Ross Leckridge: passing on legacy advice

Ross Leckridge, chartered financial planner, considers how best to leave your family secure.
Ross LeckridgeRoss Leckridge
Ross Leckridge

Q As my partner and I get older, we’re realising that we’re not as prepared as we’d like to be in terms of making sure our family are cared for financially in the future. Is there still time to sort this?

You may have two options to consider, you can either provide support for your family during your lifetime, or when you’re no longer here. It’s always important to check if your estate could push you over the threshold for inheritance tax (IHT), as this would determine how best to pass on your wealth.

Or you might be worried about passing the IHT threshold, but after a review of your finances it turns out your estate won’t be subject to the tax at all.

If it’s the first route you have in mind – passing on wealth during your lifetime – then one of the simplest ways to do this is to make gifts direct to the people you want to pass your money onto while you’re alive.

Gifts can give you complete control over where your assets or money goes, although you should consider if there is a risk your estate could end up in the hands of someone you didn’t intend it to, such as your child’s ex-partner.

If you find you do need to mitigate IHT, then keep in mind that there are certain rules around when and how much you give as gifts.

Before you do any of this, though, you will need a clear picture of how much money in savings, investments, pensions or other assets you have that will be surplus to your own needs while you’re alive.

This is crucial, so that you don’t accidentally give away too much. With this in mind, I often use a cashflow modelling tool which allows my clients to do this in a more visual way.

If you don’t feel comfortable or can’t afford to give your money away during your lifetime, because you’re unsure about your surplus capital or for any other reason, then the option to pass on wealth upon death could be right for you.

The first step here is to make sure you have a will. If you already have one, make sure it’s up to date and double check that the way it’s drafted will achieve what you want it to.

That last point can sometimes catch people out, especially if they have a blended family, for example. It’s worth mentioning IHT again, because even if the tax wouldn’t impact you now, if you passed away in ten or 20 years’ time, it is possible that your estate may have surpassed the IHT threshold by this point.

The second step is to work out how much your family will receive after your death, and if you are happy with this. If you are not, then you may want to investigate the option of life assurance, which pay out a tax-free sum to whoever you choose when you die.