Almost a third of homeowners in Wales are unable to secure their family's financial future
25.01.2024 – Almost a third (32%) of Welsh adults are not financially prepared to protect their families in the event of their death, new research has revealed.
The Lycetts Financial Services (LFS) survey also found that 32% do not understand how inheritance tax can affect their loved ones.
“Most people are focused on earning enough to buy a home and accumulate other assets over their lifetime,” said Nick Straker, LFS Division Director. “They think this is more important than considering the possible future tax implications.
“But the start of a new year is an ideal time to assess your financial assets and situation and make plans for the future. It may be the most important resolution you've ever made. not.”
Currently, the first £325,000 of an estate is exempt from inheritance tax under the 'zero rate band' (NRB). If the family home is also passed on to a lineal descendant, the NRB increases by a further £175,000 to £500,000.
If a couple marries and inherits assets from each other, the NRB can be inherited by the last person to die, up to a maximum of £1 million. However, due to the rise in property values in recent years, many people's assets still exceed the threshold and are subject to the 40% tax rate.
Mr Straker says: “A Potentially Exempt Transfer (PET) allows you to make a monetary gift of unlimited value without incurring inheritance tax. It must be lived, and the gift itself may be subject to capital gains tax (CGT) on transfer.
“Before committing to PET, you need to consider what your future financial needs will be.As life expectancy increases, how much income will you need to continue living the life you want? need to think.
“The problem with transferring assets is that you don't know how long you will live and there may come a time when you have to pay for care or a retirement home.
“The wisdom of doing PET when children are young, impulsive and may not yet have established themselves is also an important point to consider. In general, people tend to marry later, have children later in life. planning is becoming more difficult.
“However, life insurance is a good short-term measure. It protects your loved ones in the event of the unexpected, and it's relatively inexpensive. It's a great way to protect your loved ones in case the unexpected happens, and it's relatively inexpensive. As your children settle down and become more mature, you can plan for future financial needs. Once we have a better understanding, PET may be considered or other IHT plans may be considered.”
Mr. Straker also emphasized the importance of building a pension fund that can provide additional financial support to spouses and families.
“Pensions are tax efficient and are not affected by inheritance tax. You are never too young to start saving for a pension and you should aim to build up as large a fund as possible.
“My final piece of advice is to seek advice from an experienced financial advisor. An audit of all your assets is a good starting point for planning for the future.
“According to YouGov research, only 31% of people who made 2023 resolutions kept all of them. But organizing your finances is definitely something you should stick to.”