The importance of estate planning

There are many advantages to developing a plan for what will happen to your assets after you pass away. The most essential being to ensure your assets will be inherited by the people you intend.

This blog post will guide you on the importance of estate planning including three of the most important elements:

 

  • Writing a will

A will is a legal document that determines how your estate will be distributed after you die. It is important to have a will to ensure that the correct persons you wish inherit your assets, helping to provide financial security for your family and descendants. Having a will in place can also prevent disputes between family members as it makes wishes very clear. Careful estate planning when writing a will can help with minimising inheritance tax.

Not only should you consider who you want to inherit your estate, but when they will be able to access the assets. You may wish to add limitations such as age restrictions.

If you fail to write a will your estate will be subject to intestacy rules which don’t take into account your personal wishes and are distributed according to a fixed set of rules.

 

  • Executorship

Making a will is certainly an important component of estate planning but it will be of limited use if there is nobody responsible to ensure your wishes are carried out. This will be the job of an executor. An executor is the person responsible for dealing with your estate and ensuring all the beneficiaries receive what is intended for them. Anyone over the age of 18 can be your executor, even if you have included them as a beneficiary. You are able to appoint up to four executors, so you could choose a professional and a family member to ensure all aspects of your will are dealt with appropriately.

The most important aspect of deciding on an executor is ensuring it is someone you can trust to deal with family members and handle the legal and tax matters.

 

  • Tax planning

Keeping as much of the estate out of the taxman’s pocket as possible should be in the forefront of everyone’s minds while estate planning. If your estate is worth more than the nil-rate band of £325,000, a 40% IHT charge will be payable on any amount exceeding the threshold, rather than the total value of the estate. April 2017 introduced an additional nil-rate band, currently set at £100,000 which is available when the estate is passed onto a direct decedent.

If your estate valuation exceeds the nil-rate band of £325,000, then it is important when estate planning to reduce the value to below £325,000. This can be done through gifting and placing assets into trust.

Refer to our previous blog post here for more information on inheritance tax.

If you want to take advantage of an appointment with a legal advisor to review your will please get in touch. The appointment is free of charge and costs only apply if work is instructed.