Thinking about Estate Planning? – 5 Things you should consider
Estate planning is a generic term often used to describe the process of organising your affairs so that things can be properly handled after your death. It usually involves evaluating your estate (what you own and are likely to pass onto your beneficiaries), making or updating your Will, setting up Lasting Power of Attorneys and making provision for your funeral. We look at the five things you should consider doing before embarking on your estate planning.
1. Estimate your estate value
Your estate will consist of everything you own at the date of your death. This could include immovable property (like your home or a holiday let), cash assets (like bank and building society accounts) and chattels (like cars, household goods and jewellery). You may own some of your estate jointly with someone else, so it is important that you document which assets you own solely and which you own jointly.
Joint assets can be owned in different ways and how they are owned will determine what will happen to them on your death. Property owned as joint tenants will automatically pass to the surviving joint owner on death whereas property own as tenants in common will fall under the terms of your Will.
When cataloguing your estate, you will also need to think about the value of all your assets. Once you have a valuation of your estate, it should be possible to estimate the amount of Inheritance Tax which could be payable on your death. Depending on the size of your estate and your personal circumstances you may be able to utilise enough exemptions or allowances ensure that no Inheritance Tax will be payable on your death. If Inheritance Tax is likely to be an issue, it is beneficial to know in advance so that steps can be taken to reduce this as much as possible during your lifetime.
Remember your estate value is likely to rise and fall during your lifetime. If it changes considerably (for example after a large inheritance) this should be a trigger to re-evaluate your estate planning to make sure that it is still effective.
2. Consider your family’s needs
Often a person’s main concern when looking at their estate planning will be what will happen to their family after their death. If you are providing an income for your family, then the loss of this could leave your loved ones in financial difficulty. In these situations, an adequate life insurance policy could be vital.
You may also want to consider income protection policy, which would take effect if you are ever incapacitated and cannot work.
If you have young children, you should also look to appoint guardians in your Will to ensure that someone is appointed to look after them if you pass away whilst they are still young. If you don’t appoint guardians it will be up to the court system to decide who will look after them and it is possible that your children could be taken into care whilst they decide.
3. Think about who you would like to include
There are many roles you will need to fill during the estate planning process. You will need to think about who you would like to act as your executors (the people appointed in your Will to deal with your estate when you pass away), who you would like to act as your attorneys (the people appointed in your Lasting Power of Attorney to act for you if you ever lose your capacity) and who you would want to inherit your estate after you die (your beneficiaries). There maybe other roles like trustees that you will also need to allocate.
Your executors will have the job of administering your estate when you die. In brief they will need to collect in all your assets, pay any debts including any tax and distribute the remainder to your chosen beneficiaries in the proportions directed in your Will. Being an executor is a responsible and onerous job so it is important to consider carefully who you would want to act for you and even whether they would be happy to do it.
Attorneys also have an equally important role. They will be the people who look after your house and finances for you if you ever lose your capacity and can no longer do this yourself. They could have important decisions to make, like whether to sale your home and they will also need to manage all your day to day finances. You can also appoint attorneys to make decisions about your health and welfare, which could include making decisions about whether to continue life sustaining treatment.
You will also need to consider who your beneficiaries will be, these will be the people that will inherit your estate after you die. Perhaps you would like several people to benefit and even some charities too. You will need to decide who these beneficiaries will be, what they should inherit and when. Depending on your circumstances you may want to include a trust in your Will to provide greater protection for your beneficiaries.
4. Ensure your plans are properly documented
Once you have made decisions about your estate planning, it will not be enough to simply tell your loved ones about them. You will need to make sure that these wishes are written into your Will and Lasting Power of Attorney. These are both legally binding documents and will provide your appointed executors and attorneys with the power to ensure that your wishes are carried out. Without these documents in place there is no guarantee that things will happen the way you would want.
5. Consider instructing a professional
Estate planning can be notoriously complex, and it is always worthwhile involving a professional who can provide expert advice based on your individual circumstances. They will be familiar with estate planning process and the options available to you. Getting the correct advice before making any estate planning decisions is vital to ensure that the decisions you make now will provide the best outcome for those you leave behind. If you are ready to start your estate planning, feel free to contact us.