What happens to my assets on death?

Nobody wants to think about their own death, but if you don’t organise your estate in advance, the difficulties faced by your family after you go can be financially and emotionally disastrous.

What assets?

You may have a clear picture of what assets you own, but does your family? Being well organised and having well-drafted will(s) in place is futile if your executors are not also adequately prepared to manage your estate. The Krugerrands you have stored in a safe deposit box can’t be used to provide for your family if knowledge of them dies with you. It won’t help your executors fulfil their obligations either.

What can I do?

There are a number of things that can be done to help.

Asset bible/balance sheet

Keeping an up-to-date record of your assets can make life much easier for your successors. Such documentary evidence could provide details of your assets, including ownership (eg sole or joint), location, approximate value, and contact details for managers and advisers.  

Maintaining a detailed asset bible can make the transfer of wealth on death much easier, as your executors can see what is in your estate, and what your wishes are. Don’t forget to tell them where to find it, though.

Educating beneficiaries

Talking to beneficiaries and future executors about your wishes can help minimise disputes later and ensure your estate is managed efficiently. A letter of wishes is very useful, but it’s much better if appropriate parties know what it says in advance, allowing you to address any problems rather than making your grieving family do so at a time when emotions are already raw.

Inheritance tax insurance

For those who anticipate a sizeable tax bill for their family after their death, insurance is worth considering. As well as providing the money to pay inheritance tax (IHT) liabilities, insurance can provide liquidity while your executors distribute your assets.

Wills

Make sure that your will(s) are regularly reviewed and kept up to date, capturing your intentions as your circumstances change. If you have assets overseas, will your executors be able to access them, or do you need different wills in each country?

Lifetime planning

The current IHT rate is 40% on estates valued at over £325,000.

There are some straightforward IHT planning options that can help reduce a future IHT bill, including the following. 

Exempt gifts

Gifts to a UK domiciled spouse or civil partner are exempt from IHT, as are gifts to UK charities. No IHT will be due during your lifetime or on death on making such gifts, but making gifts early means that the recipient has full control over them and does not need to rely on your executors to act speedily.

Potentially exempt transfers (PETs)

Outright gifts to family and friends incur no IHT providing the donor survives them by seven years, but there are still tax savings if you survive the gift by as little as three years.

Gifts of surplus income

Regular gifts made out of excess income are immediately exempt from IHT. This can be a very effective way to distribute wealth, but it is important to document what you are doing, and advice should be taken to make sure you can benefit from the exemption.

Planning ahead

If you do not document and plan for your estate while you are alive, your family will have to do it after your death. Failure to be clear about what your assets are, who manages them and who should inherit them risks creating significant delays and even assets being lost altogether. It may not be comfortable to think about your death, but your survivors will suffer if you don’t.

For more information, please get in touch with Andrew Robins, Laura Greenhill or your usual RSM contact.