Benefits, Taxation, Inheritance, Wills & Estate Planning
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Entitlement to Benefits & Changes To Assessed Income Periods After 5th April 2016
Benefit changes can have an impact on your financial position if you take out an Equity Release scheme. If you proceed we will provide you with a benefits entitlement report as part of the Suitability Report to establish any effect releasing the money will have on your entitlement to Pensions Credit, Council Tax Benefit and Working Age Benefit.
If you already have an AIP that is due to end between 6 April 2016 and 31 March 2019, it will end – either on the original date on your Pension Credit Award letter, or earlier if your household circumstances change. If you already have an AIP that is due to end on or after 1 April 2019, it will end early and will not be renewed. If you currently receive Pension Credit, the DWP will write to you telling you the new end date 6 months in advance. You can also find the new end date on the DWP website.
The Equity Release Council is keen to ensure you know what impact on any Pension Credit any Equity Release plan you enter into will have to avoid you taking decisions which may mean you losing out financially.
The use of an Equity Release Scheme will reduce the values of your estate however this may help reduce any Inheritance Tax. Currently the standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold. For example if your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000). Since April 2017 you have been able claim an extra £100,000 – rising to £175,000 by 2020 – against the value of your home if you are passing it on to a direct descendant. This will eventually allow a couple to pass on a £1m home tax free. Equity release could be used to reduce the taxable value of an estate. When the person with the equity release plan dies, the mortgage is paid off from the value of the estate, with IHT then due on the remainder of the value. If, after the loan is paid off, the property is below the taxable value, no IHT would be due. Ultimately, you need to weigh up all of the alternatives and with our help decide if this is for you. Whether these alternatives meet your requirements.
Wills & Estate Planning
The Financial Conduct Authority do not regulate on estate planning and will writing. If you do not leave clear instructions on how you wish to distribute your estate when you die, there is no guarantee that your assets will go to the rightful beneficiaries. This could mean that your spouse, partner, or even your children, lose some, or all, of their inheritance!
Without professional will writing, there could be further complications including:
- Children or Vulnerable Adults being taken into care while guardians are appointed
- Lengthy delays and disputes for your beneficiaries
- ‘Common Law’ partners not receiving anything
Will writers can draw up your Will and can call on specialist Will writers, if your Will is complex. While Will writing is not regulated by the Financial Conduct Authority not all Will writers are specialists in their field. It is recommended working with companies whose Will writers are members of S.T.E.P (The Society of Trust and Estate Practitioners). Frost Financial Services accepts no responsibility for the service provided by external Will writers.