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Updating Your Estate Plan In Light Of COVID-19

By | Wealth Management | No Comments

This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincoln or other local offices.

The COVID-19 outbreak and lockdown have had clear implications for people’s immediate finances. Indeed, many economists have predicted that as many as 1m people in the UK could lose their jobs as a direct result. Pension pots, moreover, lost an average of 15.2% in quarter 1 (Q1) of 2020 as the stock markets reacted to the global pandemic. One important area where the impact of COVID-19 is less clear, however, is estate planning and inheritance tax (IHT).

In this short piece, our Lincolnshire financial advisers here at Castlegate offer some thoughts on this important subject, and some areas you may wish to seek financial advice about. We hope you find this content useful and informative. If you would like to discuss your own financial plan, please get in touch to arrange a no-obligation consultation, at our expense:

01476 591022


COVID-19 & estate planning

Estate planning is important for everyone even in “ordinary times”. It allows you to plan ahead to ensure your property, possessions and other assets are eventually handed to the right people, in the right manner and in the most IHT-efficient way. COVID-19 has, understandably, put this important area of financial planning into the spotlight as the headlines have reported daily rises in the UK death toll. The pandemic, however, has brought new challenges to estate planning. Here at Castlegate, our financial advisers have been working hard to help people address these challenges, such as navigating the implications of turning your home into an office during self-isolation and finding an appropriate witness for your Will.

Certainly, now is a crucial time to consider crafting a legally-airtight Will, if you have not done so already. This is shown by the UK government’s decision to include Wills lawyers on its list of key workers (which is quite short). Bear in mind that, should you die without a Will, then your estate will be dealt with under the UK’s intestacy rules. This does not guarantee that your estate will be distributed to your loved ones in accordance with your wishes.

Another important area to consider is Power of Attorney (POA), which allows you to assign a trusted person to make decisions about your estate on your behalf (e.g. if you lose mental capacity to make independent decisions yourself in the future). The recent COVID-19 social distancing measures made it difficult to set up POA, especially when it came to signing the document. This is likely to become easier in Q2 as restrictions are eased and as digitally-based solutions possibly come to the fore (e.g. video technology). Here at Castlegate, our probate partner (Duncan & Toplis Probate Services) can assist you on these fronts, and we with the IHT planning aspects of your estate during these challenging times.


IHT-mitigation opportunities ahead?

Another byproduct of the COVID-19 outbreak and lockdown, of course, is the economic damage and market volatility we have all witnessed since Q1 of 2020. Here at Castlegate, our Lincoln financial advisers have recognised that this is likely to have important implications for IHT and estate planning, many of which create more urgency for people to plan their estate urgently.

In particular, the structuring deficit in the UK housing supply is likely to remain unresolved in the near future. Therefore, any short-term reduction in house prices (e.g. due to COVID-19) is unlikely to hurt the residential property markets in the same way as, say, demand for office units and retail. Residential property, moreover, makes up the bulk of most people’s estates in the UK, including in Lincolnshire, and many properties are likely to remain above the nil rate band. This means that IHT mitigation is still likely to be important even in the wake of any damage to house prices caused by the pandemic.

In fact, the current situation could even present more IHT management opportunities due to a reduction in certain asset prices. For instance, if you are able to make a gift during a period of lower values (due to a prevailing down market), then your beneficiaries could enjoy greater asset growth in the long term as economic and market conditions eventually improve. This is because inheritance tax (IHT) is calculated at the date of the gift, and if the value of the asset is lower than it was before the pandemic hit, then the IHT charge (assuming you do not survive the 7-year-gifting window) is likely to be lower. The capital gains tax (CGT) is also likely to be mitigated, since there would be less asset growth relative to the date of the gift.

Of course, not all assets will work in this way and this IHT-mitigation tactic will not be open to everyone. However, it’s worth seeking independent financial advice sooner rather than later, to ensure that you do not miss out on any estate planning opportunities which may benefit your loved ones in the future.



If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

01476 591022