At a time when living costs are rising in ever-steeper graphs, it may be time to review your estate planning and think of the one person you may not have actually included - yourself.
It may seem an odd way to look at it, but it’s important that your estate planning looks after you first and foremost. (If you are one half of a couple, please read ‘you’ as the plural you!)
Now and for the future
Estate planning is designed to help you live now AND leave something behind in the future BUT only if that is feasible. There is no point in keeping money aside for future generations if you need it now or in the short-term. Your family want you to live and enjoy life now, with them, no worrying about giving them money later.
What’s more, your children may be feeling the squeeze themselves. So, if you do have money to spare without compromising or affecting your own investments or reserves, then now might be the time to help rather than leaving a legacy for a (hopefully!) unspecified future date.
See our blogs on gift and Inheritance tax for more information, or see the gov websites here.
Regular payments from regular income
One point to bear in mind with gifts and IHT: you can help with regular payments to support living costs for your children (or indeed your parents).
As the Gov website explains:
“You can make regular payments to help with another person’s living costs. There’s no limit to how much you can give tax free, as long as:
- you can afford the payments after meeting your usual living costs
- you pay from your regular monthly income.
These are known as ‘normal expenditure out of income’. They include:
- paying rent for your child
- paying into a savings account for a child under 18
- giving financial support to an elderly relative”
Regular not one-off
The key point here is “regular monthly income”. So it could be more tax-efficient in terms of IHT, for example, to help out a loved one with a regular contribution towards a utility bill than a one-off gift from savings. Do check with your financial advisor before doing so to ensure this is the best way to help from your existing estate planning arrangements.
Life-long estate planning
Estate planning isn’t just for the period just after retirement, but for your entire life. So, how long could that be? According to the ONS, the average life expectancy in the period 2018 - 2020 was:
- 79.0 years for males
- 82.9 years for females
The lower than predicted figure was due to the COVID-19 pandemic. Looking forward, Pamela Cobb, Centre for Ageing and Demography, Office for National Statistics said that:
“Once the coronavirus pandemic has ended and its consequences for future mortality are known, it is possible that life expectancy will return to an improving trend in the future.”
The point to bear in mind is that this is an average figure. Any average figure will include that who sadly die much younger, and those who live into their 90s. Many financial advisors work on an average life expectancy of around 80 years. At Panthera Estate Planning, we work on 84 years.
However, if your family has several related members in their late 80s or beyond, you might consider working out what the average age is for your family tree, rather than the wider population. In this case, we find that 86 to 90 is a better age range to use.
Longer lives for your children and grandchildren
It’s also worth bearing in mind that the next generations will also live longer. According to the ONS:
“People aged 65 years in the UK in 2020 can expect to live on average a further 19.7 years for males and 22.0 years for females, projected to rise to 21.9 years for males and 24.1 years for females aged 65 years in 2045.
An estimated 13.6% of boys and 19.0% of girls born in the UK in 2020 are expected to live to at least 100 years of age, projected to increase to 20.9% of boys and 27.0% of girls born in 2045.”
So, you might consider helping grandchildren now with regular income gifts as they graduate and need rental deposits, cars, etc. It could be a long wait for them to inherit from their own parents!
Long-term care for you
The care industry has radically changed in the past 10 years, with many more options for home care and independent living so seniors can remain living in their own homes for much longer. Equally, private retirement developments offer a community environment with all services close to hand.
Needless to say, none of this comes cheap, and should be included in your estate planning. Whilst there is government help available at present, we’ve all seen how the social care sector has been squeezed and is chronically understaffed at present. It makes sense to plan in private long-term care into your estate planning long before you actually need it, so it’s there to help whenever you start to need it.
For more details on the government’s plans for care and how it affects your retirement and estate planning, see Long-term care in 2022: what the government has got planned.
Practical and pragmatic estate planning
To talk through your estate planning, call us here at Panthera. We’re happy just to talk through what you have, what you need and what you want, to create an estate plan that’s personalised to the last detail.