Hoxton Life

Estate Planning Explained: How to Protect Your Family’s Future | with Jack Povah

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Do you know what happens to your assets when you pass away? 

Many people assume that estate planning is only for the "uber wealthy" or a way to avoid inheritance tax. On a recent episode of the Hoxton Life podcast, we sat down with one of our specialist estate planning advisers, Jack Povah, to demystify trusts, wills, and estate planning.

In this powerful conversation, Jack shares why estate planning is so important for everyone and how it's possible to "carry on managing assets even after you've passed away". He breaks down the importance of taking that first step, dispels common misconceptions, and explains why a proper plan can be easily updated as your life changes.

This episode is a must-listen for anyone interested in financial education and securing their family's future. What's one question you have about estate planning?

Let us know in the comments below! 👇

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Speaker 1:

um, it's a bit of a morbid way of saying about kind of control from the grave. It's like you can carry on, uh, carry on managing the assets even after you've passed away.

Speaker 2:

So with me today I've got jack pover. He heads up our legal division. He's step qualified, which means he knows all things uh, trust, wills and protection related, and he's the fountain of knowledge on all of this stuff for our clients at our company, helping clients globally with their, with their assets.

Speaker 1:

There's nothing that you, that you can't cover. You know everything you know. I keep using the word estate.

Speaker 2:

That just means everything you own you know, people need to understand that trusts aren't just for trying to dodge inheritance tax and they aren't just for the uber wealthy now.

Speaker 1:

it's one of those things that no one wants to speak about, because they look back to themselves when they were 18 years old, 21 years old, and think, well, you know, if I inherited a million pounds, you know when I was that old You'd have some fun. Yeah, to put it one way, you'd have some fun.

Speaker 2:

And you know, one of the other things that we also talk about is you know, we want to give with a warmer hand rather than a cold hand. Yeah, what we call a failed gift.

Speaker 1:

Yeah, millions and millions of pounds every year are actually clawed back by uh hmrc in uh inheritance tax who do you want your assets to go to when you die?

Speaker 2:

who do you want to be able to make decisions for you? If you can't, how would you feel if your spouse got remarried and all of your assets went to that new person's family? How would you feel if, when you pass all of the money you've given to your kids, they then get divorced and it all goes to their ex-partners? Probably not great, is the answer, and in this video video and interview on hoxton Jack and I are going to be able to help you answer these questions.

Speaker 2:

So with me today I've got Jack Pover. He heads up our legal division. He's STEP qualified, which means he knows all things trust, wills and protection related, and he's the fountain of knowledge on all of this stuff for our clients at our, at our company, helping clients globally with their, with their assets. So today we're going to have a broad range in discussion on the key areas that people need to consider to protect their assets. It's great building it up, but ultimately, if you can't retain it, it's all pretty pointless along the way. So there are many things to take into account and Jack is going to help us get to understand these. So, first off, jack, let's start with what are the concerns and areas people get wrong when they're looking at their assets people get wrong when they're looking at their assets.

Speaker 1:

I'd say the biggest misconception generally is what people think will happen. Without the correct planning in place, so without wills in place, without powers of attorney in place, a lot of people I speak to have misunderstandings of what will automatically happen. I guess the most common example of that is probably the common misconception that everything will automatically go to my spouse when I pass away. Therefore, I don't need to do any planning because that's what I want to happen. That's not the case. Every country has different default laws of what will happen with your assets when you pass away, but it's pretty rare, especially once you're over a certain threshold, that they will 100% pass to a spouse, depending on what family members have survived you. So if that is what you want, generally, you need to be putting some planning in place which would come in the form of a will.

Speaker 2:

So, yeah, interesting. I think the other thing that we normally see because obviously we're looking at this from a global aspect as well is that people in the UK or people from the UK initially, or from the US, believe that their will, that they have in their home country, will cover absolutely everything, and that's not the case is it, yeah, 100 percent.

Speaker 1:

I mean that's where we can really help out, because that's one thing which a lot of people aren't aware of how it works. I mean, every country, you know, has different laws, different inheritance processes. Um, I hear a lot people come to us either, yeah, thinking that their uk will will automatically survive even if they've got assets um, abroad. That's particularly relevant for people who have assets in places like jersey, isle of man, chimal islands. They they see that as closer to the UK so they just assume that that will work there.

Speaker 1:

But, yeah, I know every country's got their own rules. Some countries would pretty much require that you've got a separate will there. Sometimes there is acceptability of foreign wills. So this is kind of what we help clients work through the pros and cons of having separate will wheels in place for every country around the world versus the strategy which a lot of clients try to push on the meetings with me is they'd most people prefer just to have one international wheel which covers everything. But, uh, for most people they're pretty significant drawbacks to to that strategy, I'd say, and it doesn't actually exist really.

Speaker 2:

No, no, no, yeah, no, it's these kind of mythical spiritual animal spirit.

Speaker 1:

It would be nice and easy if you could go and make an international will. But no, not the case, unfortunately.

Speaker 2:

And what happens when remarried, because I know this was a really interesting topic and it hit me with my well, it actually affected my dad. So my um, my dad's uh, dad, my nan, passed away when I was much younger. Uh, my grandfather got remarried, um, and then there was problems with splitting the assets down later down the line and that's you know that's quite a typical thing. Like spouses do get remarried. It's very rare that people die both at the same time and it's normal for you. You want your spouse to be happy. You don't want them to sit at home wallowing and being there really upset about you forever. So you know, they go on, they find a new partner. What happens in that situation?

Speaker 1:

Yeah, I mean, what I look at with clients is what are the threats of your assets not going in line with your wishes? And that is one of the number one reasons it's really up there in terms of percentage chances of your assets going somewhere you wouldn't want them to go. So, to kind of walk that through, I guess it goes back to misunderstandings and people being unaware of how things work. Most people don't really think about the fact, or aren't aware of the fact, that if you've got a will in place and you get married, you no longer have a will in place. Wow, so people will go with the strategy now we'll put standard mirror wills in place. Now they think everything's fine.

Speaker 1:

First person passes away, survivor still has a will in place that has the assets being passed to their, their children, but yet they get remarried, which is not uncommon. All they don't realize that they no longer have a legally valid will. So then it goes back to your assets are going to be distributed in line with these default laws that we were speaking about before, which is usually going to pass the majority of them to this new spouse, not to your children. And I see that day in, day out. It's really, really common. I don't think I've had a week here I've not heard at least one person with a story of that happening.

Speaker 2:

It's crazy, isn't it? Because when we talk about this to clients, their eyes kind of light up, and it's normally a husband and wife scenario, and then you pose it to one of them and say, well, how would you feel if the assets then went on to the person that they get remarried to? Obviously, no one likes to think of their spouse with someone else, but unfortunately, these are the harsh truths that you need to take into account and you can protect, on which, obviously, we'll come on to. The next one. That's always interesting for me is I have joint bank accounts with my wife. I've got joint investment accounts. We own property jointly. Joint bank accounts with my wife. I've got joint investment accounts, we own property jointly. And it's just natural for me to think that, yeah, do you know what? Because we have a joint bank account and I get hit by a bus, I'm okay, I'm living still, but I'm basically incapacitated mentally. I'm not there. Naturally, my wife's just going to be able to deal with all this.

Speaker 1:

Yeah, I mean that's another common misconception.

Speaker 1:

They think that someone with a certain relationship to you spouse, children they think that that gives them a lot more standard powers than is the case, when, in reality, regardless of your relationship to someone doesn't automatically mean you can deal with that person's assets on their behalf.

Speaker 1:

So, if you work through a typical financial plan I work alongside most of the financial planners here and they know work through a typical financial plan, you know I work alongside most of the financial planners here and they're working through a plan with a client where you've got various pots of money, you've got 401k, you've got uk pension, whatever it might be, and there's a plan to draw down from certain places throughout retirement. Um, it's quite a simple question to post then, really. So, okay, well, how is that plan going to be effective if one half of the assets are are frozen for? Yeah, what could be circa 6-12 months, however long it takes to get this approval, you would need to get through a court of protection, um, if you've not got a power of attorney in place. Um, so, yeah, no, the, the, the uh chances of you of the financial plan not being negatively affected through effectively, one half of the assets being frozen for that time period is pretty low, so it's definitely important consideration.

Speaker 2:

It's tough, isn't it? Because I think a lot of people just kind of just, you know, you don't think about these things, and I think I don't know whether it's like because you don't want to think about them things, and I think I don't know whether it's like because you don't want to think about them. And when, like, people start mentioning wills and lasting power of attorney or trust and stuff, you just automatically that's right, yeah, great, like whatever kind of thing. It's kind of boring. But actually, when you boil it back down to the problems, which are, you know, the remarriage problem that if you're becoming past hated, these all of a sudden start to become, you know, it starts to become really big. The other one's kids, like most people with wealth, want their kids to inherit that wealth. And you know, yes, you can pass it on to them, but once it's theirs, it's theirs. And if they're married and they get divorced, then you know, essentially that can be split.

Speaker 1:

Yeah exactly, and it's not just that, it's yeah, what will they do with that wealth? What happens if they get divorced? But also something that I hear a lot of the time is well, I don't know when I'm going to pass away. Depending on how old my children are might not want them to inherit this big lump sum all in one, because they look back to themselves when they were 18 years old, 21 years old, and think well, you know, if I inherited a million pounds, you know when I was that old, it's, uh, you know you have some fun, yeah, to put it one way, you have some fun.

Speaker 1:

So, um, you know exactly. So it's about, you know, putting a bit of planning in place can have a bit more control on how things are used. The protection level, um, again, what happens if anything unfortunately happens to them, if they have financial difficulties, if they have a divorce, for example, without any planning in place? There are some pretty serious threats of huge, huge proportions of your wealth that you've built up going to someone which, as of today, you might not even know them.

Speaker 2:

Yeah, it's not ideal and it's not really where you want your assets to end up. It's following that bloodline, isn't it? The other big one that I think a lot of people get really concerned about, and rightly so, is your later life care costs. I mean, that's a real thing. We see that again. That is not cheap, unfortunately. My wife's grandmother is currently in care. Luckily, they have sufficient assets that they can support my wife's mum's mum, but a lot, of, a lot of people. It just completely erodes the asset base and houses have to get sold all of this kind of stuff, doesn't it? So there are other problems that people don't necessarily consider now, is it sniper's alley or something they say like from 40 to 60 as well is when you're more likely to get critical illnesses, and things like this.

Speaker 1:

Yeah, exactly, it's not one of those things that people want to think about. And again it goes back to no one ever thinks that anything like this would happen to them. But again, if you look at it objectively which is what we have to do and what we help our clients to do is the chances of any of these things that we've spoken about happening. It's not the most unlikely thing in the world, unfortunately. So if you look at care home costs, for example not planning for an expense that big the average is around £1,000 a week.

Speaker 1:

It's something like that, isn't it? And that's the amount of clients that I've heard where it's £4,000, £5,000, £6,000, plus a week on care fees for two, three years. It's hundreds and hundreds of thousands of pounds. I've had some clients where they've had family members in over a million. So if you've not not planned for this of you know how is that going to be paid for? You know, are you happy for the home to be sold? To pay for that, you know, is a common example. Um, you know, it's a really big area which should really be looked at more often and that's.

Speaker 2:

It's like a lot of those emotional assets that are like. You know that you've worked hard for that, you've had your kids in, that people have grown up in and you really want it to go down to the next layer or the next generation. It's just eaten up, gone next, which is very morbidly put. But again, I think you summarise it as you have to look at these things objectively and what you say there is so, so true. So you know, like we've talked a lot about all of the problems and then we, you know, a lot of the times people do consider this, but then they start down the DIY route, which you know is good.

Speaker 2:

Having something is better than nothing in my opinion. Having something is better than nothing in my opinion, but at the same time, a lot of the time it doesn't actually cover off what you wanted to or what you expected to, does it? So you know, let's look through some of the main things that people will do. So, as far as I see it with my clients, they will go into the Internet and then they will look for a will. I can get that for 99 quid, um, great, put in my information or even for free, and I'm sorted, yeah, and that's not the case.

Speaker 1:

No, I mean look, I mean, I think I probably agree with you that having something's usually, you know, 99 of the time, better than nothing. But the caveat to that is, you know, quite often we'll run with clients, kind of a complimentary review of their estate plan, and we'll look through their wills and oftentimes, where it has been a more of a DIY solution, where there's not been a professional involved if I simply walk through, okay, well, these are your asset base and this is your family situation and walk through the will in the various scenarios of who passes away first, so on and so forth, in the various scenarios of who passes away first, so on and so forth, it's really common that we get to a point where it's oh actually, no, I didn't realize that that's what would happen, how this will is currently written. So, again, without having a kind of a professional involved, it can lead to again going back to the misconceptions part of oh actually, I didn't realize that that's how that was written, and there's there's oftentimes with DIY, there's not as much protection against um, you know, contradictory clauses and not accounting for things that are specific to them and their scenarios. Um, so so yeah, again, it's probably better than having nothing, but I'd say having a professional involved is is probably the way to go. Um, one thing I would say on that, again we've mentioned before, it's a really easy can to to kick down the road. Yeah, it's a really easy can to to kick down the road. Yeah, it's one of those things that no one wants to speak about.

Speaker 1:

One of the things I'm most proud of, though, after working with the clients here, is one of the most common comments that I get at the end of the process which you know isn't a huge laborious process is yeah, that was so much easier than I thought it was going to be. I don't know why, why I've not done this sooner. It's a giant weight off my shoulders, you know, and within, you know, a few meetings with me in a couple of hours of their time. It's all sorted, you know. It's definitely something worthwhile doing.

Speaker 2:

Yeah, 100%.

Speaker 2:

It's definitely worthwhile doing it, and I think that you've got professionals as well, and I think we need to kind of look at the different types of professionals that you can go to.

Speaker 2:

You can obviously go to a solicitor to get this done, or obviously you can go to someone like your good self, who, I would say, is more advice. So, with a solicitor, if you go to them, typically this is again what I found and you ask for a will, you will get a will, and that's because there is not a huge amount of advice in. You've gone in looking for a specific task or a specific thing to be completed and you've got that, which is great, but that might not take into account everything else. Now, a good solicitor will do that, but a lot of the times, unless they specialize in this day in, day out, um, it's difficult to uh, you know, it's difficult to understand what the real problems are yeah, exactly, I mean, we've got people here that specialize in-house tax team, legal team, financial planning team, people who specialize in UK assets, us assets, all across the world.

Speaker 1:

So having that all so close at the end of each end of the desk, having been able to account for these things, is usually, I think, would lead to a better client outcome. Yes, go and get a will in place is fine, um, but yeah, having a kind of a team that can account for, you know, inheritance tax, capital gains tax, international impacts that we mentioned before, um, you know is is going to be a much better way to go I think the other thing, that's, you know that people often think as well and this is a this is a misconception that I see as well is that this stuff is just too complicated.

Speaker 2:

And when things generally get too complicated, people shy away from it, don't they? They kind of just like you know, kind of scrunch up and kind of go into a ball, and we see that a lot with trusts. Trusts are really useful protection and we'll come on to them in a bit more um in a minute. But you know, people need to understand that trusts aren't just for trying to dodge inheritance tax and they aren't just for the uber wealthy.

Speaker 1:

No, no, exactly, I mean just on your first comment about people shying away from things what I always say to clients when I do see that it's getting complicated, they're trying to think through their wishes, but then they're trying to themselves account for tax or do I need a trust to do that or to do well? I always say to them your job really is to outline what your wishes are. Our job is to then go away and put together a suitable estate plan which achieves those wishes, whether that's trust, whether that's will, whatever it might be. Um, so that's kind of what we're here for to take away away any complexity. But again, second point, the complexity isn't actually as bad as most people would think With trusts. Again, it's a really common misconception I've not got an inheritance tax liability, so I don't need a trust.

Speaker 1:

Again, people think that that's all trusts are for, when really that's probably very, very. One small part of it, probably very, very. You know. One small part of it. It's all about control of assets, asset protection, all the things we've mentioned before regarding you know, children, potentially vulnerable beneficiaries, what you would like to happen with these assets after you've passed away Some people.

Speaker 1:

I speak to say, okay, well, I've got an estate. It's worth X amount, happy for that to just fully form part of the personal estate of my beneficiary, and whatever happens with it happens with it. I do hear that, um, again, a lot of people I speak to, though they would be bothered if half of it was all of a sudden lost to a divorce or it was squandered away on something else. So, yes, it's more so a control of assets, protecting assets against these outside threats, as well as tax planning, which which they are great for as well. But, yeah, no, it's not like you've got a minimum net worth to be able to use a trust. Really, your net worth is not much to do with whether a trust is a good idea for you at all.

Speaker 2:

Really, yeah, and there's not huge maintenance costs with these things on an ongoing basis or anything else like that is there?

Speaker 1:

No, exactly, I mean there's a couple of different groups of trust that they would fall into, but a lot of times, the type of trust such we're helping clients with, uh, especially trust that will go within your will. Uh, oftentimes, when you're not looking at tax planning, it's more on just how things are managed after you pass away, those are extremely simple to to be put in place. Um, yeah, no, no, huge burdens on an ongoing basis. Of course, yeah, there's a wide range of types. Some will require more ongoing requirements than others, but it's pretty rare that we come across a case where it's sheer and sheer ongoing burdens that are required.

Speaker 2:

Yeah, and I suppose Perkin, now that we've kind of talked about the mistakes and the problems, let's start looking at the solutions. So you off, I know people will be like, well, what actually can I protect them? Like what, what actually should you know what? Actually, what assets can this cover? So if we look at kind of cash, we look at, uh, property, we look at investment accounts, we look at retirement accounts um, you know any other assets, you kind of think I've missed off expensive cars, all the rest of that kind of good stuff, like you know what, what can be covered?

Speaker 1:

well, simple answer is that it would be for everything. Really, there's nothing that you that you can't cover. You know everything. You know. I keep using the word estate. That just means everything you own, um, and, yeah, everything that you own, um, you know that that's worth what's worth caring about.

Speaker 1:

You should probably look at um, you know, when you come on to tax planning, then there's there's different options. Some people are looking to pass assets down whilst they're alive. Some, some people, are looking to, you know, keep it within their ownership whilst they're alive and then then pass it down. But either way, there's there's options for both. That apply to all assets. I guess how would you typically find people focus more on their more significant assets, their property, what you mentioned before about assets they might be more emotionally tied to. You know they don't like the idea of their maybe their family business or their family home something happening to that in terms of that passing to a stranger at this point. So I'd say those are probably the main ones people focus on. But in terms of what you can cover, it could be anything really.

Speaker 2:

And let's start with, kind of like looking at family and then looking at those problems that we just discussed, those problems that we just discussed. So walk us through how you would initially start to look at this, so basic things that you would start to put in place and start to discuss with me. Let's use my example.

Speaker 1:

Yeah, so typically we always start out, like I mentioned before, a complimentary introductory meeting where we'll we'll talk through your circumstances what's the family situation, what's your asset base and then start to get an understanding of what your wishes might be. Now I don't try and force people's hands on deciding anything on that meeting. It's really just where are we at now, what assets are we looking at and what generally do we think needs to happen with those. I'll then go away and put together together what I call an estate planning solutions meeting. So we'll come back and we'll revisit and look at, okay, well, in order to achieve these wishes on this situation this is what you'd want to do and pretty much clearly talk through how that would work. So typically there's going to be a few key elements involved with that.

Speaker 1:

A will is the legally binding document to dictate what do you want to happen with your assets when you pass away. So it's pretty much always going to be part of the recommendation and then, depending on their wishes, of what would happen with the assets after they pass away. If they are concerned about anything that we mentioned before regarding the control of the assets, protecting them against remarriages, divorces, care fee planning, et cetera, then typically that's where we're going to look at using some form of trust. To make it simple, the main difference between using a will alone versus a will with a trust is that a will alone will put all of the assets into the direct personal ownership of your beneficiaries and, as we all know, when you personally own an asset of your beneficiaries, and as we all know, when you personally own an asset, they're much more exposed to these outside threats than if it was held in a trust arrangement.

Speaker 1:

And then the final element to that is powers of attorney. So it's great we've got all this planning in place now, but what happens if one person loses capacity, becomes ill, something happens to them which means they are no longer able to make decisions and manage assets that are in their name and, like I mentioned, typically that's going to cause some issues. If they're no longer able to let's say, a rental property, for example, no one else is just allowed to step in and start to sign tenancy agreements on your behalf, manage the bills, sell property, whatever it might need to be done to keep up with your planning. So the lasting power of attorney is kind of the third piece of the puzzle, which is part of our kind of, I guess, a common structure that you'd see it's tough, isn't it as well?

Speaker 2:

Because it's as financial planners. It's important for us first off, not to start trying to shift and sell product, which I think a lot of financial advisors previously were really guilty of. It's just product, product, product, product product. And actually what you said there was really interesting. You start off by understanding actually what they want. What are you hoping to achieve out of this and what does the best case scenario look like? So you know, kind of going into those meetings, is that what you should?

Speaker 1:

have in mind, yeah, 100, and that's why we we don't go in.

Speaker 1:

You know, there are kind of advisors out there which would kind of put together a package, not just financial advisors. It happens in estate planning as well, where people will just push one package that you know, you know to all their clients, but like vice pixel. That's why I would always always start with an introductory meeting and some of the key questions there is you know, what do they actually care about? Because I can, for not everyone actually cares about if all of their assets are in a way for for caring fees. I've had clients who have actually said, um, well, if there is anything left over, I don't want to pass it to my children anyway, I want to hold them to make their own way in life. So so some people couldn't care less about inheritance tax, care fee planning, assets being lost to remarriages, divorce and all that sort of thing. So for those people, I'm probably not going to be recommending some sort of trust structure which protects against all those things. It'd be a waste of money for them if they don't care about it.

Speaker 2:

So yeah, understanding what matters to them is always first, and how can you get things to help follow down, the bloodline, say, for instance? For me he is important. I do want my money to. You know, if something was to happen to me and my wife was to get remarried, I obviously want her to be really happy, but also I don't want her new husband or wife maybe at the time I don't know to get the assets. So you know, know, I would want to make sure that's protected. Then I would want it to go to my kids, but then also at the same time, I want my kids partners to be able to walk away for it if something had happened, um, and then also I won't want my kids to get hold of it early on. Like, what would you start looking at in those scenarios?

Speaker 1:

Yeah, it goes back to before, either having no will or a will. Either way, the assets are going to end up in someone's direct personal ownership. You, after you've passed away, have no control, obviously, over what someone does with their personally owned assets. So that's probably not what you want if you care about what happens with these assets after you pass away, whereas a trust it would be where you would be able to appoint someone to manage these assets in line with your wishes, that you would set out effectively and in a trustee you would outline who are you happy for these assets to be used for the benefit of, without actually fully passing the assets into their direct personal name.

Speaker 1:

So you know, property, cash, business shares you can have these held by trustees who manage them on behalf of your beneficiaries in line with your wishes, so they can still provide full benefit to surviving spouse, children, just as you would want to, without exposing yourself to the threats of well, if I just put it into their direct personal name and they got married, divorced, care home, whatever it might be, and the asset's being lost to these things. So it's typically some sort of trust that would provide that. I guess a bit of a morbid way of saying it, but kind of control from the grave. It's like you can carry on managing the asset even after you've passed away, which a lot of people really do want to do. To be honest, it's the thought of the assets being lost to, you know, a new spouse or anything like that really, uh, makes that feel really so, uh, that is it.

Speaker 2:

I mean, look, he said, you know, like it's cool. It's cool if what it is, I mean that is, that is a real concern of most people. And you know, one of the other things that we also talk about is is, you know, we want to give up a warm hand rather than a cold hand. So at the moment, what you're seeing is obviously lots of people making gifts during their lifetime to potentially lower their estate for inheritance tax down the line, which is great. But again, a gift is a gift.

Speaker 2:

So how can you use trusts in your lifetime to make sure that the things that we've just talked about, you know, you can see the good that the gift is, you know that the gift has managed to achieve? I mean, we saw one example where, uh, someone uh, gifted during their lifetime, uh to their children and, uh, their children then went and had another grandchild, uh, so they were obviously amazing, but even now, to experience the grandchild. But they would never have had the grandchild because they were worried about how much it was going to cost. So you know, it's a powerful thing. Yeah, it's a huge amount of good that comes out of it and we're constantly talking about when you die, but you can use these things in your lifetime as well yeah, exactly, I always say that estate planning you can largely split into to two camps.

Speaker 1:

one is your foundation level planning, which is mostly about what happens when you pass away the wills, the trusts we've spoken about. But secondly to that is lifetime planning. So great, you've got the basics in place, but now we can look at optimizing that. So some of the common things which you can optimize against one is inheritance tax. Typically, that requires you to do something now with your assets, gifting, putting assets into trust, you to do something now with your assets gifting, putting assets into trust. Also, probate is an absolutely huge one, especially for people who have assets in more than one jurisdiction. So what is probate? Probate is effectively the legal process that has to occur before your assets can go to your beneficiaries.

Speaker 1:

So I die I can't get hold of my assets straight away. Exactly so, even if you've got a will in place, your assets don't just instantly pass to your beneficiaries. Probate takes a different amount of time in every country. It can take a huge amount of time. I usually will mention a sort of timeframe of around six, nine, maybe 12 months, and often clients will kind of laugh at that and they'll say, well, actually we've just been through the process and it took us two years, two and a half years. Um. So not having planning in place will typically extend that process.

Speaker 1:

But there are actually things you can do to completely avoid the need for probate now, and one of those is again a trust. Where you've effectively made the gift to trust whilst you're alive, you kind of skip that process of probate. You've kind of signed everything off whilst you're alive. It doesn't need to go through the core process to make sure they're happy with it, yeah, um. So again, you know, if you look at an asset, you know you could look at a house. It's worth a million pounds, half a million pounds. If you say, well, what's the time value of that being available for that one extra year versus not? Yeah, I don't know that. The average rental yield in the uk. What is it? Four, four and a half percent, or something you say. Well, if I could, just all I did was rent that property out for that extra year that you've saved by doing this bit of planning. You know that's quite a significant amount of money.

Speaker 1:

Um, so see, I forgot what the original question was. There I've gone off a bit of a tangent. But, um, yeah, during your lifetime, that was it. Um, making these sorts of gifts are really important. One other thing I just wanted to say on that, though, was another really common trap is making gifts to reduce your inheritance tax liability, but that, failing what we call a failed gift, millions and millions of pounds every year are actually clawed back by HMRC in inheritance tax where someone had thought they'd successfully gifted it out of their estate. The biggest reason for that, I would say, is what's called a gift with reservation of benefit. So if you still have benefits on case of that asset you've not given it away, hmrc, I don't really care if you've put the property into your children's name, the land registry. If you're still, they care about who's got benefit of ownership. So, whatever that asset is, if it's a rental property, if it's a main residence, if it's an investment, if you've still got the benefit of that asset, then it's not outside of your estate for inheritance tax.

Speaker 2:

I think what we're getting from all this is there's a hell of a lot to consider, isn't there? It's not just like right this, this, then this. I mean, ultimately, that will be our process with our clients, which is, we will take them through the process and help them get to where they need to go.

Speaker 1:

But you know, it's a mind, and unless you have someone who does this all day, every day, helping you focus on it is it's really hard yeah, exactly, I mean if, like you mentioned, you mentioned, if you're going into this blind, if you go through the DIY route, great, probably better than nothing at all. But all the things we've been through there, I always say, look the chances of one of the things that we've mentioned today whether it's inheritance tax, divorce, care fees, one of these things happening, the chances of that happening is relatively significant.

Speaker 2:

So it's worth spending what two hours of your time or a few meetings to uh to get it done properly yeah, agreed, I think it's whether, whether or not you choose to hopefully do it jack or not, it's definitely worth you consulting a professional there to get this stuff done, because it's, I think also, you know people look at fees and it's it the cost of having number one it off your mind. You know like these things aren't free, unfortunately, but for me I would rather pay and actually not have to worry about that going forward and then also to ensure that my kids don't have to worry about it, because when you get in, like if you don't have a lot of this stuff in place, it becomes very expensive, very messy, very quickly.

Speaker 1:

Yeah, 100%. And if, again, going back to helping people look at things objectively, if we go through their circumstances, their whole asset base, property, cash, investment, so on, and if you called that situation a no planning in place and then you went on to situation b and said, look well, this situation b, you've got all of this planning in place that's needed, but you've got a couple of thousand pounds less in you know the cash account, there's no way you could argue that situation b isn't a hell of a lot better than the situation a. So it's just really helping break down objectively. Look, no one likes to stomach, you know, the, the upfront cost, or even just the, the uncomfortable conversations which they can be, although we, you know, we tried to make it as easy as possible.

Speaker 2:

Um, there's no way that situation b isn't isn't better than a and it's it's it's it's ensuring that the assets what happens with the assets go to you know, go go where, go how you want them to be distributed, because again we see this with clients that we work with. This is normally what happens to people's assets during probate it goes in to a pot, gets liquidated at whatever file sale price can be achieved at that point and then it's distributed to kids, and kids go off and do what they want?

Speaker 1:

Yeah, exactly, that's the number one reason I always loop back to that Try and not make things too complicated. If you want your assets to be distributed in line with your wishes so that means who's receiving them and who's managing the whole probate process how is it being done If there's a tax liability? Are we selling your personal items to pay for that tax, that tax bill, or are we going to use the cash account? If you want things to be done in line with your wishes, you've got to have a willing place, otherwise it gets done in accordance with the default laws. It doesn't get done in accordance with your surviving spouse's wishes. You know your children's wish. They don't get to step in and decide surviving spouse's wishes, your children's wishes. They don't get to step in and decide what happens.

Speaker 1:

The default laws will dictate how things are dealt with, which is another common misconception. People think, well, my family will deal with it in line with my wishes, even if you've got enough trust in your family to do that, which I would probably argue against the amount of sad to see, but the amount of debate and argument that seems to happen cause of friction. Money causes friction. Yeah, exactly.

Speaker 2:

Um, so if you want things to be done in line with your wishes, then you know, at will, at least is kind of what you need it's in line with your wishes, but it's also making sure that your assets what you've worked hard for and what you want hopefully to do good with be the cause of argument and friction between your family on an ongoing basis, which is the whole purpose of them you trying to pass it on.

Speaker 1:

Yeah, that's a really common wish. Actually, what going through the you know trying to identify kind of main objectives and main drivers, a lot of people's one of their main drivers really is. I just don't want them to be a big mess and argument. I don't want things to be, you know, frozen friction and arguments between family members. So again, it's a good point to be fair because that's again like we've mentioned, without a plan in place, leaving a group of people to decide what they do with a big chunk of money is unfortunately probably going to lead to arguments or at least some friction.

Speaker 2:

And the other kind of last, last kind of objection, before we kind of go from there, which is all right, I'm yelled.

Speaker 1:

My assets are going to change. Why do this now? Yeah, exactly, I hear that all the time. I'm gonna. You know, my assets in 10 years time are going to look so much different to how they do now. I put a bet on myself that I won't pass away in the next 10 years. So therefore I won't do it for 10 years Sounds logical, but it really isn't.

Speaker 1:

People don't really know that their will.

Speaker 1:

They see it like it's going to be an itemized list of everything they've got I've got this account, this number, this number of shares, shares and they think that they have to specify everything within their will, whereas a will is actually a very future-proof document or it can be, if it's written properly anyway where it can just refer to your estate.

Speaker 1:

Um, if you take you, for example, I don't know what your wishes are, but if you said, well, I'd like my assets to go spouse to spouse and then and then to to my children, if that wish is going to apply to anything and everything, then there's no need to specify everything you've got. If that wish remains true for the rest of your life, then there's no need to keep coming back changing the will. So really there's no need to wait. Really, what you're paying for and what you're doing at the end of the day is a peace of mind that what you want to happen will happen. So I always say you know, the earlier that you get it done, the more years of peace of mind you've got for you. You've got a better, better band for your book, if you like, um, so you can change it as well.

Speaker 2:

You can amend them and and adapt them, can't you.

Speaker 1:

yeah, I mean oftentimes, for you know clients at hoxton we can even do it on a complimentary basis. It it's so easy to change these things going forwards. It's all about just taking that first step to get the plan in place and we can change them, we can amend them. It's not set in stone forever but again, like I mentioned, it's actually a lot less common than people assume that they actually need to do that. If we really go through a proper process and have it drafted properly from outset, you can kind of account for how things will change throughout time and make it future proof. But at the end of the day, things can change and we can update those quite easily that's great.

Speaker 2:

Yeah, I found that really useful and I hope hope that that's educated some of our clients, and you know people that are looking to consider these things like, like I was saying, whether you do this with us or whether you do this with someone else is completely up to you, but I think the key message is you need to take this stuff seriously because it impacts all of us, every single one of us this impacts. So, no matter where you're from, no matter what you do, it's really important that you take these things super seriously and get them done. So I hope you've enjoyed this episode of the Hoxton Life. Thanks very much to Jack for giving us all of his knowledge. It's been really useful and we look forward to speaking to you soon. Thank you very much.