Change happens – manage your finances to face change head on

Change happens in every aspect of our lives. As the years go by, marriages take place, children are born, careers take twists and turns, we move home and events out of our control such as government policies and sadly the death of loved ones all have an impact on our lives. Change is a fact of life, but you can make financial plans where possible to manage the impact of change.

Take Inheritance Tax (IHT) for instance. With some careful planning, those with estates currently worth more than the nil-rate band can legitimately reduce their IHT liability, or possibly pay nothing at all.

Gifts of assets are normally included in the net estate for IHT purposes, if they were made less than seven years before death. However, these gifts are ignored if they total less than £3,000 in any one-tax year. This means that you can make gifts of up to £3,000 among others in any tax year without attracting IHT. The £3,000 can be given to one person or it can be split between several people. If the exemption is not used in one tax year it can be carried forward to the next year, potentially enabling a couple to remove £12,000 from their joint estate in just one tax year.

Making a will is also imperative to managing change in your life. However shockingly 61% of adults in the UK are without a will.** It’s a concerning figure, why are so many people prepared to think about their pension, investments and life after work, but not about the legacy they wish to leave for their loved ones?

Retirement is one of the biggest changes that can happen to most of us, but how can we manage this change to make the best of it? The maximum State Pension you can receive under current rules is £164.35 per week (2018/2019 tax year). However, it’s a little-known fact that retirees can defer their State Pension and get a higher income when they claim it later in retirement.

For someone who has sufficient income or savings to live off in the meantime, delaying the State Pension can be attractive because the benefits can really add up. For instance, your pension will rise by 1% for every nine weeks that you defer taking your State Pension, which works out at just under 5.8% for every full year you delay claiming it.

Retirees looking to defer their State Pension should always seek appropriate advice as deferring could affect other areas of financial planning and some other welfare benefits.

For your complimentary guide to Wealth Management, Retirement Planning or Inheritance Tax Planning, please contact Stephen Palmer of Cranwell Wealth Solutions Ltd on 01825 767568 or email Stephen.palmer@sjpp.co.uk or visit www.cranwellws.co.uk

** Kings Court Trust, A changing landscape 2017, accessed 7 March 2018