High Net-Worth Families

Generally, relatively few high net-worth clients receive adequate advice on the protection and inter-generational tax planning of their estates, be it pensions, Death in Service (DIS) benefits, life cover, property assets, savings and investments or lifetime inter-generational transfers.

Integrated financial planning and effective legal planning are essential in delivering guaranteed outcomes for the distribution and protection of your estates. If you do not have Wills, you may be unaware of the complexities and misdirection of wealth that can occur under intestacy rules. If you, like so many couples have simple Wills directing your estate to each other and then to your chosen Beneficiaries in equal shares you should achieve your desired distribution, but you may be missing an opportunity to protect the surviving spouse’s interests. Importantly, you may also be missing key tax planning opportunities which are overlooked in most higher value estates, and you will not provide inter-generational benefits to your chosen Beneficiaries.

The unpredictability of life requires us to be prepared but you ought to act now to address the shortfalls of the most common estate planning arrangements, particularly the taxation considerations which require bespoke planning. On the death of the first of you, protective and tax efficient planning can be put in place and similarly protection, flexibility and inter-generational tax planning can be delivered to the ultimate Beneficiaries of your estate when both of you have deceased.

A customised plan for your family may address any number of concerns such as;

• Risk to your wealth following the death of the first spouse e.g. remarriage.
• Loss of tax allowances because your Wills may not maximise available tax allowances.
• Redirection of the first to die’s estate if the surviving spouse changes their Will.
• Potential loss of the inheritance left to your chosen Beneficiaries if they were to divorce.
• There may not be IHT payable when you die but it means your spouse’s estate is highly likely to pay IHT because of your combined wealth.
• Erosion of wealth when the inheritance left to your Beneficiaries is left to future generations e.g. your grandchildren.

If you look beyond the direction of your estate to your nominated Beneficiaries, you will appreciate the many potential issues that exist and some of them are unique to high net-worth clients.

Generally, few high-net-worth clients receive adequate advice on the protection and inter-generational tax planning of their estate, be it pensions, Death in Service (DIS) benefits, life cover, property assets, savings and investments or lifetime inter-generational transfers.

Integrated financial planning and effective legal planning are essential in delivering guaranteed outcomes, and DIS benefits are one of the most significant considerations often neglected by legal services providers. This is largely because married clients are unaware of the risks to their DIS benefits and do not understand what simple steps can be taken to address them. For high-net-worth clients the risks are even greater and a negative outcome is more certain if no action is taken.

The unpredictability of life requires us to be prepared. DIS is an excellent employer benefit which will pay out tax free (in many cases at the discretion of your employer) to your chosen Beneficiaries if you are employed by them when you die. It is good practice to check the exact details of your employer’s scheme and its benefits and establish the value of any likely payment.

Your DIS benefits will be paid to the approved nominated Beneficiary (usually your spouse) and it will be their choice how to use the funds. For example, to pay off a mortgage if required or to be invested by your financial adviser to provide a long-term income source.

You should consider any possible future outcomes once your spouse receives the DIS payment (tax free)

• Without DIS planning larger estates are more likely to increase their risk of Inheritance Tax (IHT). This will result in Beneficiaries inheriting less.
• If your spouse enters into a new relationship could there be a potential risk to the funds intended for your family (especially if your spouse is younger)?
• If, historically, your spouse is not good with money will the DIS benefits be used wisely?
• Would the DIS benefits be exhausted if they were required to pay for care for your spouse, with the result that your children (Beneficiaries) may inherit less?
• When the DIS benefits pass to your children as part of your residual estate, would you like them to do so in a protected and tax-efficient manner?