What is estate planning?
As well as making a Will, estate planning plays an important part in preparing your affairs for after you die.
Your estate is made up of your assets. This could be the property you live in, your bank accounts and things like your pension or insurance policies.
An estate planning service can ensure that your money and other assets are protected for the beneficiaries named in your Will when you die.
Careful planning could minimise the amount of Inheritance Tax you pay, or it could mean that you avoid paying Inheritance Tax altogether.
An estate plan lets your loved ones know exactly how you would like your estate to be managed after your death. This can make life much easier for your family and friends as it eliminates uncertainty.
What should my estate plan include?
The main things you should include in your estate plan are:
- A detailed list of all your assets, such as property, possessions, savings and investments. Debts should be included too
- Your funeral arrangement wishes
- Details of any cash gifts you have made in the last seven years
- Information on any insurance policies you have which may pay out on your death
In terms of formal documentation, depending on your individual circumstances, your estate plan could also include:
- A Will
- Lasting Power of Attorney
Having the right documentation in place can ensure that your estate is distributed in line with your wishes when you die. Without the correct documentation, your wishes may not be legally binding.
Make a Will
A Last Will and Testament allows you to decide and put in writing who receives what from your estate. Your estate is made up of your house, savings and investments, insurance and any sentimental items. A Will ensures that your final wishes are secured and your loved ones are protected.
Establish a Trust
Establishing a Trust in your Will can be extremely valuable in estate planning terms for a number of different reasons.
When it comes to protecting assets and controlling the distribution of your estate, Trusts are essential and at Just Wills & Legal Services we provide a variety of solutions depending on your objectives.
Despite changes in taxation policy in October 2007 there are still very valuable reasons for establishing Trusts in your Will.
Choose a Lasting Power of Attorney
Accessing someone’s finances if they become incapacitated or ill is a complex and protracted process, which can make things very difficult for a spouse, partner or children who need to pay bills or access cash on their behalf.
Setting up an LPA allows someone you trust to act on your behalf should the need arise. Your chosen person can then manage your affairs in your best interests. This could be in the long term or until such time that you are able to take the reins again yourself.
Just Wills & Legal Services will work with you to make sure your estate plan is the most appropriate and tax efficient for you. If you would like further details or would like to arrange a meeting in person or online, contact us
How can estate planning help with reducing Inheritance Tax?
One of the main benefits of estate planning is that it can protect your estate from Inheritance Tax.
Inheritance Tax is currently charged at 40% and is paid on the value of a deceased person’s estate which is above the threshold of £325,000.
If your estate is worth over £325,000, there are a number of things you can do to avoid or reduce your Inheritance Tax liability.
If you leave everything to your spouse or to a charity, your estate will not be liable to Inheritance Tax.
You could also make financial gifts to family and friends whilst you’re still alive. Gifts given between spouses or civil partners, and gifts given over seven years before your death are exempt from being taxed. In order to avoid paying Inheritance Tax on gifts given less than seven years before you die, you should ensure that the amount is less than £3,000.
Another option is to set up a Trust. A Trust allows you to make payments to family members, in essence enabling them to start receiving their inheritance early and reduce the value of your estate for Inheritance Tax purposes as a result. If you have a life insurance policy, holding this in Trust could mean that the money paid out from the policy will not form part of your estate and will be protected from Inheritance Tax.
Inheritance Tax rules change often. It is important to seek advice from a professional to make sure you get the most out of your estate planning.
Estate Planning for Same Sex Partners
The Civil Partnership Bill came into force on 5th December 2005. Its arrival heralded the introduction of new rights for same sex partners meaning that they move broadly in line with married couples.
The two main areas of interest from an Estate Planning perspective were the fact that a Civil Partner is now treated equitably from an Inheritance Tax perspective as well as being recognised under the Laws of Intestacy.
As a result more same sex partners are taking the opportunity to write or update their Wills to feature a new Civil Partner – or simply making provisions in anticipation of an impending Civil Partnership.
Why is estate planning important?
In many cases, estate planning is straightforward, however, it’s important to learn about the different options available to you. Everyone’s situation is different and our consultants will consider your individual circumstances in detail when drawing up your estate plan.
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