Reviewing your finances this New Year? Don’t forget your will

With the New Year comes New Year’s Resolutions, and while it may not be the cheeriest of subjects, if you are thinking about kick starting your finances in 2022, you may want to consider putting a will in place. Dawn Mealing from Fidelity International’s personal advice team shares her tips on ensuring longer term financial planning is part of your financial new year resolutions.

Dawn Mealing, Head of Advice Policy and Development at Fidelity International, commented: “January is the perfect time to get your finances in order. This might mean planning a monthly budget, or setting up savings goals for the year ahead, but it should also include some longer-term financial planning. Putting a will in place, or updating it as your circumstances change, can often fall by the wayside, with many of us guilty of leaving it for another day. But a will is one of the most important financial documents you can have, as it ensures your wishes can be fulfilled and that your wealth and assets are gifted to loved ones once you have passed on.

“Making an appointment with a trusted financial adviser or solicitor is the best first step and will set the wheels in motion. They will be able to help with any questions or concerns you might have, and it is particularly beneficial for anyone thinking of their retirement, inheritance or wider financial planning. So, if you do any financial planning this January, my top tip would be to take that first step and get a meeting scheduled in.”

Fidelity’s research1 into inheritance and financial planning finds:

Views on inheritance:

• The average inheritance received currently stands at £70,639, with lifetime gifts (i.e. where wealth is given away during a lifetime) amounting to £58,439
• More than two-fifths (43%) of the UK population expect to receive an inheritance or a gift of wealth from family and friends - rising to almost two-thirds (65%) of young adults
• However, a third of UK adults (34%) who are planning on giving an inheritance or lifetime gift have no formal arrangements, such as a will, in place

Saving for inheritance:

• Two-fifths (41%) of people are working longer, spending less, or are even downsizing so that they can afford to give their loved ones an inheritance
• In terms of restrictions, 17% per cent are limiting their spending, 12% are downsizing their property and 12% are working for longer or delaying retirement

What to do if you’re confused about planning your will:

1. Value your estate

Before you even come to draw up a will, it’s best to regularly assess how much your assets and debts are worth, so you have the clearest idea on possible inheritance. Working with a financial adviser is a simple way to evaluate all your assets and work out how much you'll need in retirement and how much you have to leave to loved ones. They will help you consider the value of your home, personal belongings, savings, investments, pension funds and business assets versus any loans or mortgages you may have to give you a clear picture.

2. Consider life’s ups and downs

Life is often surprising, so it’s important to remember to reassess your will every five years to account for each new milestone. For example, if you find yourself remarrying in later life then a new will need to be drawn up – pre-existing wills are void on the date of divorce. It’s especially important to reassess how you want your estate to be distributed if there are additional beneficiaries to consider.

3. To gift or not to gift

Each tax year you are able to gift up to £3,000 in total without being subjected to inheritance tax (IHT). You can gift sums to as many people as you like, but it cannot exceed this amount. In addition, you can make wedding or civil ceremony gifts of up to £1,000 per person (increased to £2,500 for a grandchild and £5,000 for a child) and give as many gifts of up to £250 per person as you want, as long as you haven’t already used any other allowance on them. Gifts to spouses or civil partners, charities, museums, universities, some political parties, and sports clubs are also not subject to IHT.

Cover photo By kate_sept2004 pn Canva