Inheritance planning 101

18 Aug 2015
You’re the sort of person whose happiness is largely affected by the well-being and happiness of those you love.

So naturally, it’s hugely important to you to ensure that those nearest and dearest to you are well cared for when you’re no longer around. But when it comes to death, financial restrictions and taxes around a person’s wealth and assets can add unnecessary complication and confusion for those left behind, at an already devastating time. Making sound financial decisions now can simplify that process so that your loved ones’ transition into a world without you is just a little less bewildering.


According to an investor’s guide to inheritance planning and tax in the Guardian, “If the value of your estate is above a certain threshold, 40% of everything you own above it could be liable for inheritance tax.” To avoid your wealth going to the taxman instead of those you love, there are a number of ways to legally avoid being unnecessarily taxed on your assets.

Ensuring the well-being and security of those closest to you requires careful and clever financial planning. If your greater family’s inheritance is something you value we look into a variety of investment options that will hold your clan in good stead.   


To state the obvious, write a will

Without a will your estate will be decided upon by the law as opposed to your personal wishes. You naturally want to save your loved ones from any possible distress and confusion.


Openly communicate your wishes

In an interesting article on inheritance planning, the intricacies of family politics are considered. With regards to speaking to your family about your will, the article offers some useful tips:

1.    ‘Manage expectations with open communication’: Give your children some idea of the value of your estate in order to curb any surprises at a time of distress.

2.    ‘Level the playing field’: If possible treat your kids equally in your will to alleviate sibling rivalry and bitterness.

3.    ‘Do the distributing yourself’: Granting the right to divvy up your wealth to one of your children may cause unnecessary pressure and unfairness. Preferably divide up your wealth yourself.

4.    ‘If you distribute unequally, explain yourself’: Everyone has their reasons and if for some reason you believe one child needs more than another, explain yourself in order to avoid resentment. You want to let your kids know that you love them equally even if you financial distribution is unbalanced.  

Consider life cover

Consider life cover

Sensible inheritance planning includes taking out life cover. By taking out a whole-of-life insurance policy, you can ensure that the policy will pay an amount equal to the tax liability into a trust where the money is exempt from inheritance tax. This will mean that the death benefit payment will occur right after the death and the funds will be available to pay the tax without waiting for a grant of probate.


Consider the advantages of setting up a trust

Setting up a trust fund offers several benefits. Trusts can protect your assets, guarantee sustainable income for those you love, and handle your wealth in the most tax efficient way. Although the process of setting up a trust can be complicated, it will put your mind at ease knowing that with the right protection, your estate won’t be sold to pay for care-home fees or inheritance tax, but rather passed on to your loved ones based on the specifications set out by you.


Consider foreign investments

If you invest in a foreign property and place it within a trust, the growth in the property’s value will accumulate outside your estate. This is useful as after seven years from the date of gifting the property into the estate, the settled amount will usually fall out of the estate, creating a channel for the property to be passed from generation to generation


An article in the Financial Times advisor outlines the difference between various sorts of trusts – bare, interest in possession, discretionary, accumulation – but whatever trust you deem right for you, they add that, “offshore trusts tend to normally be useful for advisers and trustees to give access to a wider range of investments.”


If you’ve ever been tempted by the financial and lifestyle returns of investing in one of the apartments in Calpe or Monte Carlo or any of the fine towns on the coast, consider the potential for your inheritance planning. By investing in a special spot on the Mediterranean, and gifting it through your trust you can enjoy the benefits of a life on the sunny coast now while your mind is at ease knowing that you’ll leave a grand legacy to those you love most.  


For more information about investing in property in Costa Blanca or in one of the most beautiful apartments in Calpe, contact Grupo Esmeralda, specialists in the quality real estate market.

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