks) and my sister, who I'm not that close to, appears to be ok or would be taken care of by my folks if something happened.

It looks there'd be no tax benefit to donating to charity (if a charity does help me though then I'd make some provision for them anyway - not sure how I'd word it in the will... £10k to charity most "relevant" to my death. From the few articles I've read it looks like inheritance tax relief on my main residence doesn't apply as my daughter is too young?

P.S. I took some advice from an IFA on inheritance tax and his genius idea was to take out an insurance policy to cover the tax knowing I already have £320K of insurance from my employer.....hmm!

Anyway - welcome your thoughts. Thanks

Asking a commission based IFA is, as you have found, not the right course. It looks as if some kind of trust is called for. The obvious choice is to find a STEP member and pay a few hundred for an initial consultation.

Keep_pedalling · 8 March 2018 at 7:57PM

Yorkshireman99 wrote: »

Asking a commission based IFA is, as you have found, not the right course. It looks as if some kind of trust is called for. The obvious choice is to find a STEP member and pay a few hundred for an initial consultation.

IFAs are not commission based, and taking out insurance to cover IHT is not a silly idea even if you have death in service benefits. These policies are really useful for protecting gifts for the 7 years that IHT will still apply to them. As the OP has already given one substantial gift and plans further gifts to his children it would seem such a policy would make sense.

We have a second death policy that will pay out over £200k for the modest sum of £19 a month. This was arranged through an IFA who havee access to products that are not available directly to the public.

What anyone who consults a financial advising should do hovever, is make sure they use an IFA not a tied FA.

Yorkshireman99 · 8 March 2018 at 8:30PM

Keep_pedalling wrote: »

IFAs are not commission based, and taking out insurance to cover IHT is not a silly idea even if you have death in service benefits. These policies are really useful for protecting gifts for the 7 years that IHT will still apply to them. As the OP has already given one substantial gift and plans further gifts to his children it would seem such a policy would make sense.

We have a second death policy that will pay out over £200k for the modest sum of £19 a month. This was arranged through an IFA who havee access to products that are not available directly to the public.

What anyone who consults a financial advising should do hovever, is make sure they use an IFA not a tied FA.

IFA's DO earn a substantial amount of their income from commission.

Keep_pedalling · 8 March 2018 at 8:42PM

Yorkshireman99 wrote: »

IFA's DO earn a substantial amount of their income from commission.

IFAs have had to be fee based since Jan 2012.

http://citywire.co.uk/money/will-we-miss-commission-biased-financial-advisers/a629663

https://www.fca.org.uk/consumers/trail-commission

Yorkshireman99 · 8 March 2018 at 8:57PM

Keep_pedalling wrote: »

IFAs have had to be fee based since Jan 2012.

http://citywire.co.uk/money/will-we-miss-commission-biased-financial-advisers/a629663

https://www.fca.org.uk/consumers/trail-commission

Noted. Mea culpa! Apologies

beeza650 · 8 March 2018 at 10:34PM

Keep_pedalling wrote: »

As the OP has already given one substantial gift and plans further gifts to his children it would seem such a policy would make sense.

I've not given any gifts nor was I planning to for a long time. Gifting to avoid tax is something I'll look into when I'm much older. The will now is just in case I die suddenly. I can't really see any sense in taking out additional life cover as even after tax there's plenty left from my current estate to support my daughter.

Keep_pedalling · 8 March 2018 at 11:57PM

beeza650 wrote: »

I've not given any gifts nor was I planning to for a long time. Gifting to avoid tax is something I'll look into when I'm much older. The will now is just in case I die suddenly. I can't really see any sense in taking out additional life cover as even after tax there's plenty left from my current estate to support my daughter.

Apologies, I should have re read your opening post, it was a loan you not a gift. I would still not dismiss the idea of covering a potential IHT bill with insurance though, for someone in good health and of your age it should be a very cheap option, ours was taken out in our early 60s and it was very low cost even then.

Savvy_Sue · 9 March 2018 at 1:45AM

Obviously in your will you also need to do some what if planning - what if your partner and / or your daughter die before you do? Most unlikely, perhaps, but should still be covered.

getmore4less · 9 March 2018 at 9:11AM

I can't see myself marrying my partner while I'm healthy, but it's something I'd consider for tax reasons if I knew I was terminally ill.

In the current tax structure the main benefits are spouse exemption and transferable nil rate band.

Given your other comments I think you should look into this a bit more so you understand better the framework and implications.

£150k pension and death insurance worth around £320k

Probably worth making sure these are trusts and the correct beneficiaries to be outside your estate

From the few articles I've read, it looks like inheritance tax relief on my main residence doesn't apply as my daughter is too young?

Children under 18 still qualify as direct descendants for RNRB purposes as long as the correct trust is used, the default BMT qualifies as do some others.

As Sue says you need to look at a few basic death order scenario and consider the longer term as something put in place now will need to get modified or take account of everyone becoming adults or more kids happening.

one word you need to look up is "commorientes" there are some non obvious effects around IHT, intestacy & wills that will need considering.

You also need to consider your asset base growing.

The current IHT bill <£100k(ish, getting pension&life cover outside the estate) is well covered.

You should also think about your partners and daughters estate as part of the bigger picture.

eg what would the current asset flow be if you and your daughter die together in a car crash.

beeza650 · 9 March 2018 at 12:41PM

Savvy_Sue wrote: »

Obviously in your will you also need to do some what if planning - what if your partner and / or your daughter die before you do? Most unlikely, perhaps, but should still be covered.

Very good point - just the sort of reminders I was hoping for. Thanks

Will advice

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