2 often-overlooked positives of leaving a “living legacy”

A study from Aviva reveals that 58% of over-55s wish to see the benefits of their legacy in their lifetime. Read 2 positives of leaving a living legacy here.

Throughout your life, you may not have spent much time thinking about your “legacy” – but as you get older, that may start to change.

Your family’s future financial viability may depend on the plans you put in place now, and while worrying endlessly about possible future eventualities may not be entirely helpful, making practical choices today could serve them well later.

In fact, you could already be taking steps towards leaving a lasting legacy, including:

· Making a will

· Setting up a trust for your children and grandchildren

· Ringfencing funds to leave as inheritance

· Discussing these elements with your spouse and children.

Interestingly, a new study by Aviva has revealed that 58% of over-55s would like to “see the benefit of their legacies within their lifetime”.

Read on to learn two positives of establishing your legacy before you pass away, and how we could help you make affordable plans to do so.

1. Helping your family thrive in the here and now

The Aviva research points out that, although the UK’s rising average life expectancy is positive news, it means that many people are inheriting their parents’ wealth at a later stage in life – some even in their 50s, 60s, and 70s.

While there is nothing wrong with leaving your wealth in your will, it could also be constructive to think about whether your children and grandchildren may benefit from receiving some funds earlier in life.

Indeed, by leaving a living legacy through tax-efficient financial gifts, for instance, your family members could:

· Progress onto the property ladder at a younger age

· Pay for higher education if they wish, such as master’s or PhD qualifications

· Cover school fees and other costs for their own children

· Live comfortably in a low-paid job at the start of their career

· Take time off work to start a family.

It could bring you great satisfaction to provide for your family in the here and now.

Plus, as you’ll read about in the next section, leaving a living legacy could have financial benefits for you, the benefactor, as well as your beneficiaries.

2. Reducing the value of your estate for Inheritance Tax purposes

One important benefit of leaving a living legacy could be that when you pass away, your estate’s value is lower than it would have been.

This might sound counterintuitive at first. After all, how could leaving less in your will be a positive thing?

Simply put, by reducing the value of your estate over time by offering wealth to your loved ones earlier in life, fewer assets may be subject to Inheritance Tax (IHT).

At this point, it is important to understand the rules around financial gifts. As of the 2023/24 tax year, you can give away up to £3,000 a year, split among as many people as you like, tax-efficiently. This means that the gift won’t normally make up part of your taxable estate if you died soon after handing it over.

So, if you know you have enough to sustain yourself in retirement and pay for any later-life care you may need, you could begin offering your loved ones tax-efficient gifts over the years.

Imagine that you gave away £1,500 to each of your two children every year for the next 20 years. It may not seem like an enormous financial gift, but over this time frame your estate would be reduced by £60,000 tax-efficiently.

When you pass away, a lower-value estate may mean that the amount of wealth caught in the IHT net is lower.

You can learn the ins and outs of making tax-efficient financial gifts in our recent insights that covers the rules in full.

Your Kellands financial planner can review your circumstances and help determine how much you can afford to give

Some participants in the Aviva study expressed that they were reluctant to leave a living legacy without knowing if they could still comfortably afford their retirement.

These are very understandable concerns, and in fact, it is crucial to review your finances and look at how much you can afford to give away before you begin leaving your living legacy.

Your Kellands financial planner can use cashflow planning software to enter your unique financial variables, helping you to determine:

· How much you may need to fund your lifestyle throughout retirement

· The effect that external factors like inflation and rising interest rates could have on your money

· The amount you can afford to offer to your children and grandchildren without compromising your own financial stability.

If you would like to help your family thrive now, rather than later, contact a Kellands financial planner to discuss these plans today.

Email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, tax planning, cashflow modelling, or will writing.

All contents are based on our understanding of HMRC legislation, which is subject to change.


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