Life stages that can derail your finances without the right advice

Managing your finances can often feel straightforward, particularly when it comes to day-to-day budgeting or saving for short-term goals. But some financial decisions carry long-term consequences that are far from simple. In these instances, the stakes are higher, the options more complex, and the implications far-reaching - not just for you, but for your family too. These are the moments when seeking professional financial advice is not just sensible but crucial.

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Advice on estate planning

Gifting Property to Your Children:

One of the most common motivations for gifting property is to help children onto the housing ladder or to reduce the value of an estate for inheritance tax purposes. However, this seemingly generous act can trigger unexpected tax complications and financial risks if not handled carefully.

Transferring ownership of a property can have implications for capital gains tax, especially if it is not your main residence. When considering inheritance tax, if you gift a property that is worth more than your Nil Rate Band (NRB) or joint NRB (or joint owners, usually both parents) then if you pass away within 7 years, the beneficiary of the house is liable to pay the 40% inheritance on the value of the gift above the NRB. This provides complications to the beneficiary as they may be forced to sell the property or have to set up a regular arrangement with HMRC to pay the inheritance tax due.

In addition, should you continue to live in the property after gifting it, you may fall foul of the “gift with reservation” rules, which mean that HMRC could still treat the property as part of your estate for inheritance tax purposes.

Moreover, giving away significant assets could impact your financial security in later life. Once a property is legally transferred, you lose control over it. This can be detrimental to your later life planning such as paying for care costs. If your child were to go through divorce, bankruptcy, or pass away unexpectedly, that property could become part of a legal or financial settlement. These are difficult possibilities to consider, but failing to plan for them could create avoidable hardship.

Seeking financial advice can provide you with peace of mind when gifting away assets, ensuring that they are absolutely surplus to your requirements and allow you to plan appropriately.

Passing on wealth:

Estate planning goes far beyond writing a will. It involves a careful review of your assets, liabilities and how best to pass on wealth to future generations in a tax-efficient manner. Inheritance tax, currently charged at 40 per cent on estates over £325,000 per individual, can significantly reduce the value passed to your heirs if not planned for in advance. Also, for those passing down their main residence to direct descendants, an additional £175,000 Residence Nil Rate Bands (RNRB) per individual is available (on net estates valued up to £2 million), meaning up to £500,000 for an individual or £1 million for married couples/civil partners could be passed down free of inheritance tax.

A direct descendant is classified as your spouse/civil partner, children (adopted, fostered and stepchildren) and grandchildren.

From making use of available allowances and reliefs, to setting up trusts or using life insurance to cover tax liabilities, there are many tools available to reduce the impact of inheritance tax. Missteps can lead to unintended tax bills, loss of asset control, or disputes among beneficiaries.

Advice using equity release

Equity release has become an increasingly popular option for those seeking to unlock the value in their home without selling it. Whether you're looking to supplement your pension income, fund home improvements, or gift money to family, releasing equity can be appealing. It’s even an option for some with large estates looking to lower the value of their estate for inheritance tax purposes. However, it's not a decision to take lightly.

Equity release products, such as lifetime mortgages, can have long-term financial consequences. While you do not need to make monthly repayments, interest is typically rolled up and added to the loan, which can significantly reduce the value of your estate over time. If not for the intended purpose of lowering your estate, this may impact what you are able to leave behind for your loved ones and could also affect your eligibility for means-tested benefits. In order to have maximum benefit from a lifetime mortgage for inheritance tax (IHT) your estate needs to be more than the sum of the NRB and RNRB.

It is essential to assess your overall financial situation to decide whether equity release is the right fit, or if there are more appropriate alternatives available.

Advice on planning for retirement and managing pensions

Pension planning is another key area where financial advice can make a substantial difference. For many, pensions represent the most significant savings pot outside of property, yet they are often misunderstood or neglected. As retirement approaches, knowing how to draw down your pension in the most tax-efficient way becomes increasingly important.

There are several options available when accessing your pension, including taking a tax free lump sum, setting up drawdown arrangements, or purchasing an annuity. Each comes with its own set of implications for tax, investment performance, and long-term income security. Without clear guidance, it’s easy to make choices that could result in paying more tax than necessary or even running out of money later in life.

Financial advice is particularly important when consolidating multiple pensions, especially if you are considering transferring your defined benefit schemes to a drawdown arrangement or the current scheme provides guaranteed income features such a Guaranteed Minimum Pension (GMP) benefit. It’s vital to evaluate the advantages and disadvantages of consolidation and help you build a sustainable income plan for your retirement years.

Advice on understanding the value of cash in retirement

In retirement planning, maintaining a cash reserve is crucial to safeguard your financial future, especially when facing market volatility. This strategy helps manage ‘sequencing risk’.

Sequencing risk is the risk of receiving lower or negative returns early on in your retirement due to market downturns when you begin drawing an income from your investments. The negative impacts of sequencing risk can have the effect of eroding your savings at a faster rate and can potentially increase the chances of running out of money.   
Holding a cash reserve equivalent to one to three years' worth of living expenses provides a buffer during market downturns. Instead of selling investments at a loss, you can draw from your cash reserves, allowing your investment portfolio time to recover. This approach helps preserve the longevity of your retirement savings.

Making the most of what you have

Life is full of financial crossroads - some expected, others less so. Selling a business, receiving an inheritance, going through a divorce, or receiving a medical diagnosis can all bring sudden and significant changes. In times like these, a financial adviser can act as both a guide and a steady hand, helping you navigate uncertainty with confidence.

Even if you’re not facing a major life event, periodic check-ins with a financial adviser can help ensure you remain on track toward your goals. Whether you're planning for retirement, helping your children financially, or simply looking to make smarter investment decisions, the right advice can help you make the most of what you have.

At its core, financial planning is not just about numbers. It’s about peace of mind, protecting your loved ones, and creating the future you want to see. For the decisions that matter most, getting expert advice can be one of the most valuable investments you make.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Levels, bases and reliefs from taxation may be subject to change.

Using equity on your home will affect the amount you are able to leave as an inheritance. Any means tested state benefits (both current and future) may be affected by any equity released. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The Financial Conduct Authority (FCA) do not regulate estate, cash flow planning, will writing or tax and trust advice.