Tax Planning

5 core components to wealth preservation

By August 21, 2020 No Comments

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.

Some people are fortunate enough to happen upon wealth. For many of us, however, they have carefully built up their savings, investments and assets over many years and want to make good decisions about how to look after them. Especially as you look ahead into retirement where they will play an important role in sustaining your lifestyle; and then even further ahead, when you may wish to pass it all down to your loved ones as an inheritance.

In this short guide, our financial advisers here at Elmfield in Padiham, Burnley, Lancashire offer five crucial aspects of a wealth preservation strategy for you to consider. We hope you find this content useful. If you’d like to speak to an independent financial adviser you can reach us via:

T: 01282 772938



#1 Financial protection

All of us insure our cars and our homes in case of accident or loss. It is curious, therefore, that not everybody thinks to insure their life and income. After all, what would happen to your loved ones if the worst suddenly happened and they could no longer rely on your salary?

Such a scenario can place a huge strain on a family’s finances, sometimes even resulting in the need to sell the family home to release the necessary funds to keep things afloat. This is where financial protection can play a pivotal role in helping to preserve your wealth for your family. A life insurance policy, for instance, will pay out a lump sum upon your death. This is often enough to pay off your remaining mortgage, giving your family much needed financial “breathing space”.

Other options to consider with your financial adviser include critical illness cover (CIC), which releases a lump sum if you are diagnosed with a certain illness or condition (e.g. a stroke or certain cancers). Another idea is income protection. This replaces a portion of your income if you suddenly can no longer work due to a sudden injury or serious ill health.


#2 Making a will

If you die without a will then your wealth will be dealt with under the UK’s intestacy laws. These aim to be fair, but inevitably they cannot cater to everyone’s wishes and so your wealth could be at risk if you rely on then. Instead, consider crafting a legally-airtight will. This spells out your wishes regarding how you want your estate to be handled upon your death.


#3 Lasting power of attorney

There is always the possibility, of course, that you may not be able to make independent decisions about your estate in the future. One sad story in the Telegraph, for instance, tells of an elderly married couple where the husband got dementia and could no longer make decisions about the family finances. Here, it can help to prepare for this kind of scenario by creating a Lasting power of attorney agreement. This allows you to delegate decision-making about your estate to a trusted person when certain conditions are met (e.g. “lost mental capacity”).


#4 Inheritance tax (IHT)

One of the biggest, looming threats to the wealth in an estate is inheritance tax (IHT). This is not insignificant, since in 2020-21 the IHT rate is 40% on the value of your estate over £325,000. A 40% IHT bill on a £500,000 estate, for instance, could amount to £70,000 without careful financial planning. Fortunately, there are many strategies available to help mitigate your future IHT liability. Speaking with a qualified financial planner can help shed light on your options here.


#5 Trusts

Perhaps you and your spouse have young children who are not yet ready to simply inherit all of your assets, should both of you pass prematurely. Or, it could be that you want to retain a higher degree of control over how your wealth is distributed upon your death, when and to whom. This is where considering the use of trusts can be enormously beneficial for many people looking to preserve their wealth accordingly. 

When set up correctly, moreover, a trust can also help to mitigate a future IHT bill. Since you no longer technically “own” the assets you place into a trust, they no longer are counted as part of your estate for IHT purposes. As such, a trust can be a tremendously useful way to hold a life insurance policy (see Point 1), since otherwise the payout from the policy may be counted as part of your estate and thus inadvertently be liable to IHT too!


Conclusion & invitation

As you can see, there are many components to a successful wealth preservation strategy which cover both the short and long term aspects of your financial plan. We have touched upon just a few of them here, yet there are many possibilities available to an individual or family looking to keep their wealth sheltered from unnecessary risks. A financial planner can help you with this.

If you are interested in starting a conversation about your wealth preservation plan, then we’d love to hear from you. Get in touch to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire. 

Reach us via: 

T: 01282 772938