The Importance Of Planning For Retirement

Jessica Shore, associate at North West-based law firm SAS Daniels, advises on key legal considerations when preparing for retirement.

Tying up legal loose ends when looking forward to retirement may be the last thing on your mind whilst you focus on your finances and pensions, and more exciting things such as new hobbies and exotic holidays. However, making certain legal arrangements will give you peace of mind that your intended beneficiaries are adequately provided for, leaving you free to make the most of your retirement.

Having a will in place

Making a will means your estate passes to those you wish to benefit. A common misconception is that everything will simply go to your partner when you die. Wills can also incorporate trusts to assist with asset protection, which can be particularly important for second marriages where couples have children from previous relationships. When assets are left to a surviving partner, there’s a risk that they may later change their will and cut out the children/family of the partner who died first.

Trusts can also provide a mechanism for a nominated person to control the estate's assets and decide what to pass to the beneficiaries. This is particularly important if you have minor beneficiaries (e.g. grandchildren) or those with difficulties such as debt or going through a divorce.

Inheritance tax (IHT): maximising reliefs or exemptions
The nil rate band (NRB) is the proportion of your estate which can be passed on to your beneficiaries IHT-free. The residence nil rate band is an extra allowance where a person leaves their residence to their lineal descendants. Unless you qualify for specific reliefs, any assets over the available NRBs are ordinarily taxed at 40%.

Properly drafted wills can make maximum use of any reliefs or exemptions from IHT and ensure that such reliefs are not wasted, e.g., where the person making the will has assets qualifying for business or agricultural property relief, consideration can be given to ringfencing them in trust rather than adding them to the estate of their surviving spouse. If the relief is lost during the surviving spouse's lifetime, those assets will be added to the value of their estate, thereby increasing the IHT bill which could have been avoided.

Lasting power of attorney (LPA)

LPAs allow the people you choose to manage your finances and make decisions about your health and welfare, if you are no longer able to. Critically, LPAs can only be put in place where a person still has mental capacity. Without LPAs, a long and costly application is required for the Court of Protection to appoint someone to act on the persons behalf if they sadly lose mental capacity. LPAs ensure peace of mind that if capacity is lost, the trusted individuals you choose to manage your affairs can do so quickly and efficiently.

Jessica Shore

For more information on planning for retirement, contact associate Jessica Shore at SAS Daniels Solicitors’ Chester office on 01244 305 941.
www.sasdaniels.co.uk