What is estate planning?SmartWill
Estate planning is simply the process of putting in place measures to make sure that your assets go to the people you want them to after your death and to ensure that the people and organisations you care about are provided for and your assets are given to the people you want to benefit.
You can also include methods of reducing inheritance taxes payable on death too with sensible use of one or two techniques.
And for parents, practical estate planning can also include making provision for their children including guardianship if they are minors.
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When should you carry out estate planning?
None of us knows what the future holds and this is the most important point when thinking about estate planning – it’s better to do it now and not need it than neglect the task and for your relatives to be saddled with issues later.
Surprisingly research by UK insurer Royal London shows that 59% of parents either do not have a Will or have one that is out of date and this shows that it is important to get on top of the job early and to make sure you keep your plans up to date.
Everyone has an estate, some are large and complex and some are small and simple but whatever you have at the time of your death is classified as your estate and so it is not necessary to own property or to be a millionaire to need some form of estate planning.
What types of things are included in estate planning?
The first and most obvious thing is a legally valid Will and this is the aspect that everybody should attend to.
A Will is the cornerstone of estate planning and it gives instructions as to who should have your assets and how they should be divided up.
The Will can name the executors which are the people who you want to be in charge of looking after your affairs when you are gone.
When you are planning your estate, you should think about who will need to be looked after when you are no longer around.
You may wish to take out life insurance and nominate the beneficiaries giving them some measure of financial protection.
If you have a pension plan or in-service death benefits at work then you should also nominate beneficiaries for these.
It may be that you don’t want people to have access to ready cash, perhaps as protection from divorce or because they are unable to manage money and in this case, you can use the estate planning process to ensure there are properly looked after.
Unfortunately, the intestacy rules in the UK offer no protection for your children and if they lack the ability to receive an inheritance through the intestacy rules, an application would have to be made to the Court of Protection to appoint a Deputy to manage their inheritance.
Inevitably this would lead to a delay in funds reaching your child and most likely additional expenses deducted from their inheritance.
By setting up trusts and nominating guardians you can make sure that their interests are properly looked after in the future.
Estate planning can also include making provision for your pets and making sure that they are well cared for too.
Estate planning isn’t just about tax
Many people think that estate planning is only for the wealthy and is just about reducing tax.
Inheritance tax can indeed be reduced by properly planning out your affairs but there are many more aspects to it than that.
It is also true to say that even people with modest means can make use of estate planning to ensure their wishes are respected.
By planning your estate in good time you can reduce tax, make sure that the right people benefit and ensure that those you care about are properly looked after.