Financial experts are urging families to review their estate planning ahead of April 2027, when pensions are expected to become part of estates for inheritance tax purposes
Finance experts have outlined the ‘most common mistakes’ they see families making around wills(Image: Getty Images/iStockphoto)
Families have been urged to ensure they have the right provisions in place ahead of an HMRC rule change due to take effect in 2027. A Lasting Power of Attorney is a £92 document that outlines your wishes regarding how your affairs should be managed should you lose the capacity to do so yourself, for example through ill health.
However, forthcoming inheritance tax (IHT) changes from April 2027 have prompted urgent warnings from pensions specialists. From next year, pensions are set to be incorporated into estates for IHT purposes.
There are fears the rule change could render poor financial planning considerably more costly for families in the coming years, reports Birmingham Live.
Rebecca Robertson, Independent Financial Adviser, planner and director of Evolution Financial Planning, said: “The two most common mistakes I see are married couples assuming all assets go to each other and non-married couples not considering what will happen without a will, which can be a major issue for women without any personal assets.
“The majority of people like to hope for the best and, only when they have to deal with a family’s estate when someone has passed away, do they realise the complexity of it all.”
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She continued: “One milestone when people do recognise they need a will is when they have children, but this is generally at a time when finances are straightforward.”
“Often over time the will becomes old and out of date. Again only years later when they are dealing with another family member or they come across an issue, will they act. If they haven’t, they have missed an opportunity.
“This is going to be even more important post-April 2027, when pensions become part of the estate.”
In addition, Steven Greenall, director of Greenall Estate Planning, said: “Everyone knows they need a will and a Lasting Power of Attorney, but they keep putting them off until it’s too late.
“Trying to cut corners and preparing a will without seeking advice or transferring property while the testator is still alive, without considering the seven-year rule or gifts with reservation of benefits, can really cause a lot of unintended consequences.
“Not updating wills after life events such as divorce or remarriage often sees inheritance going to people it’s no longer intended for.”
As the GOV.UK website explains, a lasting power of attorney (LPA) is a legal document that lets you appoint one or more people to help you make decisions or to make decisions on your behalf. This gives you more control over what happens to you if you have an accident or an illness and cannot make your own decisions.
There are two types of LPA: health and welfare, and property and financial affairs, and you can choose to make one type or both. Your LPA will be legally binding only in England and Wales, and there’s a different way to make a power of attorney if you need one that works in Scotland or Northern Ireland.
A health and welfare lasting power of attorney gives an attorney the power to make decisions about things like your daily routine, medical care, moving into a care home, and life-sustaining treatment.
A property and financial affairs lasting power of attorney, meanwhile, gives an attorney the power to make decisions about money and property for you, for example managing a bank account, paying bills, collecting benefits or a pension, or selling your home.
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