What is Estate Planning?
Virtually everyone knows what a Will is and the need to make one, but we do get asked the question “what is Estate Planning?” quite often. If you are not sure, hopefully, the following will answer.
First of all, what is an “estate”?
We all have an estate, granted some may be bigger and more complicated than others, but we all have one. Your estate is made up of everything you own: your home and perhaps other property or land you might have, your car, your savings, investments, and bank accounts, your business, your personal possessions right through from jewellery to your golf clubs! Depending on how they are set up your life assurance and your pension could also form part of your estate.
Everyone has an estate – that is why you should be thinking now what should happen to it when you die or should you become incapacitated in your lifetime.
What exactly is estate planning?
Estate planning allows you to put together a clear plan that details exactly your wishes regarding how you would like your estate to be managed and distributed on your death, or managed during your life should you become incapacitated.
Doesn’t a Will do that for me?
In short no, a Will is one absolutely essential part of your estate planning but not all of it. Having an up-to-date and valid Will is the first step that we will work with you to ensure your estate planning is correct. Your Will only deals with your estate on your Death, whilst your Estate Plan also includes plans and instructions for within your lifetime.
What estate planning cover should I consider?
The main areas of estate planning we will address for you are:
- Ensure only those you want to benefit from your estate do and in the manner you want. We will take steps to robustly exclude those you don’t want to benefit and restrict the successes of any challenges to your Will.
- Provision of instructions for your care and financial affairs should you become incapacitated in your lifetime. This will ensure that your family and loved ones will be able to manage your finances should you, for example, have a long stay in hospital due to an accident or illness, or have a long-term condition such as Dementia. It will also allow your loved ones to instruct on your behalf on decisions surrounding your wellbeing or healthcare.
- If you have children, name guardians for them should the worst happen. This removes the possibility that they may be brought up by people you would not want them to be.
- Ensure that if you have family member with special needs that they are cared for in the manner you want them to be without them being penalised by losing government benefits.
- Ensure continuation, or planned exit of your business for your loved ones.
- Help your loved ones who may not have the experience or responsibility to deal with an inheritance, or might have personal circumstances that could mean your estate would suffer or be lost due to subsequent divorces, remarriage or creditors.
- And of course, your estate planning can significantly help to reduce loss of your estate to unnecessary inheritance tax and other legal and practical costs associated with death.
What should I have in place for my Estate Planning?
Number one on the list is your Will. There are many reasons to have a Will, the main is to avoid being declared intestate and therefore having your estate distributed by intestacy rules that may be in a manner that is not to your wishes. This is particularly important for unmarried couples.
Trusts can be set up within or separately to your Will. They effectively are a protective wrapper around your estate or parts of it, which provide the extra protection that your requirements might demand. There are many uses for Trust, including but not limited to; ensuring that a partner can stay in your family home after your death, protecting younger or vulnerable beneficiaries’ inheritance, or ensuring that your loved ones do not pay unnecessary tax after you have died.
Lasting Powers of Attorney (LPA)
A lasting power of attorney is a legal document that lets you appoint one or more trusted people to help you make decisions or to make decisions on your behalf in your lifetime. This gives you more control over what happens to you if you have an accident or an illness and cannot make your own decisions or because of a lack of mental capacity. There are two types of LPA:
- Property and Financial Affairs. This allows a trusted person to make decisions for you or manage your money and property, such as your bank account, payment of bills, collection of pensions, or selling or managing your property.
- Health and Welfare. Allows a trusted person to make decisions on your behalf on things like medical care, moving to a care home (or not), life sustaining treatment and your daily routine such as washing, dressing and eating.
Transparency and clarity of your wishes. On the whole, Wills and other estate planning is very much about the “what” and the “how”, but not about the “why” of your wishes. We can work to provide clarity on the reasons for your decisions and gifting through our Will Clarity and Statement of Execution documents to leave no room for misinterpretation or possible claims against your Estate.
On the whole, this is not something that too many of us want to think about, but alongside your other estate planning, it makes perfect sense to organise your funeral via a funeral plan in advance. The two main reasons being:
- To remove the financial burden from your loved ones. Due to timing, it is common that they will be unable to use your estate to pay for your send off and instead will need to find the funds to do so out of their own pockets. Financially it makes sense to as funeral costs are increasing quickly, with estimations that they will have doubled within 10 yrs to an average of £9,000. You can guarantee your funeral cost today for less than half that price alongside a range of options for different plans.
- To lessen the emotional burden of organising your funeral at a very hard time in your loved one’s life. With your funeral already planned by you, your loved ones will not have to think what would be suitable and then talk about it with a Funeral Director. Your plan will allow them to feel happy that you are getting the send-off you wanted.
If you have life insurance it is good practice to keep your insurer updated with your wishes regarding possible settlements on your death. By default, payments are usually paid directly and absolutely to your beneficiaries which can expose the payments to threats. Trusts can be used to receive the settlements and add greater protection and preserve more of the payment for your loved ones.
We all have an estate, and no matter its size we should be putting planning in place now both for what might happen in your lifetime but also when you die.
If you have any questions, worries, or just want to get going on your personal estate plan then get in touch for an absolutely free and no-obligation consultation.