Your Guide to Estate Planning

Estate planning involves deciding how to distribute assets after your death. It can be complex, but it's important to have one in place to ensure that your wishes are respected, and your loved ones are taken care of.

You can use this article as your guide to estate planning, as it provides an overview of the process.

Why is estate planning important?

There are several reasons why estate planning is important:

• To ensure that you split your assets according to your wishes. If you die without a will, your assets will be distributed according to government guidelines. These guidelines may not be in line with your wishes.
• To minimise inheritance tax (IHT). Individuals pay IHT on the value of an estate above a certain threshold. Estate planning can help to reduce the amount of inheritance tax that your loved ones have to pay.
• To protect your loved ones from financial hardship. Estate planning can secure the financial future of your young children or dependent relatives after you pass away.
• To choose someone to make decisions on your behalf if you become unable to. If you are unable to make decisions, estate planning ensures that you choose someone you trust to make decisions for you.

What does an estate plan include?

Estate planning can involve a variety of different elements, including:

• Making a will. A will is a legal document that sets out your wishes for the distribution of your assets after your death.
• Setting up a trust. A trust is a legal arrangement that means you can transfer ownership of your assets to a trustee. They will then manage your assets for the benefit of your beneficiaries.
• Appointing a power of attorney. A power of attorney is a legal paper that lets someone make choices for you if you can't.
• Appointing a healthcare proxy. A healthcare proxy lets someone make medical decisions for you if you can't make them yourself.
• Purchasing life insurance. Life insurance can provide your loved ones with a financial payout after your death.

How to create an estate plan

To create an estate plan, you should first take the time to consider your wishes. Ask yourself: What do you want to happen to your assets after your death? Who do you want to benefit from your estate? Once you have thought about this, you can start to put together your plan.

It is important to seek professional advice when creating an estate plan. A solicitor or professional planner can help you to understanding your options and creating a personalised plan that meets your needs.

Estate planning tips

Here are some more estate planning tips if you're a UK resident:

• Make a will. Doing this is the most important thing you can do to ensure that you distribute your assets the way you want.
• Consider setting up a trust. A trust can be a useful tool for protecting your assets and minimizing inheritance tax.
• Appoint a power of attorney and a healthcare proxy. This will ensure that someone you trust is able to make decisions on your behalf if you become unable.
• Purchase life insurance. This can provide your loved ones with a financial pay-out after your death.
• Keep your estate plan up to date. You should regularly review your plan to ensure it reflects your current wishes and circumstances.

Inheritance tax

The current inheritance tax threshold is £325,000. If your estate is worth more than this, your beneficiaries must pay inheritance tax on the excess amount.

There are a number of ways to reduce inheritance tax liability, such as setting up a trust or making charitable gifts. If you are concerned about inheritance tax, read our Guide to Inheritance Tax.

Conclusion

Proper estate planning ensures the distribution of your assets according to your wishes. If you don't have a plan, you can make one yourself or get help from a professional to create one. Our team are experienced in creating estate plans for all eventualities, if you'd like some help in creating yours, get in touch.

* Some forms of Estate Planning are not regulated by the FCA.