How to make things easier for your family and heirs

Understandably, many people avoid discussing the practical implications of their death with family. But if your affairs are not in order, your loved ones may face unnecessary costs and delays during that difficult time.
What should you consider to make things as easy for them as possible, before and after your death?

Power of Attorney
Although a sensitive subject, you should think about this before it is needed, while you are of sound mind. Granting a Lasting Power of Attorney legally enables someone to make decisions about your property, finances and/or health and welfare if you are unable to do so, for example through illness or following a serious accident. It is particularly important to consider in the case of a deteriorating mental state.

The person or persons you appoint can help manage your bank accounts, property, investments and pensions, as well as decisions about your health, like changing your doctor. This could be a temporary situation, such as during a hospital stay when everyday bills need paying, or a permanent arrangement, for example, following a dementia diagnosis.

It is a good idea to discuss your intentions with the person you wish to appoint – usually a family member or trusted friend – to make them aware of your wishes. Once registered, a Lasting Power of Attorney for finance and property becomes effective immediately when you no longer want to make decisions for yourself; a health and welfare one becomes effective only when you are unable to make your own decisions.

If you become mentally incapacitated without a Lasting Power of Attorney in force, the Court of Protection will take control of your assets. Each time anything needs to be decided, an application to the Court would have to be made – a costly and time-consuming process for your loved ones.

Your will
A key consideration is making sure your will – in which you outline how your estate should be passed on – is up-to-date. It needs to keep up with any major life events like moving house, getting married or divorced, and welcoming new family members such as grandchildren or stepchildren.

For expatriates and Britons with overseas property, it can be beneficial to have two wills – one for assets in Portugal and a UK one for British-based assets. These should align and cross-reference each other to avoid conflict and the potential for one will to invalidate the other.

While a UK will can be effective in Portugal, after going through the UK probate process it needs to be translated and notarised before going through probate here. Separate wills can, therefore, prevent considerable delays and expense for your heirs.

Note that UK wills usually include a provision to automatically revoke all earlier versions. If you make a Portuguese will and then change your UK one, ensure your solicitor knows about both so it is not unintentionally invalidated.

Also be aware that the EU regulation ‘Brussels IV’ lets you nominate in your will for the relevant UK law to override local succession law. This enables you to distribute your estate in line with your written wishes instead of according to your bloodline as defined by the Portuguese ‘forced heirship’ rules. However, take advice on your options as Brussels IV can have unforeseen implications.

Pensions paperwork
Remember to update other relevant paperwork as necessary, especially for your pensions, which are often very valuable. When you first set up your pension, you specify who will inherit your benefits through ‘expression of wish’ or ‘nominated beneficiary’ forms. However, many people forget to update these if their family situation changes.

If your documents are not up-to-date and there is confusion or a dispute over who should receive your benefits, usually the Trustee of your pension will make the final decision. Avoid this scenario by ensuring both your pensions paperwork and will are current and aligned with each other.

Tax planning
For UK nationals, even if you have lived abroad for years, you could still be considered UK-domiciled. This brings you into line for 40% UK inheritance tax on worldwide assets, potentially in addition to local succession taxes.

An extra gift you can leave heirs is structuring your estate to protect them from losing too much of their inheritance to taxation. Explore Portuguese-compliant opportunities that may provide tax advantages during your lifetime as well as for your future heirs.

Estate planning is a complex area and every family is different, so your approach should be tailored to meet your personal objectives and unique situation. With careful planning, you can have peace of mind that your legacy will end up in the right hands at the right time with minimum fuss and expense for your heirs.

This article should not be construed as providing any personalised investment advice. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change; individuals should seek personalised advice.

By Dan Henderson
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Dan Henderson, Partner of Blevins Franks, is a highly experienced financial adviser, specialising in retirement, investment and succession planning. He holds the Diploma for Financial Advisers and advanced CII qualifications in pensions and investment planning.