You’re all going to die. Or go Ga Ga. Either way Mother Nature will get you in the end! I hope that caught your attention, it was meant to and for a very good reason.
Many of you who are reading these jottings will not have a last will and testament, because, “Hey, nothing is going to happen to me!” Another classic is: “They can take what they want, because I won’t be here!”
However, let me put a counter proposal to you. You are in business, and, thankfully, enjoy the life and its trappings that your hard work has allowed you to acquire. You have a beautiful house and maybe a holiday home which may have some very nice ornaments because in your youth you thought you deserved to be able to spend, and spend well. Your bank balance has a healthy total, and to be truthful you don`t really need the money, the children have all but left home, and of course you might have helped them out a bit. Some years ago, you did take some financial advice and bought some savings bonds, ISA’s, insurance schemes and the like.
You may have also placed some monies into your pension scheme instead of paying income tax, you still can do this, however it isn`t as tax efficient as it was as the government have capped it. Your business may be yours as a single trader or as a private limited company, but you are the owner or majority shareholder. Your business is trading well; your assets within the business are yours and not the banks, so therefore you have two major assets, the business value and the property value. Here comes the kick in the pants! You are sixty years of age, neither of your children want to come into the business, you don`t want to sell the business because it is more of a hobby now, I mean what else would you do if you didn`t get up at silly o`clock every morning, but your estate could quite easily be over £2m and that is being very conservative, because you have to take all your assets into account, even the cash surplus in your business which isn`t destined for other immediate use.
Now take 40% away and give that to the government please.
Because that is what your family will have to pay upon your death, assuming your partner has gone before you. All your personal and business assets can be transferred to your partner tax free if they survive you. S elling your business could actually be counterproductive, as that just inflates your bank account, and that’s the last thing you want at the moment.
Now that really got your attention didn`t it, I thought it would. Please do read the next excerpt from the Tax office:
What is Inheritance Tax?
“Inheritance Tax is usually paid on an estate when somebody dies. It’s also sometimes payable on trusts or gifts made during someone’s lifetime. Most estates don’t have to pay Inheritance Tax because they’re valued at less than the threshold (£325,000 in 2012-13). The tax is payable at 40 per cent on the amount over this threshold or 36 per cent if the estate qualifies for a reduced rate as a result of a charitable donation”
Referenced from http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm#3
There is a light however. There are good family businesses and family tax planning solicitors out there, hunt them out and take good advice from two or three of them and then make your plans accordingly. There are also very good tax efficient schemes to invest into that will help when the grim reaper calls at your door. Do yourself a big favour, no matter how unpalatable it seems, plan for not being here!
Now that I`ve totally depressed you – let me throw you another curve ball. What happens to you and your estate if you become incapable to control your own personal and business interests because of an illness such as dementia. Just imagine the upset if you are in a family business where you are in partnership with your brother or sister and you both have young children who want to come into the business. You are then diagnosed with Alzheimer’s disease, your whole business dynamics start to change before your very eyes. Who`s going to run the business if you`re incapable? Will your partner, are they capable? How will your children fare against your partners children when they both want to take a more active role?
You’re starting to see shadows in every corner by now, and that’s good. People change when they see a potential fortune coming their way, family and friends alike. Plan now, just in case. Take advice, you can create a separate “power of attorney” over your health and also your assets. There can be many powers of attorney; you can also be one of your own “powers of attorney” it can stay there, until and if you get diagnosed by a medical professional, it is legal, so you can stay in control. However, doing this means you do get the chance to put what you want into place and look after your own family the way you want, before you don`t know who your family are.
Just a thought.