Have You Made Your Will Yet?

Have You Made Your Will Yet?

1After a lifetime of saving and prudence, you may well have accumulated a great deal of personal financial wealth that will outlast you.

However, without a will to state who will benefit from your wealth, much of the hard work you have put in over the years might be lost.

Dying without a will (being intestate), can present your loved ones with all sorts of difficulties when it comes to dealing with your estate and it presents the tax man with an opportunity to extract wealth from your life savings.

This blog article is a quick guide to making a will and ensuring that your legacy goes to your loved ones as you intend.

A Will To Fit Your Circumstances

Leaving your wealth behind might not be quite as straight forward as you think.

Depending on your circumstances, your age, health and life expectancy and the number and age of your dependents, you might find you have to word your will specifically.

For example, if you have young children or grandchildren, you might want them to inherit your estate at a certain age, or you might stipulate that the money is used for something specific, such as university fees.

It might be that you want to appoint certain trustees or guardians in your will. This might be the solicitor who is drawing up the will or another legally recognised individual who can administer and distribute your estate.

Giving To Charity

If you are leaving an estate to others, you can give part (or all, if you want) of this away to charity.

The amount that you leave to charity will be deducted from your estate before the government calculates the amount of inheritance tax that is due.

If you leave at least ten percent of your estate to charity, the overall inheritance tax rate that is levied will decrease (though not if you take the option of deducting contributions from your estate first, as listed above)

Dying Without A Will

You should probably consider updating your will every five years or so. As your life circumstances, and that of your dependents, changes, your instructions on how to deal with your estate will change as well.

If you don’t have a will and pass away unexpectedly, a relative will have to apply for probate, the legal right to administer your estate.

There are legal processes that also decide who is legally entitled to what if you do die without a will.

Decisions made by the government might not match your own wishes, and they expose your estate to inheritance tax.

A will that is written by an inheritance expert can help avoid large portions of inheritance tax , simply by allocating money and property according to inheritance tax allowances. Anything left to your spouse or civil partner is inheritance tax exempt up to the value of £650,000 (if you both combine your allowances).

Having a will drawn up might cost in the region of £150-£250, but in the long run, it is worth an immense amount more in terms of peace of mind and the knowledge that your life’s savings will go to good use.

Leaving wealth behind is a way in which we leave something of ourselves to future generations and it can be more complex than it appears to be.

 

Will Writing is not part of the Openwork offering and is offered in our own right.  Openwork Limited accepts no responsibility for this aspect of our business which is not regulated by the Financial Conduct Authority.

 

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen

Tips For A Cautious Investor

Tips For A Cautious Investor

With interest rates offering little to get savers excited, now may be a good time to look at other options.

If you are a first time investor, you may be feeling nervous about taking the plunge. That’s fine; there are a range of low risk investments to help you take your first steps into investing.

Here are some tips to get you started.

You’ll Still Need Some Cash (So Make It Work As Hard As It Can)

Having cash to hand acts as a buffer against life’s ups and downs. How much cash you need to keep depends on your situation. Some people like to keep a couple of months’ salary.

That being so, it’s a good idea to make your cash savings work as hard as they can.

From Autumn this year, ISAs (Individual Savings Accounts) will become more flexible. You will be allowed to withdraw and replace money as you wish.

The only condition is that the net contributions stay within the ISA limit for any given year. This means that all or part of your ISA allowance can essentially be used as a standard savings account. It will have the benefit of allowing you to receive interest on your savings without paying tax.

Look At Government-Backed Schemes

Every now and again, governments introduce schemes to encourage saving and/or investing.

At the moment, first-time buyers building a deposit for a house might like to look at the “Help To Buy ISA”. This scheme is due to start in autumn this year. In short, for every £200 saved, the government will add £50, up to a maximum of £3000.

The government also recently ran a “Pensioner Bonds” scheme for over 65s. This is currently closed, but given its huge popularity, it is entirely possible that it will open again.

It’s always worth keeping an eye open for government-backed schemes as they may offer special benefits.

Make Your Investments Match Your Needs

There is a huge range of investment products available.

Instead of thinking in terms of “good” and “bad”, think in terms of “appropriate” or “inappropriate”. In order to decide whether or not an investment is appropriate, you will need to start by taking stock of your current situation.

In particular, you will need to be realistic as to whether you should start investing right now at all. If you have high-interest debts, you may be better to spend any spare cash you have, on paying them down first.

Once you are ready to start investing, you will need to think about your short-, medium- and long-term goals. You will also need to be realistic about your attitude to risk.

You may have heard the expression “the value of an investment can go down as well as up”. This is true. It is also true that some investments carry more risk than others. Some people are happy to accept higher risk for the possibility of higher reward. Other people prefer to take a safer line in their investment strategy.

 

Of course it is perfectly possible to divide your investment funds between investments with different levels of risk.

Diversification And Dividends – The Two Pillars Of Investment

You’ve probably heard the saying “don’t put all your eggs in one basket”. That often holds true for investments. Putting all your money into high-risk investments creates the risk of losing it all.

By contrast, putting it all into lower-risk investments means you can miss out on some great returns.

By having a mixture of investments of different degrees of risk, you can have the best of both worlds.

Also remember that investments can be for growth or income or a mixture of both. Many listed companies pay dividends to shareholders. These can be reinvested for more growth or used as income.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

Want To Pay Less Tax?  Ideas To Help Reduce The Amount You Pay

Want To Pay Less Tax? Ideas To Help Reduce The Amount You Pay

lesstax-300x252Paying tax is an onerous duty and one we all wish we didn’t have to do.

Judging by recent newspaper headlines, it seems that if you are rich and famous tax avoidance is almost compulsory.

Whilst actual tax evasion is illegal (ie stashing it under your mattress), tax avoidance is not, it is simply the practice of being savvy with your money to limit the amount it can be taxed within the law.

This quick guide will talk you through some of your options if you are looking to reduce the tax burden on your personal income. If you ever wonder: ‘how can I reduce my tax bill?’ this guide is for you.

How To Pay Less Tax: The Obvious Methods

The government already provide a generous annual entitlement to every UK saver in the form of ISAs. If you open and Independent Savings Account, you will be able to deposit £15,240 tax free each year.

This means that any interest earned on the money invested is yours, tax free.

As well as paying into an ISA, the more of your income that you put into a private pension, the less of it can be taxed.

You can be eligible for tax relief on pension contributions of up to, the lower of; 100% of your earnings or £40,000 annual allowance, making it one of the most important means of limiting your exposure to taxation.

If you smoke, drink to excess and drive a gas-guzzling car, then you are making life easy for HMRC.

By giving up these vices, you not only make yourself far healthier and protect the environment, buy you also prevent yourself from losing money through indirect taxation like VAT.

If you are married, you might want to take advantage of the new rules that allow you to transfer your tax allowance to your partner or vice versa. If your partner pays a lower rate of tax than you do, transfer or ‘gift’ them an amount of savings that come up to their personal allowance threshold.

How To Pay Less Tax: The Less Obvious Methods

If you are a parent with young children you can avoid paying taxation on £55 a week by investing in the government’s child care vouchers, if your employer is enrolled in the scheme. This allowance is allocated to each parent and therefore a couple can buy £110 a week of vouchers.

By diverting your income into the vouchers, you can avoid income tax and NI contributions being levied on the sum and have the full amount to buy child care with.

This means that most tax payers on basic rate can save a maximum of £930 per year on income tax and NI.

Another way of protecting your income from taxation is through renting out part of your property. The government’s Rent a Room Scheme has a tax threshold of £4,250 per year.

 

You will need to charge at least that amount to a tenant per year before you have to pay any tax at all, making room rental an attractive means of tax free income generation.

Getting Some Guidance

This list of tax benefits is by no means exhaustive and it is simply there to show that you don’t need Take That’s accountant to simply be sensible with your finances and to reduce your tax liability.

Getting help and seeking advice can be one of the most effective investments, however, if you are looking to streamline your finances and reduce your overall tax burden.

 

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen

We give no endorsement and accept no responsibility for the accuracy or content of any site linked to this site.

How Divorce Could Affect Your Retirement Income

How Divorce Could Affect Your Retirement Income

Breaking up is never easy” but sometimes it’s the best you can do. The Abba hit “Knowing Me, Knowing You” was released in 1976. A lot has changed since then, but breaking up still remains a painful and potentially expensive matter.

The Basics of Divorce

There are three steps to getting a divorce.

Step one is to file a divorce petition. This currently carries a fee of £410.

If your spouse accepts the divorce petition, you can then apply for a decree nisi. This is essentially a statement which confirms that it is legally acceptable to end the marriage. If your spouse refuses to accept the petition and you wish to proceed with the divorce, you will need to attend a court hearing. You may require legal representation for this. The cost of this will vary depending on your needs.

If a decree nisi is granted, there is a 6-week cooling off period before you can apply for a decree absolute. The decree absolute formally and finally ends the marriage.

The Basics of Divorce Finance

It is perfectly possible and legal for two parties to divide their assets between themselves amicably upon divorce. Whether or not this is advisable depends on a number of factors.

Even if the divorce is amicable, it may still be worth both parties taking legal advice. Divorce can be a highly emotional situation. Having professional legal advice can help to keep both people focused on the practicalities.

There are basically four points to consider when looking at finances during a divorce.

  1. The needs of children.
  2. The immediate needs of the divorcing parties.
  3. Longer-term maintenance.
  4. The division of assets and debts

 

Where there are children in a marriage their needs will always be the highest priority. After this, both couples will need sufficient funds to meet their current needs. How much this will be will depend on individual circumstances.

It may also be considered appropriate for one party to pay another maintenance over a longer-term period. This is particularly likely if there are children. Even without children, however, the lower-income partner may be entitled to maintenance.

The division of assets and debts covers basically everything else – including pension savings.

How to Protect Your Finances in Divorce

Moving on financially after divorce is a bit like unscrambling eggs. Fortunately it can be done. You will need to disentangle yourself and your credit record from your spouse as quickly and effectively as possible.

One of your first priorities should therefore be to set up a current account in your own name. You should also aim to close all joint accounts as soon as you can. Separate lives mean separate bank accounts.

If you have joint debt, then this also needs to be dealt with. In an ideal world, the debt would be repaid as part of the divorce process. For example, joint assets could be sold and the proceeds used to pay the debt.

In the real world, this may not be possible. For example if children are to stay in the family home, then the mortgage payments on it will still need to be met.

Therefore the division of debts needs to be looked at just as carefully as the division of assets.

Divorce and Retirement Planning

Divorce can have a significant impact on your financial health in your later years.

First of all your existing retirement savings may well need to be split with your ex spouse.

Secondly you are each going to need to run your own home. This means that you may have the initial expenses of renting or buying a new property. It also means that bills which may have been split by two people now need to be paid individually.

We give no endorsement and accept no responsibility for the accuracy or content of any site linked to this site.

https://www.gov.uk/divorce/overview

https://www.gov.uk/divorce/file-for-divorce

http://www.divorce.co.uk/your-finances

Will You Be A Silver Entrepreneur?

Will You Be A Silver Entrepreneur?

silver-300x250Retirement isn’t what it used to be. A century ago, when old age pensions were first introduced, life expectancy was far lower than it is today.

After a life of hard manual work, most people of retirement age, enjoyed on average, only 31 percent of their total lifespan outside the labour market (this included childhood) passing away on average, at the age of 47.

The future for retirees today could not be more different, the years that follow the end of a working life are no longer counted in single digits but normally, decades.

For many, their retirements are a time of new opportunities when a lifetime of prudence and investment in pension pots pays off.

With the advent of new pension freedoms enabling savers to draw down large lump sums from their pensions, with the first 25% tax free and the remainder taxed at their usual income level, it might be possible for a generation of ‘silver entrepreneurs’ to emerge.

According to the Daily Mail, a tenth of the UK’s wealthiest retirees are now considering taking the plunge and setting up small businesses with their nest eggs and on average, the size of the pot they can draw from is £550,000.

This suggests that the desire to ‘start a business using my pension’, is growing amongst retirees.

 

A lifetime of expertise

 

Ending a career at 55 or 65 has often meant abandoning a lifetime of knowledge and expertise acquired in a valuable and important field.

With new opportunities to ‘use my pension to invest in a business’ opening to entrepreneurial pensioners, these skills no longer have to go to waste.

It might be that in retirement you can establish the type of small business or consultancy that you had always dreamt of, one which is not necessarily based on your work.

Some retirees, used to a life of frenetic activity in business, have found doing nothing in retirement frustrating and there is growing evidence that simply ‘giving up’ at 65 is very bad for mental and physical health.

 

Getting Advice

Even though many retirees might have had successful business careers, the prospect of cashing in up to a quarter of an entire pension pot in one go to set up a small business can be daunting.

Firstly, any investment is a risk, even if you think the business idea is sound and likely to work. Taking a risk when you are 35 is a different proposition to taking one when you are 65.

This means that, not only should you not gamble more than you can afford to lose (not that you can really ‘afford’ to lose any pension at all), but seeking professional business and investment advice is essential.

Many people who have worked in law, finance, engineering or other key professions or trades might have managed throughout their career to have successfully avoided ever creating a business plan or cash flow forecast.

Most local authorities run free business courses, which are always worthwhile investing your time in, but getting expert financial advice on your new business is also important.

Making the business as tax efficient as possible, ensuring that the right kinds of personal and professional insurance, or public liability insurance is purchased – these are the types of issues that a trained advisor can give you some guidance on.

Sources:

http://www.bristol.ac.uk/media-library/sites/cmpo/migrated/documents/wp140.pdf

(page 3 I.INTRODUCTION “On average, the 1900 cohort spent 69% of their total life in the labour market, …”

http://www.pieria.co.uk/articles/life_expectancy_and_the_stock_market

http://www.dailymail.co.uk/money/smallbusiness/article-3055539/One-ten-UK-s-wealthiest-55s-thinking-drawing-pension-funds-start-business-finds-study.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490

http://www.theguardian.com/small-business-network/2013/aug/02/starting-a-business-after-retirement

http://www.agewatch.org.uk/ageing-why-and-how/successful-retirement-staying-2/

http://www.thisismoney.co.uk/money/smallbusiness/article-2740547/How-tap-pension-fund-start-make-money-middle-age.html