Estate Planning Essentials: Protecting your assets for future generations

Estate planning is a vital component of financial management, often overlooked until it becomes a necessity. It is the process of organising and managing your assets, investments, and financial affairs to ensure that your wealth is protected and passed on to your loved ones, according to your wishes, in a way which maximises tax liabilities. Spending some money now on professional fees may save you hundreds of thousands of pounds in the long term.

Make a Will

We cannot stress enough how important it is to obtain legal advice and put a professionally drafted Will in place. A Will ensures your estate is distributed as per your wishes and can include Inheritance Tax planning.

Create Lasting Powers of Attorney

Who can access your bank accounts if you loose capacity? Who will decide where you live if you are unable to make that decision yourself?

These issues can easily be dealt with by creating Lasting Powers of Attorney (LPA), a document in which you appoint people you trust to act in your capacity to make important decisions on your behalf should you loose capacity.

There are two types of LPAs, a Property & Financial Affairs LPA and a Health & Welfare LPA. An LPA allows you to make provisions, in advance of deterioration of health, to ensure that your affairs are properly dealt with by someone you trust.

Inheritance Tax Planning

Inheritance Tax is the highest rate of tax in the UK, charged at 40%.

Every individual is entitled to a Nil Rate Band of £325,000.00 upon their death, meaning Inheritance Tax is only payable on assets over this amount.

But please don’t panic, there are ways to reduce the amount of tax payable:

• Own your own home! If you own your own home, you can make use of the Residence Nil Rate Band which provides an additional allowance of up to £175,000.00 on top of the £325,000.00.
  *There are some additional requirements to obtain the Residence Nil Rate Band.
• Get married! If you are married there is no Inheritance Tax payable on first death, and on second death you are able to transfer the unused Nil Rate Band from the first death, which is an additional £325,000.00. You can also transfer an unused Residence Nil Rate Band from first death too, which is a further £175,000.00.
• Give away your cash! Take advantage of the annual gift exemption, which allows you to gift up to £3,000.00 to your loved ones each year.
• Invest and trust wisely! Tax efficient investments, pensions, trusts and lifetime settlements can also help protect your wealth.

Care Planning

It’s crucial to think about the cost of care when dealing with your estate planning, which can be significant in some instances. Various options, such as Will Trusts, can be explored to address this issue.

Regular Reviews

We recommend you review your estate planning every 3 to 5 years, or when there is a change in your financial or personal circumstances or those of your loved ones. The law also may change and impact your estate planning, and you may need a professional to advise you on these changes.