How Can I Maintain the Value of My Estate?

Your estate is at risk from a range of factors. Inflation, the property market, incapacity and tax pressures are all potentially conspiring to reduce the value of your assets.

You may need to take proactive action to protect your estate. So how are your assets at risk, and what can you do to protect them?

Inflation

Inflation has become one of the most dangerous perils facing any estate. While it may have been overlooked in the past, rising rates of inflation mean that you must now think carefully about how to maintain the value of your assets.

If you have large cash savings, or if the bulk of your estate consists of cash, you need to be thinking about keeping that asset somewhere that will pay a rate of interest that is above the rate of inflation. This can be more difficult than it sounds, particularly in the current climate of high inflation and low base rates. You should make absolutely certain, though, that it is not languishing in a current account. This will simply mean that its value is being eaten away.

Property prices

Many people have most of their money tied up in property, which they then intend to pass on to their beneficiaries. But, while it is common to consider bricks and mortar to be the best investment, the fluctuations of the property market can mean that the value of your estate is unpredictable.

Of course, there is little you can do to stabilise the property market. But you can help to minimise its impact by thinking about where you keep your assets. A balanced portfolio will by nature be less affected by risks to one asset class. You should therefore consider whether it is really a good idea to keep the bulk of your cash in a property.

Tax

Inheritance Tax (IHT) is a major concern. If the value of your estate exceeds the nil-rate band (currently set at £325,000) and you want to pass your assets on to someone other than your spouse, you need to think about ways to protect your estate from IHT.

Some people choose to establish a trust in order to protect their assets from the taxman. Discretionary trusts, established at the point of death, can help to mitigate the damage done by IHT, and maintain the value of your estate when it is passed to your beneficiaries. More information about discretionary trusts is available in an article elsewhere on this site.

Mental incapacity

Finally, you may wish to consider how your estate will be protected in the event that you are rendered incapable of making decisions. If you are in an accident, or you suffer from a degenerative disease, you need to be confident that your estate will be protected – both in order that you have the cash you need, and in order that any relevant assets are looked after for your beneficiaries.

Lasting Power of Attorney (LPA) is one potential way of dealing with this. You can use LPA to appoint an attorney who will have the power to make decisions on your behalf. Alternatively, you might choose a living trust. Details of both of these legal tools are available in other articles elsewhere on this site.

As with all financial matters, if you are in any doubt you should seek independent advice before taking any action.