Estate planning for single people and couples without direct descendants

The growing number of potential clients whose circumstances don’t conform to the ‘traditional’ family model represents a new and exciting challenge for estate planners.

Single people and couples without direct descendants, who’ve either chosen not to have children or found they are unable to, often require a different approach to their estate planning than those with obvious successors – and Legacy Software from CTT Group can help.

No kids, no will?

The first step is convincing potential clients who fit these categories that they need to write a will at all. The common misconception is: ‘If there’s no-one to inherit my estate, then there’s no point in drafting a will, is there?’ But this couldn’t be further from the truth.

Although financial concerns for people who don’t have children are very different from those who do, it’s no less important to make future wealth and estate plans that don’t include kids. Couples and single people who don’t have any direct descendants still need to consider:

• Who they wish to benefit from their estate when they die and any inheritance tax due
• How they will pay for their future care if needed
• Who will be responsible for their wealth and future care if they aren’t able to make decisions for themselves

Estate planning can be a difficult journey to embark on when you’ve never thought about it before. With CTT’s Legacy Portal app, advisers can show potential clients what approaches will work best for them using personalised in-app animations, illustrating the effects of different products on their estate planning.

These videos are an emotive visual tool for demonstrating the benefits of good estate planning and the potential pitfalls of not having a will in place.

Inheritance tax planning

With no immediate successors, it’s common for people who don’t have children to think Inheritance Tax (IHT) is something they don’t need to worry about. In fact, IHT is an even bigger consideration for those without direct descendants as there are fewer exemptions available.

The Nil Rate Band gives everyone a tax-free allowance of up to £325,000 before they must pay Inheritance Tax (IHT). The Residence Nil Rate Band (RNRB) gives those who are leaving their main residence to their children, step-children, or grandchildren an additional £175,000 tax-free allowance. The Nil Rate Band (currently set at £325,000) and RNRB can also be transferred to spouses or civil partners. This means people with children who are married or in civil partnership pay significantly less IHT on the same size estate than those who are not in a relationship and/or do not have children.

Proposals to extended IHT exemptions to include siblings who cohabit are currently being put forward by the House of Lords. However, these proposed changes are subject to certain criteria and may not automatically apply.

With fewer tax-planning options available to people who do not have children and/or are not married or in a civil partnership, it’s even more crucial these potential clients get the professional advice they need if they wish to reduce their IHT bill.

Legacy Will Writing Software has access to over 90 legal products and services to help you achieve the most tax-efficient solution for your client, including those who are single and/or do not have direct descendants.

Meeting clients’ wishes

If a person dies without a will in England or Wales, their estate is shared according to legal default. In cases where there are no children, but the person was married or in a civil partnership, the spouse inherits the estate. Where there is no spouse and no children, the estate is allocated to the deceased’s next of kin in the following order:

1. Parents
2. Siblings
3. Half-siblings
4. Grandparents
5. Uncles and aunts
6. Cousins
7. Half-uncles and aunts
8. Half-cousins

If there are no surviving relatives, the estate goes to the crown.

Although this process may seem clear-cut, it can cause a lot of upset and complex paperwork for those involved at what is often a difficult time. It also negates any personal preferences the deceased may have had about the distribution of their assets.

Without a will, there is no way to ensure who does – or who doesn’t – receive funds from an estate. Whether a person wishes to leave everything to a close friend or charity, or make sure certain family members do not inherit, a will that’s backed up with a clear letter of wishes is the only surefire way to do this.

Making a will avoids potential conflict between would-be beneficiaries, including siblings. It also provides peace of mind and an opportunity to ensure other wishes are respected, such as funeral arrangements and who will care for any surviving pets.

Estate planning is a very personal practice, and much consideration should be given to the individual who’s making their will. To ensure the client’s wishes are met and both client and adviser are protected from any potential future contestation, Legacy Software provides both a Will Clarity Statement and an Execution Statement. These documents, which are created at the same time as the will and signed by the client, ensure the same level of due diligence is carried out for every client and there is a clear record of their preferences regarding their estate.

Later life care

Appointing an LPA is something everyone needs to consider; no one knows what the future holds. Choosing who will be responsible for your health and wealth should you become incapable of making those decisions is a vital, unavoidable part of life planning.

Whether or not a potential client has children, appointing an LPA is essential to make sure they have a reliable, trustworthy individual to manage their finances and welfare should the need arise. With Legacy Software, you can draft client LPAs quickly and easily and let CTT’s professional support team handle its registration.

It’s also essential clients have sufficient funds available should they require any specialist treatment or care, such as assisted living, and ringfence any assets that may be protected from care fees with the appropriate trusts. CTT Group has over 12 flexible trusts available to its advisers, so you can offer your clients the very best tailored solution to meet their future needs.

Conclusion

Without the pressures of providing for dependants, estate planning can fall by the wayside for single people and couples who don’t have children. These potential clients are often neglected; however, there is still ample need for estate planning services among this demographic, which is largely uncatered for. This is an opportunity for advisers to grow their portfolio and hone their specialisms.

Using Legacy Software and with professional support from CTT Group, we can show you how to broaden your client base and capture this undervalued market. To find out more, contact CTT Group.