A Large Percentage of Homeowners are Not Securing their Family’s Financial Future

New survey findings have revealed that over a quarter of adults in the North West region have failed to undertake the necessary financial measures to safeguard their families in the event of their demise. The analysis, carried out by Lycetts Financial Services (LFS), has also brought to light that 34% of individuals are not fully comprehending the potential impact of inheritance tax on their loved ones.

Nick Straker, Divisional Director at LFS, underscored the prevalent prioritisation of property acquisition and asset accumulation over the consideration of long-term tax implications. He stressed the significance of assessing financial assets and circumstances, particularly at the commencement of a new year, to effectively strategize for the future.

The prevailing Inheritance Tax threshold, or “Nil Rate Band” (NRB), provides an exemption from taxation for the first £325,000 of an estate. This threshold can be further increased to £500,000 if the family home is bequeathed to a direct descendant. Furthermore, married couples have the potential to inherit a combined NRB of up to £1 million upon the passing of the last spouse. Notwithstanding these allowances, the recent upsurge in property values has resulted in more individuals surpassing the threshold and becoming subject to a 40% tax rate.

Straker also highlighted the option of making Potentially Exempt Transfers (PETs), which allow for unlimited financial gifting without incurring Inheritance Tax liability. Nonetheless, judicious consideration is imperative, taking into account future financial requirements and potential implications such as Capital Gains Tax (CGT) on transfer.

With regards to life insurance, Straker endorsed it as a short-term protective measure, furnishing financial security for dependents in unforeseen circumstances. However, he also advised that as children become more settled and financial needs become clearer, exploring PETs or other Inheritance Tax mitigation plans should be given due consideration.

Furthermore, Straker underscored the significance of accruing a pension fund, which remains tax-efficient and unaffected by Inheritance Tax. Seeking counsel from seasoned financial advisers and conducting an audit of assets were also highlighted as pivotal steps in planning for the future.

In conclusion, Straker urged the public to accord priority to arranging their finances, emphasising the weight of seeking professional advice and adhering to this resolution.