Whatever age you are, there are plenty of reasons to start planning your estate. You might have children or other dependants, or a partner you would want to be financially comfortable in the event of your death. You might own assets, a house, or financial products including life assurance, all of which will need to be passed on to somebody after your death.
It can be a complicated issue, with lots of pitfalls, so it is essential to get it all planned l ahead of time, and with expert help – so please fill out the form at the bottom of the page with any enquiries, and we will be happy to help.
Most people have heard of intestacy, or ‘dying intestate’, in simple terms, the person died without a Will. If you have surviving family, dependants, or other individuals they may by entitled to a share in your estate when it was not your intention for them to benefit.
Planning your affairs can reduce the Inheritance Tax paid on your estate if applicable. Gifts made more than seven years before your death can be free of Inheritance Tax, whilst donating a portion of your estate to charity can lower the rate of IHT payable.
It’s not just about when you die, either – estate planning can also include lasting powers of attorney, or LPAs, which allow you to designate somebody to look after your affairs if you become incapacitated or unable to deal with your own affairs whilst you are still alive.
Wills are most people’s main idea of estate planning, and they are the documents that avoid leaving you intestate when you die. However, they need to be legally enforceable, and there are many tiny mistakes that can undermine everything you have expressed in the Will.
For instance, there are rules preventing beneficiaries from acting as witnesses of the Will – a clear conflict of interest – and it is increasingly difficult to write a dependant or spouse out of your Will entirely. If you fail to account for the IHT payable on your estate, you might leave a Will that is impossible to execute, too.
Remember, you do not just need to write a Will – you need it to be found when you die, too. Do not leave your family to rummage through your possessions at an already difficult time; let us look after your Will and make sure your loved ones know they can come to us when they need it.
Probate is the formal process given to the Executors or Personal Representatives to administer the estate of the deceased person. The official term is a Grant of Probate where the deceased had a Will or Grant of Representation where the person died intestate.
–It is wise to tell those who benefit or those named as executors of the Will, which is why it is sensible to make sure it is kept in a safe place. Proving a copy of a Will can be difficult so keeping the original safe is essential.
Although a witness to the Will cannot be named as a beneficiary, there is nothing to stop beneficiaries acting as executors of the Will – especially if the instructions in it are quite straightforward. It is sensible to avoid having the executor be one of several beneficiaries to the Will though, as this could raise accusations of a conflict of interest, leading to costly legal battles if the other beneficiaries contest the Will.
As mentioned above “estate planning can also include lasting powers of attorney, or LPAs, which allow you to designate somebody to look after your affairs if you become incapacitated or unable to deal with your own affairs whilst you are still alive.”
We have put together a fact sheet about Lasting Power of Attorney which covers everything from what happens if you don’t have a LPA in place to the benefits of having one in place.
Estate planning is a complicated topic, depending on your family and friends, your personal circumstances including your health and life expectancy, and of course, on how much money and asset wealth you have.
However, there are a few questions we are asked repeatedly – so here are some simple answers to the main queries we receive.
It’s never too early, but it can easily be too late. Remember there are several reasons to plan your estate – you might want to reduce your exposure to Inheritance Tax, or you might just want to leave instructions regarding who gets what from your money and possessions when you die.
For tax purposes, it’s sensible to start planning your estate as soon as you own any major assets, such as a house, or have amassed substantial personal wealth in cash savings, stocks and shares, and so on; if you own your own business, that may be relevant to your personal estate too.
It is essential to consider a Will l if you are committed to a long-term relationship, have children, or have other friends and family you would want to leave an inheritance to, even if you are expecting to live for many more years to come. Unmarried couples living as partners are particularly vulnerable from an unexpected death.
Again, it depends on your circumstances – if your estate remains roughly the same for many years, then there may not be any need to change your Will. However, if you move house or your property or other assets change in value, or you have any children, get divorced, your children grow up and leave home etc, then it’s worth taking another look at your Will.
Marriage is a major issue – getting married invalidates your existing Will, and your new spouse will have automatic rights to your estate. This is especially important in the case of second marriages, when it may not be completely clear who is entitled to what. Careful thought is needed on second marriages where the parties have children from previous relationships or marriages. With careful but essential planning, your estate can go where it is intended rather than passing to another family by default.
There are other practical aspects of your Will that might need updating too – for example, if a named beneficiary or executor dies before you do, or you no longer want that person to be involved in your estate, then you’ll need to update your Will to reflect that.
It’s worth bearing in mind that altering an existing Will can be quite difficult, and typically takes as long and costs as much as just writing a new one from scratch – so you might be better off discarding the old Will completely and getting a new one written instead.
The main purpose of estate planning for wealthy individuals is to reduce exposure to Inheritance Tax. This is sometimes referred to as the ‘death tax’ and is charged on estates valued at over £325,000 at the time of death, not a huge amount for anyone who owns a house.
Anything above £325,000 is charged at a flat rate of 40%, which obviously takes a large chunk out of what you can leave to family and friends, and often leads to property being sold to raise the funds to pay the tax bill.
You can reduce the rate to 36%, but to do this you have to leave 10% or more of your total estate to charity. Beneficiaries of the Will usually won’t pay any other taxes, but in some circumstances, income tax on profits from the inheritance, capital gains tax on inherited property, and Inheritance Tax not already paid by the estate itself, may all be due.
Married couples effectively share a £650,000 tax-free inheritance entitlement, which means assets can be passed from a deceased spouse to their surviving partner tax-free, and usually, if the estate combined is worth less than £650,000, there will be no IHT charge on the total sum.
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The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.