Hanging loose in the nervous 1990s

In the era of the elastic family, new strategies are needed for rolling with life's punches, says Justin Urquhart-Stewart

What did Superman, Lassie and the Invisible Man have in common? Well, none of them proba bly needed a will. Superman didn't need to because he was indestructible, Lassie because she was a dog, and the Invisible Man - well, probably nobody noticed when he departed anyway.

Unfortunately for the rest of us it is an increasingly important issue. In days gone by our family structures were bigger, more permanent and reliable. We inherited from the Victorians the aspiration of the three- tier family of grandparents, parents and children. After the two world wars, social and financial changes led to the nuclear family, with husband, wife and for some odd reason 2.4 children, which has always sounded rather unpleasant.

Now in the nervous Nineties family structures have changed again. But this time they are far more elastic, primarily because of the increasing number of couples who do not wish to get married, and rising divorce levels. Additionally, financial pressures are likely to move grandparents back towards their children in order to form more financially viable units. Perhaps with job insecurity, early retirement and increased costs of care, family units will grow again to a new financial comfort level.

The elastic family can consist of partners married and unmarried, second husbands and wives, as well as sundry offspring scattered around the country. Grandparents can also be included as both families combine their limited resources. I wonder when the Government will introduce a tax break on our parents?

With this elastic family, it is all the more important to structure your finances to cover both their current demands and those for the future when you are not there. This is not impossible and in fact is becoming easier than before, but as ever you will need some help.

The biggest threat to the elastic family is inheritance tax. If you do nothing about your planning, 40 per cent of your estate on anything over pounds 154,000 could go in tax. Spouses can leave each other assets without paying tax, but that may merely compound the problem. Eventually the taxman will be waiting and he wants his share of every other transfer on estates that exceed the threshold.

Inheritance tax is a combined death duty and gift tax. Most gifts need not be taxed so long as you live for another seven years. As far as possible, married couples should also try to ensure that they both use up their own pounds 154,000 limit before either one goes over it.

However, you can further minimise this payment by various gifts of money around your family. For example, both husbands and wives can usually give each other as much as they like (but for an unmarried couple the law is not so helpful). In any one tax year you can give up to pounds 250 to as many people as you like - your elastic family need know no bounds. But you may only give away up to pounds 3,000 in any one tax year. This can also be carried forward in a tax year.

In addition, you can give your children pounds 5,000 when they marry, assuming you have anything left after paying for the reception. There are other exemptions, including gifts to charities and political parties. All of these can ameliorate the potential tax liability, but be careful that you still have enough to live on.

One consideration on inheritance tax is the possibility of establishing specific life insurance policies to pay the tax when the time comes. This does not save tax but provides the funds for the payment of it. If you have such life policies already consider putting them into a trust so that the sum insured does not become part of your taxable estate but goes directly to your beneficiaries tax-free. Your solicitor will show you how.

This brings into question the use of trusts. Often these appear overly technical but can in fact be an effective device for protection from tax. A trust is simply a method of transferring ownership away from your estate, to be held by trustees for the benefit of intended beneficiaries. This has the effect of potentially reducing tax liability. Trusts, whilst beneficial, need careful planning and professional advice in their construction.

Traditionally trusts have been seen as a means of grandparents passing on assets. These days, however, they have a new place. Trusts can be a very efficient way of separating and securing assets for specific individuals and children.

A key consideration when contemplating mortality is the control of our assets when we are no longer competent. Powers of attorney can ensure that plans are laid out in advance of illness or accidents. There are two main types, a general and an enduring power of attorney. In either case professional direction will be needed. They are a simple way of ensuring that an individual's affairs can be properly maintained. Failure to do so can result in much family difficulty at a very sensitive time.

Our wills and legacies don't have to be complex, and in fact I would counsel everybody to keep their inheritance affairs as straightforward as possible. Many an inheritance has been wasted in unnecessary expense of interpretation of the deceased's intentions.

Although there will be expense it is always essential to take advice. As with all financial products you can shop around. The inheritance laws are constantly evolving but that is no reason to delay. Try to ensure, however, that your advice also links into investment, insurance and taxation assistance and not just the legal elements.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
News
news
Life and Style
Jack Cooksey goes for the grand unveiling - moments before dropping his new iPhone 6 on the floor
iphone launch
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
football
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Finacial products from our partners
Property search

Two million first-time buyers are locked out

The drought in lending to people with low deposits has created legions of frustrated buyers, writes Emma Lunn

Leaving money to charity in your will could help reduce the tax bill for your loved ones

Next week has been designated "remember a charity in your will week", to put the focus squarely on the subject
Money is slipping through our fingers: the UK is falling behind other countries in the amount we put away

How to save money: UK is crashing down the European league table for putting money away

The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options

Energy firms found guilty of bad practice could have licences revoked under Labour government

Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator

A student's guide to financial survival: You don't have to drown in debt at university

Fresh from A-level delight, the moment does not have to be soured by students resigning themselves to thousands of pounds worth of debt in three years' time. Rob Griffin sees how to pass the university challenge

'Dismal' eurozone data sparks concerns

European Central Bank chief Mario Draghi is under pressure to launch promised stimulus before the EU slides further
Love but not marriage: property is one area where cohabiting couples are in danger of losing out

How couples can protect their financial interests when cohabiting

People who simply live together cannot assume they have the same rights to each other's assets as spouses or civil partners. Michelle McGagh sees how they can protect their financial interests

India could be jewel in the crown for investors

With a new government and an ambitious prime minister, the country offers the prospect of strong returns. But there may be hiccups ahead, warns Simon Read
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Audit Manager Central Functions

    To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week