The Effects of COVID 19 on financial planning

The COVID 19 pandemic has shaken our world and has led us to consider a lot about our current lives and future. Due to the impact the outbreak has had on jobs and the economy across the country, many people are undertaking significant financial planning. Coronavirus has made us all rethink and change elements of our lives. Whether this is regarding our jobs, delaying holidays, or considering our retirement options.

There are many people, who, due to the outbreak, have changed their retirement plans already or have had to rethink potential investment opportunities. As the outbreak has affected the stock market performance, it is understandable that some may be concerned about their investments. It is natural for people to want to react to these changes and do something about it now. Here we discuss the effects of COVID 19 on financial planning.

Wills

It is sad that due to the virus, many of us are being confronted with our own mortality and therefore there are increasing numbers of enquiries for wills and estate planning. Drawing up a new will or reviewing an existing one is the first step in the process. Whilst some believe that once a will has been written, then the job is complete, this is not the case. Wills should be reviewed and adjusted on a regular basis as your personal circumstances and/or legislation can lead to necessary changes. Writing a will is naturally a daunting prospect, as it means you have to consider the worst-case scenario, however, wills ensure that your wishes are followed and can help lift the financial burden from your executors in the future.

Estate Planning

Unlike wills which are very specific, estate planning as a whole is a lot wider and covers a lot of aspects, from succession planning to retirement planning and wealth management. Effective estate planning helps ensure that your wealth is protected and helps mitigate inheritance tax (IHT) where possible. Depending on your personal circumstances and those of your family, different solutions will need to be explored such as gifting, investing in assets and more.

As of this moment, COVID 19 has not impacted the rules significantly on estate planning but it is now more important than ever that you have these conversations with your family. It is difficult to have these discussions, however, they are necessary. A financial advisor will be able to help provide the right questions and topics that need to be considered that may aid the conversation.

Regardless of whether the virus impacts estate planning and IHT in the future, it is important that you have an extensive plan in place to ensure your assets are passed on to those you want them to go to. Doing so now, regardless of the impact of COVID will help provide you with peace of mind that you have everything covered. Any planning should be done alongside your financial advisor and solicitor who can help ensure your will reflects your present wishes but is also as tax efficient as possible.

Personal Tax Planning

The UK tax system is one of the most complex in the world. There are many obscure tax rules that individuals can end up tripping over. Protecting family wealth is particularly important during these uncertain times, and effective tax planning has an important role in this process.

Every tax year, each taxpayer has an “annual exemption” of £3,000. This allows people to give away £3,000 of assets without the value of the gift forming a part of your estate for IHT purposes. In addition to this there is a “small gift exemption” of £25 per person per tax year. It is important to note that the exemptions cannot be used on the same person.

Recent months have led to extreme uncertainty in the markets. Therefore, it is potentially a better time to make more substantial gifts of property or shares to children or grandchildren. These otherwise could lead to a large capital tax bill.

Despite no major changes to inheritance tax in the most recent budget, with the escalation of the pandemic, the future remains unpredictable and as circumstances and legislation are inevitably going to keep changing, it is important to take tax planning advice sooner rather than later so that a robust plan can be formed. Getting professional advice on your personal taxes can lead to substantial reductions in income tax, capital gains tax and inheritance tax bills, therefore it is well worth doing.

Unfortunately, there is never “one best way” to plan your finances for the future as it is often determined by the individual’s circumstances. Financial planning involves a lot of revision as opposed to a one and done exercise. Therefore, regardless of a pandemic or not, your financial planning should be revised regularly.

A lot remains unknown about the virus and how this will continue to impact our lives for years to come. We have no way of accurately predicting the financial impact the virus will have in the long term. However, there is no need to panic. There are many financial planning options available. We understand financial planning, especially during this time, can be overwhelming and we are here to help. If you need to discuss the effects of COVID 19 on financial planning, then please get in touch. Email website@wrightvigar.co.uk.