Not many want to think about death but, being as inevitable as taxes, refusing to do so is selfish — since the ones you leave behind are lumbered with sorting out your mess — and foolish, because you could end up needlessly diverting a chunk of your cash to the taxman.
In today’s digital world, it could also cause swathes of your estate disappear altogether: with investments, bank statements and insurance policies all online, your demise could mean no one else knows the assets exist.
Now is also the very best time to be thinking of making a will. November is the annual Will Aid month — when thousands of solicitors around the country waive their fee for writing your will and ask you to instead donate £40 (or more) to nine charities including the NSPCC and the Red Cross.
Book the service now with a local solicitor via willaid.org.uk and avoid dying intestate (without a will), which could land your family with months of legal battles and heavy expenses or result in your belongings being syphoned off by the Government’s insatiable coffers.
Dying intestate can be particularly tough on unmarried couples, as surviving partners have no automatic rights to inherit.
Writing a will is also a good time to think of inheritance tax (IHT). The Government earned 14% more — £2.7 billion — from IHT last year. The tax is only imposed on individuals whose estate — home, savings, investments and possessions — is worth more than £325,000 or married couples whose belongings exceed £650,000. Any gifts to beneficiaries above that are taxed at 40%.
So Jason Witcombe, independent adviser at Evolve Financial Planning, says planning ahead is essential. “You don’t need to set up fancy loan trusts or discounted gift trusts or other things the financial services industry is trying to push,” he says. “There are easier ways to help your family while reducing a potential IHT bill. Taxpayers can give away £3000 a year as part of the annual gift allowance, and can give away unlimited money if doing so is both regular and coming out of ‘excess income’.
“The rule is you can give away surplus income as long as it’s not hitting your standard of living — although it’s not clear-cut. For example, a retired NHS doctor getting a £70,000-a-year pension who only spent £30,000 a year could give away £40,000 a year and it would be deemed outside of the estate the minute it was given it away.”
Small sums up to £250 can also be made to any number of individuals each tax year, and parents can give up to £5000 tax-free to a couple getting married. Grandparents can give £2500 to the newlyweds tax-free. Larger transfers of capital or investments bequeathed before you die are known as “potentially exempt transfers”. If you live for seven years after giving them away, they avoid inheritance tax.
Money aside, today there’s another aspect we have to think about around death: “digital lives” and what happens to them when you’re no longer logging in. Your online assets could even have significant value, according to Julia Abrey, partner at law firm Withers. “Broadly there are three categories: personal and sentimental items, financial information, and items which, of themselves, may already have a value or could acquire value in the future,” she says. “This may include our accounts and characters in online games such as World of Warcraft, our YouTube videos or domain names which may be significantly valuable in connection with business activities. They must be thought about.”
The first step is to leave online passwords accessible to others — but in a secure, controllable way. “Keep a record of your digital life so that your executors and beneficiaries know what there is and where to look for it,” says Abrey. It’s best not to record passwords in your will — most people change them regularly and would therefore require a codicil to amend the will.
“One way round this may be to use an online storage arrangement. You leave your executors and beneficiaries the access code to the online storage facility you have chosen to use and everything else is in there.” Providers who offer this service include Legacy Locker, AssetLock, Deathswitch, Entrustet, ifidie.net and Data Interest.
You might be concerned about the security of giving online banking and other details to an external site, so check to ensure you’re happy with their security measures. Think about all potential assets. “There are now some assets which only exist in digital form and which we might assume are worth nothing at all,” Abrey adds.
In 2009, a account on RuneScape, an online multi-player game, sold on eBay for £46,000 and the website www.armorybids.com, which runs auctions of virtual gaming goods, has a large group of characters for sale. “The biggest group available online is those in the World of Warcraft — at a range of prices. You, or more likely your teenage son, might therefore — simply by sitting in front of your laptop — create an asset at minimal cost,” says Abrey.
The same is true of revenue-earning YouTube videos; if you’ve a large store of digital assets, it is worth talking to your solicitor about them. “Digital assets are not usually specifically bequeathed and this may not be required,” says Abrey. “Many digital assets are normal assets which happen to be held in digital form — photographs or an online bank account. Other assets might only exist virtually.
“Include a specific gift in the will if there is a worry that a digital asset won’t be covered by other provisions of the will. Be aware, of course, that the legacy may fail if the terms and conditions mean that the asset cannot be passed on when you die.”
Where there’s a will there’s a way — to pass things on
October 9, 2012
London Evening Standard