Estate Planning

What is estate planning and why is it important?

Estate planning is all about discussion and planning with our clients. We cover taxation – generally inheritance tax, but possibly capital gains tax – and how to mitigate these so that you can pass your assets on to beneficiaries with the least amount of tax payable.

That means looking at things like estate distribution, succession planning, preservation, protection and development of wealth, and trust intervention strategies to mitigate the effects of illness and death. The list goes on. It’s not the most exciting of subjects – and possibly quite grim, but one that we need to look at for some clients.

What should be included in an estate plan?

During the discussions around tax planning, we’re going to look at estate distribution – how to minimise the effect of tax on a person’s estate and enable them to pass it on to their chosen beneficiaries.

Not only are we looking at saving money, we make sure that the client’s wishes are carried out and the chosen beneficiaries are the people that benefit at the end of the day.

Do I need a will?

Realistically, every person should have a will. If you don’t have one, the Rules of Intestacy apply. You can have a look through those – there are flow charts online that show you the effect of not having a will.

Having a will just makes things tidy. It helps your family distribute your estate as per your wishes. If you have children, you may want to appoint guardians for them within your will. The Rules of Intestacy are wholly inappropriate for most people – so you should have a will.

Do I need a Power of Attorney?

Yes, you should consider Power of Attorney. Again, this is going to help keep your life tidy in the event that you’re unable to make any decisions for yourself. You decide who will look after your financial and health affairs should you become incapacitated.

We tend to think of Powers of Attorney as being for old people. But you could be in a car accident or get dementia at any age. It’s not just for the old. It’s something that you could consider when you’re younger, because if you’re mentally incapacitated, somebody’s going to have to look after these things. It’s all about protection.

What should I plan to do with my pension?

Pensions are long term investments. You’re looking at putting money away for 10, 20 or 30 years, depending on your age. Your pension should be reviewed annually to make sure it still meets your needs and if any changes are required, to bring those in.

Your attitude to risk should be looked at annually to make sure it still suits your situation. The higher the risk, the higher the potential return – but also there can be higher drops in your investments. Review your pension annually with your advisor, just to make sure that it’s on track for your objectives.

What is inheritance tax?

inheritance tax is payable when a person becomes deceased. It’s paid on their estate if it exceeds a certain level. Each person has a Nil Rate Band which is very bespoke to your situation.

You’ve got an exception for your main residence of up to £1 million, and married people can carry their Nil Rate Band over from their deceased spouse. So it’s something to speak to either a financial advisor or a tax expert to work out how it might affect your situation. Estate planning helps to ensure that you don’t pay too much inheritance tax.

Can an estate planning specialist ensure I don’t pay too much inheritance tax?

Estate planners develop a bespoke, flexible plan according to the size and nature of your assets. It might give you guidance on whether you gift assets as you get older or put them into trust. You can also put assets into different companies.

It really depends on the size of your estate and the family circumstances as to how we develop a plan to reduce your inheritance tax liability.

How do I make a gift as part of estate planning?

You need to speak to a financial adviser. We will look at the circumstances and advise you from there.

What do family estate planning services do?

They’ll take into consideration your family dynamic. In modern society we often have stepchildren from a previous marriage or partnership. An estate planner is going to look at whether stepchildren are brought into the will or left out of the estate.

It’s quite fluid and flexible. The plans we put in place for people again depend on the size of the estate and what you want to happen with it.

How can a financial adviser help if somebody is looking into estate planning?

A financial adviser will create an individualised framework for you – a flexible plan. If you get rid of assets, or you gain more assets or become wealthier, we need to be able to change that plan.

We’ll create a suitable approach for you, allowing for gifting to family members, potential care costs and allowing for your family dynamics in the background. It’s very complex, and probably no two solutions will ever be the same – they’d be very bespoke to each client.

The value of pensions & investments and any income from them can fall as well as rise. You may not get back the amount originally invested.