Know the risks: 4 ways to protect your family

Posted 7th July 2018

Want to protect your family? Of course, you do…

Us humans, we’re pretty much hardwired to protect the things we love. We have an inbuilt primal command to guard anyone and anything that is important to us… most of the time anyway!

As parents we are fiercely protective of our children keeping them from harm, teaching them how to protect themselves etc… And, as children ourselves, we are protective of our parents, particularly as they age and need more from us. Then there’s our wider family, friends, pets…. well you get the picture. We want to keep the things we love safe from harm.

It doesn’t stop at living, breathing things either. Nope. We protect the things that we own, things we’ve worked hard for. Alarms on our homes and cars. Passwords our electronic devices, locks on our windows and doors. We even padlock up the shed. Actually, there are expensive things in our shed, so that’s not a real surprise. Then there are insurance policies; buildings, contents, pets, cars and even our lives are insured.

So, why is it that millions of us fail to put adequate protection in place to protect our family and loved ones when we’re no longer around?

Here at Future Legal Services, we think it’s got a lot to do with people not really understanding the risks that they’re leaving loved ones vulnerable to. And, equally not knowing how easy and affordable it is to put things in place to mitigate these risks.

Know the risks

As the centuries-old proverb goes… to be forewarned is to be forearmed. Basically, if you don’t know the risks then you can’t plan for them. The risks fall into two main categories. Risks to you and risks to your family.

Risks to you

Many people wrongly assume that should anything happen to them their spouse, partner or children would be able to make decisions for them, access bank accounts, generally look after their affairs no problem. This just simply isn’t the case.

Without an LPA in place, your friends and family’s hands are pretty much tied in terms of what they can do without your consent. For example, if you were seriously ill hospital they wouldn’t be able to make decisions about your care. Nor would they be able to take over your finances –generally it IS a good thing that people can’t just swan in and take control of your bank account – however at some points in our life, such as old age, you might find that you need someone to take control if not forever, perhaps just for a while.

Risks to your family

Who would look after your children should the unthinkable happen? Appointing Legal Guardians for your dependants removes any uncertainty. These also the risk of sideways or accidental disinheritance to consider with cases of this very much on the rise. Sideways or accidental disinheritance can occur when on first death all jointly owned property passes to the surviving spouse. Now forming part of their estate they are at liberty to dispose of this as they wish, should that person go on to remarry, or go bankrupt, or just decide to leave it to the local cats home they can very easily, accidentally or…. accidentally-on-purpose disinherit the children of their deceased spouse.

Without the proper trusts in place, any inheritance that a vulnerable person may receive could, fall into the wrong hands or mean that they lose any benefit entitlements. Then there are unmarried partners, stepchildren, and grandchildren to consider, all of whom would be overlooked under the current laws of intestacy. Oh, and then there’s Inheritance Tax – you REALLY don’t want to pay more than you really absolutely have to, right? And, probate – who will do it, what does it cost, what are the risks?

It’s a minefield.

But, don’t panic. Nothing is insurmountable (well none of the above anyway).

Here are four ways you can minimise the risks and protect your family.

Make a Will

Millions of Adults UK… MILLIONS, do not have a Will. There is a myriad of reasons why people don’t ‘get around to it’ but, life is unpredictable and sometimes the worst does happen.

A Will is the foundation block of the end of life planning. Without one place you’re, leaving your hard-earned wealth to be distributed under the current (old-fashioned) laws of intestacy. You are not in control. Important people may be overlooked and unimportant people may benefit greatly. Not ideal. Plus, who wants the government to decide what happens to your estate?

It’s in a Will that you appoint legal guardians for your children. And, by including a property trust you can safeguard your share of any jointly owned assets. Therefore, shielding your beneficiaries from the threat of sideways disinheritance. In these trusts, you can make provisions for your surviving spouse to live in the property, downsize and even draw an income they won’t, however, be able to get their hands on your share.

Read more about making a Will here.

Protect vulnerable family members

Aside from property trusts, the other Will trust that we most commonly write are Vulnerable persons or discretionary trusts. Like Ronseal, they do exactly what it says on the tin. They protect Vulnerable people.

A Vulnerable person can either be someone with a mental or physical disability that qualifies for benefits or someone under 18 who has lost a parent to death. Discretionary trusts can be used for someone that you wouldn’t want to hand a large of amount of money to, those with an addiction for example.

Money put into a Vulnerable person’s trust will not affect any means-tested benefits they may receive and it also protects it from falling into the wrong hands. These types of trusts are discretionary. Meaning that the trustees can use the funds held in it at their own discretion for anything that the beneficiary may need be that practical or just for enjoying their lives.

Read more about property trusts here.

Protect yourself with Lasting Power of Attorney

Only with an LPA in place can someone step into your place and make decisions about your care or handle your finances.

There are two types available – Health and Welfare, and Property and Financial Affairs – it’s always a wise idea to do both. All you need to do is download the forms from the Gov.uk website. Decide on your attorneys (probably best to let them know you’ve bequeathed such an honour on the unsuspecting souls) fill the forms in. Pay your money – just £82 per LPA – and a few weeks later you and your Attorneys will receive them in the post. It’s worth noting here that an LPA can only be invoked when it’s needed AND cannot be put in place retrospectively. So, you need to do it before you lose your marbles, or have that unexpected, totally out of the blue accident.

We would always advise you to do it yourself. It’s really very easy and is significantly, and I mean SIGNIFICANTLY to the tune of hundreds and hundreds pounds cheaper than using a Solicitor (or us for that matter, although we are more than happy to help).

Mitigate your Inheritance Tax burden

There many misconceptions surrounding IHT, unsurprising as it’s complex and it does change. More often than you realise. To reduce IHT burden you may be tempted to give away your wealth, but should you die within 7 years you’re beneficiaries may still have to pay tax on it. You do however have a £3,000 a year gift limit which is tax-free.

Tax breaks, the world’s most unromantic reason to get married?
Assets and wealth passed between spouses are tax-free. Who said romance is dead? But, seriously who doesn’t want to save money? I know I do!

Feeling philanthropical (and want to save money)?
By giving 10% of your total estate to charity you can reduce your tax bill from 40% to 37% – and the gift is tax-free. You can reduce your IHT burden to ZERO by giving away as much cash as you need to take you under the threshold. Or, just give it all away.

The tax man is not known for his/her lenient look the other way attitude so, should you need to consider ways to reduce your Inheritance Tax bill it’s always best to seek professional advice.

Probate – a poison chalice?

Whilst you may consider that your son, daughter or friend/relative be more than capable of taking on the role of executor and handling the probate on your estate when you die. Would they actually want to do it? It’s a hard and complex job that comes at personal risk… read more here. However, should you pass this work over to a Solicitor they will take a large fee for the privilege. Catch 22. (By the way, we have a Lexcel 500 firm of Solicitors that will do it for a fixed rate fee of 1% – you’ll find that rate VERY hard to beat. Get in touch to learn more).

Let us help you protect your family

Should you need any help or advise on any of the points mentioned above give us a call. Our fully qualified Will drafter is on hand to answer any technical IHT questions and, if you would like it, one of our locally based Estate Planning consultants will visit you to discuss your wishes in the privacy and comfort of your own home.

Call today on 01322 664885 or email enquiries@futurelegalservices.co.uk