To make sure your family are adequately provided for throughout your lifetime and after your death, you should also consider succession planning carefully. It is important to think about how your wealth will pass and any adverse tax effects this will have on your loved ones.
When should you consider your estate to be high net worth?
‘High net worth’ or ‘HNW’ is a term which tends to differ from industry to industry and across different organisations. There is no legal definition.
HMRC’s high net worth department considers estates that are worth £20 million or more.
Meanwhile, professional advisors tend to consider estates that are worth £2 million or more to be high net worth because they usually require more complex tax planning. This is because the HMRC residence nil rate band begins to taper at this level, and estates worth £2.5 million or more do not benefit from the residence nil rate band at all.
Essential planning
Preparing for your future with a will and powers of attorney is important for everyone, but for a high-net-worth family it is even more essential.
A power of attorney is especially important to ensure that you can continue to enjoy a lifestyle to which you have become accustomed. You should also consider the need for planning, within a power of attorney and your will, for the continued running of a business, including factors such as how mental incapacity or death could affect shareholders and majority voting.
You should also ensure that your power of attorney allows for investment in the type of assets that are most beneficial to you and your loved ones, with appropriate levels of risk, and you should ensure that your will adequately plans around the potential loss of the residence nil rate band. Each member of a high-net-worth family should review their will regularly to ensure that they continue to make the most of ever-changing laws and tax rules.
Other planning to consider for a high-net-worth family
Lifetime trusts can be one of the most useful tools for tax saving purposes and to protect assets for descendants. Certain types of investments will attract additional reliefs which can significantly reduce inheritance tax, for example business premises, agricultural property, or woodland.
You may also wish to make generous gifts to loved ones while you are alive and well, so as to reduce the overall value of your estate. It is important to seek legal advice before making lifetime gifts, as some gifts may not achieve the tax planning results you desire.
The holistic nature of planning for a high-net-worth estate
Succession and tax planning for a high-net-worth estate is complex and varied, and planning of this nature requires an array of skills and expertise. A high-net-worth estate might include business interests, tax schemes, and overseas interests, for example. Your lawyer will, therefore, need to work with other professional experts who specialise in such areas to ensure you receive comprehensive advice. You should speak to a solicitor as soon as possible regarding your estate planning requirements so that they can involve whoever else may be necessary.
As well as potential interests relating to the assets themselves, effective succession planning should also include careful consideration of family dynamics. This might be ensuring that both sides of a blended family are provided for, providing trusts for loved ones who are vulnerable, or considering family members who do not get on in order to avoid a dispute later.
Part of the strategic approach for your estate may involve working with members of other departments within our firm. For example, our family team can provide cohabitation agreements and prenuptial agreements for children in high-net-worth families to protect the family legacy.
How we can help
As important as estate planning is for everyone, it is vital for a high-net-worth family to protect their wealth. Our solicitors will provide bespoke advice for your needs and help you to consider the best approach for you and your family.
For further information, please contact Sarah Wood or a member of the wills and probate team on 01905 721600 or via email worcester@parkinsonwright.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.