Lets start with the definition of Inheritance Tax Inheritance Tax is a tax paid on the Estate (the property, money, and possessions) of someone who has died. What is the threshold for tax of Inheritance Tax? We each have an Inheritance Tax Allowance of £325,000, any assets above this people are subject to Inheritance Tax at 40% once said person has passed away. In cases where we have unused inheritance tax it can be passed to your spouse or civil partner, meaning that couple have a total Inheritance Tax Allowance of £650,000. In addition to this, the Residential Nil Rate Band Allowance has been introduced. This allows you to claim an additional £175,000 of tax-free allowance, if you give away your home to your children (including adopted, foster or stepchildren) or grandchildren. This means your Inheritance Tax threshold can increase to £500,000 or £1,000,000 for a couple. But be aware that there is normally no Inheritance Tax to pay if either: The value of your Estate is below the £325,000 threshold You leave everything above the £325,000 threshold to your spouse, civil partner, a charity, or political party. Even if the Estate value is below the threshold, you will still need to report it to HMRC through Probate. Can I reduce the level of Inheritance Tax I pay? There are many steps you can take to reduce or mitigate your Inheritance Tax liability and protect your legacy for your loved ones and beneficiaries.Pease bear in mind that you should seek professional advice to understand which one is best to minimise your liability. Ensure you have a valid will Having a valid Will is the critical starting point to Estate Planning. Making a Will is one of the most important things you can do to ensure your Estate goes to who you want and that your wishes are carried out. If you do not have one, you need to make one. If you have one, it must be reviewed to ensure it is up to date and valid. Insure against your Inheritance Tax liability Life Insurance is an often underused, overlooked and yet remarkably simple and cost-effective solution to an Inheritance Tax problem. Let us assume there is an inheritance tax liability on your death of £100,000, you could simply choose to take out a life-insurance policy for £100,000. As long as it is the right type of policy, paying into the right type of Trust, it will provide the money to your beneficiaries on your death so they can pay the Inheritance Tax from the life insurance proceeds and don’t have to find the money to pay the tax bill themselves. Depending on your age and health, we often find that Clients pay far less in life insurance premiums than they ever do in Inheritance Tax. Give your Assets away You could choose to give some of your wealth away before death occurs. However, there are some important rules to be aware of. First is the Seven-Year Rule which says that if you give away some of your wealth, then in order for that wealth to be outside of your Estate for Inheritance Tax purposes, you need to survive for seven years after the gift has been made. Second is the Gift with Reservation of Benefit Rule. which says it must be a true gift. If you give some of your assets away, for example you sign your house over to your children before you die, then you cannot reserve some kind of benefit or use of that house. You would have to pay your children the full market rent value to continue living in the property and you cannot receive any of that rental back as a gift from your children. If you do, then the seven-year clock doesn’t even begin to tick and the value of your property or any money you have received will be counted back into your Estate for the purposes of Probate upon your death.. Inheritance Tax Investments Investments can also be an excellent way to solve an Inheritance Tax problem. The Government have a range of investments which they exempt from Inheritance Tax that you can choose to use. These type of investments are not available from your high street banks or building societies, these are true investments into the market, so it’s no good just simply saying if a particular investment works for Inheritance Tax then you should put all of your money into it. It is important that you take specialist investment advice from a specialist Financial Adviser. Whether that’s us or somebody else, it’s critical we make sure that any investment strategy meets ALL your investment needs, including what risk are you happy to take with your money, do you need access to capital, income or both, what growth are you expecting? Spend the kids Inheritance! If you have an Inheritance Tax problem and you are happy that you have more money than you need to look after yourself for the rest of your life, you may want to start considering spending some of that wealth now, on things that you enjoy. Whether that is booking the holiday of a lifetime or buying the car you always wanted think of it like there is a 40% sale on permanently! Every time you spend £10,000 of your money, that’s £4,000 that won’t be going to the Inland Revenue. If you have done everything in life you want to do, but still have more money than you need, then why not consider spending your wealth on whoever your beneficiaries are now. Why do we wait to pass the wealth to the next generation when we die? We don’t get to see the amazing effect we’ve had on our loved ones with this wealth and for those of us left behind, it’s bittersweet, because yes, we’ve received the family wealth but we’ve also lost somebody we love at the same time. If we are going to give some of that wealth away before we die, it comes back to the earlier point about doing it safely and the best way to do that is through our Protective Family Trusts. There are a whole range of different Trusts we can choose to use for our loved ones. Some examples would be an Education Trust. If you like the idea of paying for your children or grandchildren’s private school fees or higher education. There is a Deposit Trust that is becoming far more popular these days with parents or grandparents wanting to help their loved ones get on the property ladder. It enables you to give them the deposit, but you can give it to them through a Protective Trust so that if their future relationships don’t work out then the deposit you gave to them is safe and stays with your loved ones. There is even a Mortgage Trust. If you like the idea of paying off your adult child’s mortgage for them. With any of these gifts, as long as you survive 7 years, the gift will be outside of your Estate for Inheritance Tax purposes, saving 40% tax and the Trust will keep this gift safe and protected for your beneficiaries. When is Inheritance Tax due? Inheritance Tax must be paid within six months of your loved one’s death, and interest will start to be charged by HMRC thereafter. Typically, the taxes on an inheritance will be taken out of the deceased Estate. Usually, the deceased will have appointed an Executor in their Will to take care of this. However, HMRC expect to be paid before Probate is granted and other than some exceptional cases, the beneficiaries have to make arrangements to settle the Inheritance Tax bill before they can receive their Inheritance and recoup the Inheritance Tax bill value. What if no Inheritance Tax is due? If no Inheritance Tax is due, you will still have to report to HMRC and provide an Estate Value calculation. For this reason, the first thing to do when someone dies is to calculate the total value of the Estate. This is the role of the Executor or appointed Administrator. If you want further advice please get in touc h with our team who will offer a free consultation

Women are living longer, taking career breaks and working longer! Retirement needs to be planned to be enjoyed and to ensure financial stability as we age. Get in touch with our team for a free consultation. Surrey Farnham

The majority of people will face times in their lives where they are not sure what to do with their money, or what decisions to make to reap the financial benefits in the future. There are thousands of financial products on offer and so it can be difficult choosing between them. If you are confused about dealing with your finances it can be helpful to get professional financial advice, our financial advisors in Farnham offer some advice here about whether you need the help of a professional or not. Our financial advisors in Farnham are professionals who can help you organize your finances and projects and also help you get prepared for retirement. They will help you make decisions with your money that will make sure you are on the right path to achieving your financial goals. If You Are Thinking About Hiring Professional Help  The terms ‘financial planner’ and ‘ financial advisor ’ typically mean the same things, but this does not mean all financial planners and financial advisors are alike. They will all have different levels or education, training and experience, and so the advice you get will differ depending on who you go to. Some people are happy managing their own financial planning, others believe the help of a financial advisor will improve the quality of the financial decisions made. If you just have some spare cash that you would like to put aside as a nest egg, then you may be able to manage this yourself. In contrast, if you are a high worth individual with a deal of assets, then you might want to draft in the help of a financial advisor, our Farnham team may be able to help you with this. What a Financial Advisor Wil Do A good financial advisor, such as our team in Farnham, will give advice regarding the following areas. – How you should change your current financial behaviour. – How much you should save each month – What times of retirement accounts you might want to open. – What type of mortgage you have and whether you should pay it off or refinance. – What type of insurance you need, such as life insurance, health insurance and property insurance. – How much money to keep in an emergency fund. – What changes might improve your tax situation. – What rate of return you will need to achieve your goals over your chosen time frame. Our Farnham financial advisors can work with you to help you manage and achieve these aspects of your financial situation, ensuring you stay on track to achieve your financial goals.

If you want to have a comfortable, secure and fun retirement that you can really enjoy, then you need to build up a financial nest egg to fund it all. It may seem a bit of a drag now but putting together a retirement plan with a financial advisor is the best way to make sure you stay on track and achieve your goals. Planning your retirement starts with thinking about your goals and when you would like to meet them by. You can look into types of retirement accounts and how these accounts can help you increase your funds, as your funds increase a financial advisor can help you invest the money to enable it to grow even more. 1) Understand Your Time Frame Your current age and expected retirement age create the initial groundwork of a retirement plan. The longer you have between making your plan and your aimed retirement age the higher the level of risk you plan can withstand. If you are young and have 30 plus years before your retirement then you should have your funds in riskier investments such as stocks, as you may see larger growth. You should consult a financial advisor when it comes to investing your retirement funds. 2) Determine Retirement Spending Needs Having a realistic idea of your post retirement spending habits will help you get an accurate idea of the size of the retirement portfolio you need. Most people believe that once they retire their annual spending will be between 70-80% of what it currently is, but any financial advisor will tell you this often isn’t the case. It is more realistic to assume that your spending will be the same, if not more, as the cost of living increases every year and once you retire you will have more time on your hands and so more time to spend. 3) Calculate After-Tax Rate of Investment Returns Once you have worked out a timeline and what your spending requirements will be, you must work out the after-tax real rate of return, you will want a financial advisor to help you with this. Calculating the after-tax real rate of return will let you know whether your retirement portfolio will produce the needed income. 4) Assess Risk Tolerance vs. Investment Goals Whether it is yourself, or a financial advisor, who is in charge of the investment decisions, a proper portfolio allocation that balances the concerns of risk aversion and return objectives is arguably the most important stage when it comes to retirement planning. How much risk are you willing to take to meet your objectives? You should make sure you are 100% comfortable with the risks being taken. 5) Stay on Top of Estate Planning Estate planning is another step involved in a successful retirement plan. Each aspect requires the expertise of different professionals such as lawyers and accountants. You should also ensure you have life insurance as this is an important part of estate planning and the retirement planning process. Having a proper estate plan and life insurance coverage means that your assets can be distributed the way you would want, in the event of your death.

A financial advisor helps you manage your money and make strategic choices for your future, they are your financial planning partner. For example, you may decide you want to retire by 50, or you may want to send your child to a private university in 10 years. To accomplish these goals, you will need to seek the advice of a professional who has the right licenses and experience to make these plans a reality. Together, you and your financial advisor will talk through many topics including the amount of money you should save, the types of bank accounts you need and how to plan your tax. Your financial advisor is also an educator, part of their task is to help you understand what you need to do to achieve your future goals. At the start of your relationship with them they will help you understand budgeting and saving, and as you progress the financial advisor will assist you in understanding complex investments, insurance and tax matters. Understanding Your Financial Health A financial advisor will work with you to get a full picture of your assets, liabilities, expenses and incomes. They will often ask you to undertake a financial health questionnaire, on the questionnaire you will fill in information about future pensions, income sources, retirement needs and any long-term financial obligations that you have. The questionnaire will also touch on subjective topics such as your risk tolerance and capacity. Creating a Financial Plan All the information your financial advisor has gathered and learned about you is collated into a comprehensive financial plan, this serves as a road map for your financial future. It will open with a summary of your financial situation including your net worth and liquid or working capital, as discussed in your questionnaire. Based on your net worth and your goals the plan will create simulations of potentially best- and worst-case scenarios. These will take into account your retirement goals and reasonable rates of withdrawal, as well as your relationship or marital status a long with any goals you have for your children. After you review the plan the financial advisor can adjust it as necessary and then you are ready for action and can get on track to your financial goals.

Legacy planning is a financial strategy that involves planning and organising affairs in order to best bequeath assets to a loved one, or next of kin, after death. This planning most often involved a financial advisor. Why do You Need to Consider Legacy Planning? Although it is not the most pleasant of topics, it is important to consider legacy planning. If you don’t have a plan in place for your estate, its management might go against your wishes once you pass away and the estate is passed on. Legacy planning is especially important for those with small businesses, and other assets that require ongoing maintenance. How Can a Financial Advisor Help?  Just like writing a will, it is important to start planning your legacy early, so that when the time comes your affairs are in order. A financial advisor can provide advice on how to best prepare your legacy and assist with any questions you might have. The financial advisor will guide you toward reaching a level of financial security that both provides you with a comfortable life, but also allows you to leave some wealth behind to your loved ones. It is important to remember you cannot leave behind a legacy if you are not financially secure enough to build a legacy in the first place. After they have helped you get your affairs in order, a financial advisor will help you plan how your affairs are managed after you pass on, ensuring that they continue to prosper. Often, legacy planning will involve a meeting with your next of kin, so that there are no surprises and that they understand any preferences you have over how your estate should be managed. It can be useful to have this meeting with a financial advisor present, as it means all the information will be in writing. A financial advisor can also assist with any taxes that might affect your estate. This is a very important part of legacy planning, as many people don’t realise how high the taxes on their estates can be. A financial advisor can help you plan all potential tax scenarios, and may be able to suggest ways you can reduce how much of your estate is lost to tax.

If you have a defined benefit pension you may be offered the option to transfer it into the more common type of pension, a defined contribution pension. This is a big decision to make, and it is irreversible once done, so you need to understand what exactly it means and what the pro’s and con’s are. What is it and How Does it Work? A defined benefit, or DB pension (also known as a final salary pension scheme) is a special type of workplace pension. Instead of building up a pension pot over time, as is commonly the case, it provides you with a guaranteed annual income for life, based on either your final or average salary. Final salary pension schemes are most often provided by the public sector (health, education and government employees), some private sector employers do still offer them, but it is not as common. If you are a member of a final salary pension scheme your employer contributes to a central fund on your behalf. The scheme will assign you a ‘normal retirement age’ and your pension will then be paid from this date. The amount you receive is based upon a number of factors. What are the Advantages and Disadvantages? This type of pension is often seen as more generous, because it would take an above average DC pension pot to be able to buy an annuity that will pay you the same amount as a DB scheme. On top of this, the payouts from a final salary pension scheme are guaranteed for the rest of your life. As long as the pension scheme remains funded, your pension will be paid for as long as you live. Despite the obvious attractions of a DB pension scheme , in some ways it isn’t as flexible as a DC pension pot. You can’t vary the income you take from it, and often you can’t draw out large lump sums. Furthermore, this type of pension cannot be inherited by your beneficiaries. If you die prematurely there is the possibility that your widow may get a pension, but most of the benefits will be lost and nothing will pass to your children.

Choosing a financial adviser can be a daunting process, but if you are in the position of needing help with money then it’s worth putting in the time and effort to find a good one. The right financial adviser can save you a lot of money, stress and worry. The first step to finding the right professional is to decide what you need them for. For example, are you nearing retirement and want advice on your pension. Or, are you looking to invest in stocks and shares, or an ISA? A financial adviser can also help you with mortgage or life insurance. There are numerous reasons you may want the help of a financial adviser, and there are also numerous types of financial adviser, so it pays to choose the best one for the job. Types of Financial Adviser Financial adviser is an umbrella term for a range of professions, mortgage advisers, investment advisers, pension advisers and financial planners all count as financial advisers. Sometimes they may also be called a ‘broker’ if they are dealing with mortgages, home or car insurance, or investments or shares. It can get a little bit confusing. Whatever term the adviser is operating under, they all have to be regulated by the Financial Conduct Authority. This means there are rules they must stick to when offering you a service. How to Find a Financial Adviser Asking friends, family or colleagues for personal recommendations is one way to find a financial adviser, however, it’s not always easy to work out how well the adviser does their job until after they have already given the advice, by which point you would have already paid. So you may want to dig a little deeper. Some unions may offer guidance on financial advisers who are best qualified to deal with your questions, depending on your particular pension, so it can be worth checking with your workplace or union first. You can also check regulatory bodies such as the British Insurance Brokers Association (BIBA) to find a broker service.

There can be a lot of confusion around the difference between a Defined Benefit and a Defined Contribution pension plan . In this article we will explain how they differ from each other. Company pensions are generally categorised as being either a defined benefit or a defined contribution. The main difference is that a defined benefit pension plan sets out the specific benefit that will be paid to the retiree. This calculation will take into account factors such as the number of years an employee has worked at the company, and their salary. This then dictates the pension and/or lump sum that will be paid on retirement. In contrast, a defined contribution pension (DC) is an accumulation of funds that makes up a person’s pension pot. The member of staff will contribute a portion of their salary to a pension scheme . Usually, though not always, the employer also contributes, and the contributions are invested in a fund in order to provide retirement benefits. There is a tax relief on this type of pension, and the benefits at retirement will depend on a number of different factors such as the contribution levels, how the investment fund has performed, plan charges and fees, as well as the annuity rates available when you retire.  How to Decide? As discussed, the main difference between a defined benefit scheme and a defined contribution scheme is that the former promises a specific income, and the latter depends on factors such as the amount you pay into the pension, and the investment funds performance. When choosing a pension plan there will be numerous options available to you. Whether you are an employer or an employee, an investor or a total novice, our financial planning team can help you with Defined Contribution and Defined Benefit pension advice , so that you can choose the best pension for you.