14-year inheritance warning as expert explains how to sort it | Personal Finance | Finance
Britons can ease the burden on their families after they pass away by keeping detailed records, some of which may need to date back as much as 14 years.
The emotional toll of losing a family member is compounded by the complex process of managing their estate. However, there are steps that can be taken to ensure a smoother financial transition for heirs.
Ian Dyall, the Head of Estate Planning at Evelyn Partners, has outlined six essential areas where meticulous record-keeping can significantly help loved ones. He advocates preparing a final thoughtful gesture in the form of well-organised documents to be discovered posthumously.
Recalling a personal anecdote, Ian mentioned how his colleague’s father left behind a folder labelled: “Dad’s dead – what next!? ” upon his passing after a prolonged illness, which greatly assisted his family.
Ian emphasised: “This is a relatively simple measure that anyone who is concerned about passing on their wealth smoothly to their family, and making it easier for them, can and probably should adopt.”
Gifts pose a particular challenge for executors dealing with inheritance tax, as they may be exempt or subject to a hefty 40% tax, potentially affecting gifts made up to 14 years prior to death.
Ian detailed: “Your executors will also need to know what gifts you made in the seven years before your death and potentially in the seven years before the earliest of those gifts, in other words up to 14 years before death. That is very difficult for an executor to answer unless you have kept a record of the gifts you have made.”
Gifts made on a regular basis, or those planned to be made on a regular basis, that don’t affect your standard of living are immediately exempt from IHT. However, proper evidence needs to be provided that these gifts meet the criteria for the exemption that your executor will be charged with providing.
Keeping records of these gifts, especially the tables that need to be completed on the IHT403 form, can be the crucial evidence your loved ones need. Ian suggested adding copies of these forms into your file and filling them out as gifts are made.
Maintaining similar paper trails from each of your investment, savings, pensions and bank accounts can also assist with this as well as ensure your executors have tied up all the possible loose ends and none of your hard-earned cash is getting lost in the inheritance process.
Ian further recommended listing the contact information for financial advisors, accountants and other professionals involved in your finances.
Additionally, it would be beneficial to include details of past employers where you may still have pension pots, as well as nominating beneficiaries for these policies.
Essential supplier contact details such as utility suppliers, internet providers, car and house insurers can also be left in this folder, easing the process for loved ones when they have to notify all relevant parties of your passing.
He added: “For example, I have a collection of guitars which would be difficult to value and sell, so I have a list of their approximate values and contact numbers of people I trust who would be able help when selling them.”
For any unique or valuable possessions, he suggested listing their approximate values and potential buyer contacts.
While it’s uncomfortable to think about debt after death, it was also advised to be transparent about credit cards, mortgages, and car loans in this file to prevent surprises for your dependents.
