Your Money - Your Future
How to Pandemic Proof Your Will and Estate PlanBack to News & Views
· Critical illness cover
· Joint life cover, on either a first or second death basis
· Whole of life cover, which does not have an expiry date
Being realistic, the Coronavirus pandemic does not mean you are more likely to die. This is particularly true for the families who can most benefit from life insurance, as they are less likely to fall into any of the vulnerable categories. In fact, staying at home is likely to reduce the risk even further, as road injury is by far the biggest cause of death in previously healthy people.
But one of the few positives of a pandemic is that it can open up discussions about risk and what would happen in a worst-case scenario.
Life cover is relatively inexpensive and can be set up remotely so there is no reason to delay.
Adding a Trust means that benefits can be paid out more quickly and without Inheritance Tax. It is worth seeking advice to determine if a Trust could benefit you.
Powers of Attorney
A Power of Attorney (POA) allows you to appoint someone to deal with your affairs on your behalf. This can cover both financial matters and issues around health and welfare. It must be registered with the Office of the Public Guardian, but only comes into play if you are incapacitated and unable to deal with your own affairs.
The rules and terminology are different in England, Scotland and Northern Ireland, but the principles are the same.
A Power of Attorney is especially important for elderly and vulnerable people, although they must have the mental capacity to make their own decisions when the POA is set up. The benefits of having a POA are:
· There is a plan in place if the donor becomes unwell or mentally unable to deal with their affairs. It is much more difficult to make arrangements after this happens, particularly during the current crisis.
· It allows the donor’s day to day banking and investment management to be taken care of without the need for them to sign documents or make stressful decisions.
· Decisions can be made about the donor’s medical care, including the painful end-of-life choices that are best made by a loved one.
Having a POA in place during a crisis can make difficult processes much more straightforward.
The Challenges of Social Distancing
Of course, with offices closed and the requirement to avoid face-to-face contact, there are practical challenges in making and executing a Will or Power of Attorney. The Law Society is considering this, but there are still some challenges.
Legal professionals are deemed to be essential workers, so most law offices are still fully operational on a remote basis. Many will take instructions by telephone or video meeting and documents can be exchanged by email.
The main obstacle is finding a witness to sign your legal documents. A witness to your Will cannot benefit from it, which normally means that members of your own household are excluded.
Some other options include:
· If you are still working outside the home, you could ask a colleague to witness your signature.
· You could also ask someone you have contact with as part of their job, for example a healthcare, bank, or shop worker. Of course, only ask if the person actually knows you, and always be respectful of their time.
· A trusted friend neighbour could also act as a witness, providing you remain at least 2 metres apart, each use your own pens and don’t make a social gathering of the event.
· Gloves, masks and extensive hand washing can also help to reduce the risk. While the risk of the virus living on paper is very low, you may also wish to ‘quarantine’ the documents for a couple of days before touching them again.
· Do not arrange a signing if you or any of your witnesses are displaying symptoms.
Prepare for Higher Taxes
Considering the massive cost of keeping the country running during the pandemic, it is reasonable to expect taxes to rise in the near future.
Entrepreneur’s Relief has already been cut and we may see further increases within the Capital Gains Tax regime.
Inheritance tax may be another key target as it is a way of raising revenue without impacting quality of life for those who may already be struggling.
While good tax planning is always sensible, we may see greater demand for IHT planning solutions as estates face higher tax bills.
There are a number of solutions for reducing IHT, for example, making gifts, setting up Trusts or selecting investments, which benefit from Business Relief (although many of these are high-risk).
Charities will also be appreciative of support in the wake of the pandemic. Charitable gifts are immediately outside your estate and can also benefit from tax relief if you claim Gift Aid. Donations made via your Will can also reduce the IHT liability on the rest of your estate.
You should never give away more than you can afford or take high-risk strategies that you wouldn’t otherwise contemplate. But the potential for increased taxes may mean that IHT planning is higher on the agenda.
Please don’t hesitate to contact a member of the team if you would like to find out more about estate planning.
The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts