We often have conversations with clients who have ‘too much money’. Now, please don’t get me wrong. As far as ‘problems’ go – this has got to be one of the better ones to have!
However, it is a problem nonetheless
In the context of Estate Planning, dying with too much money means that your Inheritance Tax liability will be larger than necessary.
More importantly, dying with too much represents missed opportunities that could have been enjoyed earlier in life.
Of course, before taking any drastic action, we will all wish to be sure that we have enough money for our own needs, both now and in the future. We will also generally wish to build in a healthy contingency for things like medical treatments or care needs.
However, even taking all of this into account, we often still identify that there is ‘too much money’.
This of course, gives us some fantastic options:
Spend More on Your Own Lifestyle
Many people underestimate their own spending power, often incorrectly feeling that we ‘don’t have enough’ or ‘we might need it for a rainy day’. This is a crying shame as often those same people have items on their bucket list that are going unfulfilled because they feel (again, often incorrectly) that they can’t afford it.
A well thought out estate plan will identify what spending capacity you will have for the rest of your life, while also providing a generous contingency for unexpected events.
What’s more, any money you spend – on holidays, home furnishings, dinners with the family – all of these items immediately come out of your estate – providing an effective 40% IHT saving on whatever you have spent – what’s not to like!
However, none of us wish to waste money. There is no sense in spending money just for the sake of it. Some clients that we meet do indeed have ‘too much money’, however they are fortunate not to have any bucket list items or unfulfilled lifestyle needs.
This then leads us onto some other attractive options as follows:
Give More (To Family or Charity)
If you don’t wish to spend the money yourself, perhaps there is value in making a gift to your children or grandchildren or a favourite charity sooner rather than later.
A gift can be far more impactful if it is given earlier in life, rather than waiting until we pass away.
Imagine you make a gift to your children when you pass away at the age of 85 or 90 – the children will probably be in their late 50’s or early 60’s at that point. They may well have had their own children who have grown up and moved out and they might well have paid off (or be close to paying off) their own mortgage.
A gift from your estate at this stage will undoubtedly be welcome, but may not be hugely impactful.
Now imagine you gave that same gift during lifetime at the age of say 65 or 70. The children might be in their 30’s and 40’s and struggling with the cost of young children, potentially private school fees and now higher mortgage rates.
A gift at this stage in life can, quite literally, be life changing and will have a larger compound effect through the life of the recipient.
If you don’t wish to give to your direct beneficiaries, then a gift to charity can also be a very attractive option. Not only are these lifetime gifts usually immediately exempt from IHT, it can also be hugely forfulling to see the impact that your gift has had during your lifetime.
Do Nothing
Of course, as with anything in life, doing nothing is always an option, but if you do so, we encourage clients to do nothing as a considered and documented decision. At least then your family will understand the reasons and rationale behind the decision and won’t simply assume that things were never considered because of apathy or inertia.
Whatever you decide to do, it is surely best to make these decisions in the context of a well informed Estate Plan. At least then you are making plans from an informed position and will fully understand the benefits and drawbacks of each potential course of action.
If you require any assistance with your own Estate Planning, please don’t hesitate to contact a member of our friendly team.
