Estate Planning and second families

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Hitting retirement when second families are involved can pose a lot of questions.

However, they are questions which need to be answered to ensure that financial affairs are properly addressed and dealt with appropriately.

  • Is it simply a case of identifying who brought the most into the second relationship?
  • Does this need to go to their original children or split equally with the second family?
  • How much financial responsibility do you want to take for someone else’s children?
  • How much do you want to provide for your own children?
  • How should the Will be structured?
  • How do you avoid the potential for arguments and challenges to your Will?
  • If you have a business that involves some children but not others, do you want to leave the business to the ones running it but compensate the others by bequeathing them other assets?
  • How do you protect your own capital for your children without depriving your surviving spouse of the capital to provide an income?

Life policies and Trusts are a couple of the vehicles which are available to help you get the most from your financial plan.  Cash flow modeling can help explain and demonstrate whether there is sufficient income to support two families.  Openness about your financial affairs is always preferable and help from experienced financial planners essential.

Often it is as much about the individual people involved; more diplomacy than financial but, nevertheless, seeking independent financial advice at an early stage is critical.

STOP PRESS: The inheritance tax (IHT) nil rate band will increase by 1% in 2015-16 to £329,000, the government has announced.  IHT is charged at 40% on the amount over the nil rate band.

And don’t forget that from April 2012 anyone who leaves over 10% of their estate to charity can choose to pay a reduced rate of 36%.

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