What is Lifetime Planning and do I need to do it now?
So few people are prepared for their futures that the Government have announced a “Lifetime Planning Day” to be held later this year to raise awareness.
Most people understand the importance of having a Will/LPAs and tax planning in place and yet these things are often left until a person has reached old age, by which time it can be too late.
What happens if you leave it too late?
Wills and Lasting Powers of Attorney (LPAS)
An LPA is used to appoint an Attorney (a trusted person) to deal with your finances or make important decisions on your behalf. As your Attorney needs to be someone you trust implicitly, you can only make an LPA whilst you have “sufficient mental capacity.”
If you were to, for example, develop severe dementia, you may no longer be deemed to have mental capacity and the option of making an LPA is no longer available to you. Instead your loved ones must apply to the Courts for a Deputyship Order. These are more expensive and take around six months to put in place, and they impose onerous duties on the Deputy. So there are lots of advantages to making an LPA and not delaying.
The same condition that a person has “sufficient mental capacity” applies to making a Will. There is an urban rumour that an Attorney can alter a person’s Will during their lifetime if they lose capacity. This isn’t true! A person’s Will can only be altered (or put in place) during their lifetime after they have “lost capacity” if the Court agrees to make a Statutory Will for them. Again, this is an expensive and time consuming application.
Many people end up paying more Inheritance Tax than is necessary because they fail to look into tax planning early enough. Again, there is a common misconception that as long as you transfer an asset to someone else before you pass away there are no tax consequences. This isn’t true either! It is really important that you understand the tax consequences of making gifts so that you can time them in the most efficient way.
I don’t have time!
The thing clients most often say to me after their Will has been signed is: “This is such a load off my mind. I’ve been meaning to do this for years. I thought it was going to take ages so I’ve been putting it off.” My advice is strike whilst the iron is hot. Plan ahead. Don’t put your head in the sand. It won’t take long and then once in place all you have to do keep things under review.