Of those who do attempt estate tax savings, only a fraction - possibly 30% or 40% - make use of another highly workable idea that is so beneficial to affluent people that it has been called "the rich man's law." This is the trust, which most professionals look upon as the bread and butter tool for high-quality, big-money estate planning. It is true that the 2009 tax reform law dimmed some of the brighter facets of the trust. But still there are enough advantages remaining to justify a prosperous man's visit to an adviser's office. The "rich man's law," incidentally, can be profitably applied by most businessman, executives, and professionals with incomes above £30,000.
Of the small percentage of people who use some version of the trust, only a small percentage, in turn, use the "living trust" which is the type that carries with it the biggest benefits - in most cases, at least. The concept is simple: The property goes to the trustee (family member, solicitor, banker) today while the donor - the businessman or professional - is still alive. The property is managed as an investment, for income purposes and growth of principal, until the donor dies. It then is automatically distributed to the heirs of the donor - or is retained in trust for their benefit - according to the precise wishes of the donor as spelled out in the trust agreement. This distribution is made free of the complications of a formal written will - and this means free of the slow and often expensive probate procedure, the routine that family solicitors are accused of coddling and cherishing so persistently.
So, for long-range estate-planning, it comes to this: Of the £30,000-and-up families who need it, just a fraction - maybe 10% to 20%, at most - get it, in any meaningful and organized way. And only about a third of all these who should have estate planning - whose property justifies it - even so much as visit a professional planning adviser before the husband becomes an entry on the obituary page. After that, it is too late!
Year-to-year management of personal business suffers, too, and the estimates of neglectfulness are equally drab:
A maximum of about 50% of those in the £30,000-plus income range hire income tax men of any sort, from tax solicitors and Accountants down to run-of-the-mill accountants. No more than half of this 50% employ solicitors or Accountants; so roughly 75% of the people in higher income brackets - £30,000-plus - either do their tax work themselves or get something less than the best advice and guidance, which is at the hands of the real professionals.
About 40% of all £30,000-plus people who routinely invest in the stock market get their portfolio advice from brokers' registered "reps" - and go to no other source. A second 40% go a step ahead. They rely on registered reps, but in addition read various market "letters", and articles on investments in specialized magazines, financial publications, and websites. Some do a reasonable job; others kill their time and money.
Only the remaining 20% go beyond this point, and seek out reliable investment information through study, investigation, and the use of advisers other than brokers. This means that just 20% of £30,000-plus income earners who invest in the market do what amounts to a smart job of probing and double-checking before they lay out their cash.
About 20% of the group, at most, take the trouble to seek some form of independent advice on life insurance. This means at least comparing policies offered by two or more competing insurance companies and discuss ating them with some skilled person other than the life insurance salesmen involved. The other 80% go along hook-line-and-sinker with the sales pitches, and buy on the basis of company reputation alone. And this is an outlay of bread-and-butter money that deserves some investigation and, hopefully, just a bit of ordinary buyer's scepticism.
No more than 10% of the £30,000-plus group hire independent real estate appraisers before buying standing houses in the £40,000-and-up range. The vast majority, again, buy without any real amount of investigation and are safeguarded mostly by the prudence of banks and other mortgage lenders. And this is another area where the salesmanship is as pitch-laden as you can find anyplace.
As for checking the references of contractors and home remodelers before they are hired - this can be put down at 10% maximum, too, among people in the £30,000-plus brackets.
Only about 40% of the income group - with teenagers in junior and senior sixth form college - carry out any sort of reasonable school financing scheme. This includes everything from smart short-term trust arrangements to the simplest form of bank savings plan. The other 60% simply let school funds develop out of last-minute desperation - and one way or another this generally means some form of borrowing at high cost.
There is a good argument for periodically updating one's will, assuming a will has been written in the first place. An old will should be taken out of its box and dusted off in a solicitor's office every now and again (some say every five years). This is in view of any number of changing circumstances that can make a will obsolete - but the reviewing can be done quickly and cheaply (£50 is par). But this generally simple chore is widely neglected and probably causes half of all the serious estate foulups that, in turn, cause so much grief and added expense for families. And just as he ought to revise his written will, a higher-income businessman or professional needs to review periodically all... see: Take A Simple Case.