How long will your savings last in sickness or accident? It’s your responsibility to maintain payments! Are your affairs in order? In the event of your death, all liabilities must be cleared before the estate can be released from probate and settled. Any mortgages need to be repaid, possibly through a life insurance policy or pension plan, to ensure assets are distributed to the right family or business partner without delay.

Trusts play a crucial role in estate planning, ensuring the right people get the right money at the right time. It is important to use the correct trust to meet financial needs upon death. A bare (absolute) trust ensures a named individual will have legal rights to the trust fund from age 18. A discretionary trust offers flexibility, allowing trustees to allocate the trust fund to beneficiaries at their discretion, though it involves more administration and potential taxation on income or capital gains.

Inheritance tax may be due on assets held within a trust when transferred out (exit charges) or at a tenth anniversary. However, there are exceptions. These include assets in a bare trust, an ‘interest-in-possession’ trust established before 22 March 2006, a ‘transitional serial interest’ made between 22 March 2006 and 5 October 2008, or set aside for a disabled person or bereaved minor.

The residence nil rate band is an additional inheritance allowance (£175,000 from April 2020) for direct descendants if certain conditions are met. For married couples/civil partners, mortgages and other liabilities must be deducted before calculating the available allowance. All liabilities, like mortgages, must be repaid before the estate is released from probate and letters of administration are sent. Let’s talk…

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