National Financial Awareness Day is the perfect opportunity to take a step back and review not just your finances today, but how they will be managed in the future. While many people focus on savings, investments and retirement planning, two of the most important areas of financial protection are often overlooked: Inheritance Tax (IHT) planning and putting a Property and Financial Affairs Lasting Power of Attorney (LPA) in place.
Together, these planning tools can help protect your wealth, reduce stress for loved ones, and ensure your wishes are followed if circumstances change.
Understanding Inheritance Tax
Inheritance Tax is a tax on the estate of someone who has passed away, including property, savings, investments and personal possessions. In the UK, the standard nil-rate band is currently £325,000 per person. In addition, those leaving their main residence to direct descendants may qualify for a Residence Nil-Rate Band of up to £175,000. This means some individuals can potentially pass on up to £500,000 tax-free, while married couples and civil partners may be able to pass on up to £1 million when allowances are transferred between spouses.
With property values having increased significantly over the years, many families who do not consider themselves wealthy may find their estate exceeds available allowances. As a result, more people than ever are becoming affected by IHT.
Why Property Owners Should Pay Attention
For many families, their home is their largest asset. A property purchased decades ago may now be worth substantially more than anticipated, potentially increasing the overall value of the estate.
Without proper planning, beneficiaries may face:
- A larger IHT liability
- Delays during estate administration
- Difficult decisions about selling property to meet tax obligations
- Reduced inheritance for future generations
Regular financial reviews can help identify opportunities to structure affairs efficiently and ensure assets pass to loved ones in the most tax-effective way possible.
The Often Forgotten Financial Safety Net: Property & Financial Affairs LPAs
While many people spend time planning what happens after their death, fewer consider what could happen if they are unable to manage their finances during their lifetime.
A Property and Financial Affairs Lasting Power of Attorney allows you to appoint trusted individuals to make decisions about your finances and property if you become unable to do so yourself. This can include managing bank accounts, paying bills, handling investments, collecting pensions and benefits, and even selling property where necessary.
Importantly, this type of LPA can be used while you still have mental capacity, provided you give permission and the document has been registered.
What Happens Without an LPA?
Without a valid LPA in place, loved ones do not automatically gain authority to manage your finances if you lose mental capacity.
Instead, family members may need to apply to the Court of Protection for a deputyship order. This process can be lengthy, costly and stressful at a time when families are already dealing with significant challenges.
In the meantime:
- Bills may go unpaid
- Property transactions may be delayed
- Investments may not be actively managed
- Access to accounts can become restricted
An LPA helps avoid these complications by ensuring trusted individuals can act when needed.
Why IHT Planning and LPAs Go Hand in Hand
Inheritance Tax planning and LPAs are often viewed as separate conversations, but they are closely connected.
An effective estate plan requires ongoing financial management. If you lose capacity without an LPA, your carefully considered financial strategy may become difficult to implement or adapt.
Having a Property and Financial Affairs LPA in place means your chosen attorneys can continue managing your financial affairs, helping to preserve your assets and maintain your financial wellbeing according to your wishes.
National Financial Awareness Day Checklist
This National Financial Awareness Day, consider asking yourself:
✅ Do I know the approximate value of my estate?
✅ Could my estate be subject to Inheritance Tax?
✅ Have I reviewed my estate planning arrangements recently?
✅ Do I have a valid Will in place?
✅ Have I appointed trusted attorneys under a Property and Financial Affairs LPA?
✅ Would my family know where to find my key legal and financial documents?
If any of these questions give you pause, now may be the ideal time to seek professional advice and put plans in place, contact us today.
Final Thoughts
Financial awareness is about more than building wealth. It’s about protecting it, preserving it, and ensuring those we care about are supported when it matters most.
By reviewing your Inheritance Tax position and establishing a Property and Financial Affairs LPA, you can take proactive steps to safeguard both your assets and your family’s future. National Financial Awareness Day serves as an important reminder that the best time to plan ahead is before you need to.
