Time for New Year legal resolutions

Time to start saving again after Black Friday and Christmas. Picture: Getty

Time to start saving again after Black Friday and Christmas. Picture: Getty

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Resolving to deal with life’s admin is the key to a successful 2016 says Alasdair Johnstone

New Year Resolutions are at the fore right now and many of us are trying our best to stick with the “plan”, whatever the plan may be. However, the resolutions can just as easily be applied to legal affairs as well as personal matters.

• To get fitter

The extra pounds piled on during the season of mince pies and sherry has left me with a desire to lose the weight, look after myself better and to think about the year ahead and what might be round the corner.

The often quoted statistic is that around 60 per cent of Scots do not have a will in place and so risk “falling into intestacy” on their death. This scenario means an individual will have missed the chance to say who gets what when they are no longer around, as their estates will be dealt with in accordance with the strict procedures set down in law.

Not having a will in place can produce some perverse results. For example, the survivor of an unmarried couple can suddenly find themselves without any financial provision or even a roof over their head, children (and stepchildren, in particular) risk being entirely disinherited and heirlooms don’t pass down the desired family line.

A simple will can avoid all of these risks by allowing an individual almost total control over their affairs. Trusted executors can administer an estate, family heirlooms left to the desired beneficiary and provision made for spouses, partners and children. More importantly, instructions can be left for the care of young children rather than leaving their choice of guardian to the discretion of the court. An inheritance can be protected in trusts until children reach a responsible age. A veritable “super-document”, the importance of a will simply cannot be overstated.

• To do more mentally stimulating activities

Keeping the brain active is vitally important, although we know the mind will not always be as sharp. The reality is that we will likely all need some help in the future. This is where a Power of Attorney (PoA) comes in handy. A PoA is a document which allows an individual to select a number of chosen individuals to act for them in certain circumstances. This might be as simple as having someone pay the bills during convalescence, or something more involved, such as taking medical decisions where an individual lacks the capacity.

While many find the idea of giving someone else the power to make decisions for them an unnerving prospect, it should be contrasted with the complete loss of control and uncertainty which both they and their family face if no such PoA has been put in place. In such a case, an application to the court may be required in order to obtain intervention or guardianship orders - a process which can be extremely time consuming and expensive, not to mention emotionally draining and intrusive medical reports can be required.

• To be more financially responsible

Many of us need to start saving again after Black Friday and the Christmas sales. Luckily, the approaching tax year end on 5 April provides the perfect opportunity to maximise savings opportunities.

While it is expected that from 6 April the first £1,000 of savings income (or £500 for higher rate tax payers) will be tax-free, it is important to ensure that this year’s tax allowances are used to their fullest before this new relief comes into force.

The most straightforward method is to ensure that the full ISA allowance is used up in each year. Any cash or investments held in an ISA are allowed to grow tax-free and so important savings can be made, especially for higher and additional rate tax payers. An individual can currently invest up to a total amount of £15,240 in an ISA in the 2015-16 tax year and, given that any unused annual allowance cannot be carried forward, it is sensible to use this allowance to its maximum. The same applies for pension contributions where one’s annual allowance should be used to make the most of this tax-free cash.

In addition, anyone owning stocks and shares and who has not yet used up their capital gains tax exemption for the year should consider whether they wish to sell or otherwise dispose of assets in order to obtain up to £11,100 of tax-free gains. Even gifts up to £3,000 in a year can be used to help with inheritance tax planning.

Of course, as with all such matters, proper advice is key and your solicitor will be able to guide you through all of these areas.

So, the best way to feel better in January may just be to resolve to take care of some “life admin” to be in better shape for the year ahead.

• Alasdair Johnstone is a senior solicitor in the private client team at Anderson Strathern

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