Your personal finance to do list

Published by Daniel Robertson on 15 June 2020

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With social distancing measures and working from home arrangements set to largely continue for a little while still, you may find yourself with some downtime during this period, where it could be worthwhile  putting your basic financial planning ‘house in order’.

We have put together a simple checklist of considerations below to help you with this.

1. Write a Will

With many individuals having not written a Will, this time could be the opportunity to do so. If you have young children, you may wish to appoint guardians in your Will.

For those who do already have a Will, this may be a good time to review and determine if it needs to be updated to reflect any change in circumstances to ensure it remains up to date and continues to reflect your wishes.

2. Execute a Power of Attorney (POA)

A POA is a legal document nominating someone to make decisions for you should you no longer be able make decisions for yourself. This could be as a result of having to spend time in hospital or care.

Decisions that need to be made on your behalf may relate to your health and  welfare, or managing your finances. There are two different types of Power of Attorney which can be used accordingly.

3. Collate old pension arrangements

Many individuals have old pension policies, perhaps from a previous employer, to which they no longer contribute.

These accumulated benefits could make a real difference towards funding retirement and can be tracked down using the governments free ‘Pension Tracing Service’.

4. Update pension beneficiary forms

Where the benefits under a pension are paid at the discretion of the pension trustee they do not usually form part of your estate for Inheritance Tax purposes and are not usually inherited under your Will.

Although not legally binding you should consider specifying who you wish to inherit your pension policies by completing an Expression of Wish form and review this upon any change in personal circumstances.

Dependent on the type of policy held and exact circumstances, it may be the case that nominated beneficiaries are able to retain the tax advantageous pension wrapper in the form of a beneficiary’s pension.

Please contact your pension providers to ensure a nomination is noted and whether this may require updating.

5. Review your state pension

A large proportion of individuals are unaware of how much they may be entitled to under the current New State Pension or previous entitlements and what date they would qualify for it.

This could form a valuable part of your retirement income and can be checked with the free government service: www.gov.uk/check-state-pension

6. Review old insurance policies

Insurance policies should be regularly reviewed to ensure you are adequately covered in the event you may have to claim. If you cannot locate your original policy documents, you should contact your insurance policy.

Whilst reviewing these policies, you should check if your life insurance policies are written in trust. Where policies are written in  trust it may mean that when funds are paid out they may not automatically form part of your estate and may not be subject to inheritance tax.

7. Consider new insurance policies

There is currently a ‘protection gap’ in the UK meaning a large proportion would be left financially vulnerable, should they or their spouse, pass away prematurely or suffer an illness or injury that would affect their earnings.

In addition to life insurance, individuals may wish to consider some form of Critical Illness, or Income Protection cover to protect them and their family.

8. Consider making gifts

We recommend that a periodic review of your financial position from an Inheritance Tax perspective is important.  Where you are looking at ways of mitigating your estate’s liabilities the best way to do this may be  through lifetime giving.

When considering making gifts of assets to your family or friends it is important to understand the tax implications of what you are proposing.  Inheritance Tax, Capital Gains Tax and Stamp Duty Land Tax may all be relevant on a non-cash gift.  For cash gifts only IHT needs to be considered.

Furthermore, making gifts must not be to the detriment of your general living and therefore considering your income and capital needed longer term must be considered as part of this process.

9. Making charitable donations

There has been overwhelming support for some charitable causes recently. If you are doing so it is worth remembering that you may be able to elect to make donations via Gift Aid, enabling the registered charity to receive and extra 25% at no extra cost to you.

If you are a higher or additional rate taxpayer you may also be eligible to claim the difference between the rate of tax your normally pay and the basic rate on your gross donation, so should always note this figure for entering within your self-assessment tax return.

There may also be inheritance tax benefits to leaving 10% of your estate in your Will to charity.

10. Budgeting

As a result of current circumstances many household’s income and expenditure has changed. For many there will be cost savings in the areas of transport, eating out and entertainment, which may present an opportunity to increase or start savings arrangements.

11. Create an ‘In Case of Emergency’ document

It can often be the case that family members are unaware of where important documents are held and/or who to contact upon event of incapacity or death.

This situation can be alleviated by containing this information all in one document, listing appropriate wealth managers, accountants and solicitors, with their contact details along with anything else you think may be relevant or could help should something happen to you.

Contact our Financial Planning team on +44 (0)1227 768231 or contact us should you wish to review or develop a strategy for achieving your personal financial goals.

The content of this article is for information only and does not constitute formal financial advice.

This material is for general information only and does not constitute investment, tax, legal or other forms of advice. You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

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