The first 5 Estate Planning tips follow:

Estate planning is important for everyone, regardless of how wealthy they are. For Ladies, however, it is even more crucial. Ladies, on average, live longer than men and will often need to manage financially for many years after their partner has died. Ladies also paid less on average, and are often at a real disadvantage when their spouses die and all of a sudden pension income is cut dramatically.

It is not true that it is never too late to organise your financial life and plan how you will pass on your wealth to your beneficiaries. Accident, stroke, heart attack can rob you or your other half of the power to make decisions in a second, and once mental capacity is lost, life starts to get very much more difficult. So here are a few tips for planning ahead:

Estate Planning Tips: 1) Estate Everyone Needs a Last Will and Testament

A will makes absolutely clear your wishes for how you want your assets handled after your death and to whom they should go. Without a valid(1) Last Will, you die “intestate” and the Government decides what happens to what you own. Even if you have only modest savings, it is important to specify where this should go.

Estate Planning Tips: 2) Estate Planning Matters

There may be tax implications of transferring assets after your death. While all transfers to or from your husband wife or Civil Partner are tax-free as long as they have UK domicile, leave assets to wealthy adult children or other beneficiaries may cause the beneficiaries estates to become liable to pay tax when they die – so they may receive money they don’t need, die then pay another 40% tax before it gets to a generation who actually needed it in the first place.

As an example:

  • Meg dies, and leaves an estate large enough to pay Inheritance Tax.
  • Her daughter Joan, who is already well off, receives £60,000 after £40,000 inheritance tax has been paid, and immediately passes it on to her daughter Felicity who uses it to pay off her mortgage.
  • Sadly, Joan dies soon after and the £60,000 is technically brought back into her estate for calculating Inheritance Tax.  Depending on how long she has survived, there will be further Inheritance Tax to pay on Meg’s estate before Inheritance Tax starts to be calculated on Joan’s.

Either of these would have made the transaction much more tax-efficient:

a)      A deed of variation of Megs Will to pass Joan’s inheritance direct to Felicity, without Joan ever becoming the owner. Or the cheaper option:

b)      Making sure Megs Last Will reflected what was actually needed rather than what she thought she ought to do.

Planning ahead of time minimises taxes and ensures that your beneficiaries receive the maximum amount of your assets – even if you don’t have many. And regular review means that you avoid tax traps and put your assets to the best possible use.

Estate Planning Tips: 3) Choose an Executor Wisely

An executor sorts out estate pays and taxes and bill, “proves” that she has done to the relevant Probate Registry and then collects in and distributes your assets in accordance with your Last Will or the Rules of Intestacy.

Many people choose a relative or close friend as executor, but be sure to pick one who has some financial savvy, and if you are over 60, they also should be at least 15 years younger than you – some folk are perfectly capable at 90, but the majority would not really wish to be saddled with such a major responsibility at that age! Once again, regular review is required:  you are trusting them with all the money you have left in the world.

Some appoint a bank (why?) or a solicitor in their Wills (that is the origin of the term “goodwill” – the value of the income which a solicitors’ practice of the fees they will get from all the Last Wills they have in storage. Before you appoint a professional, remember that you are putting them in TOTAL charge, even if they are appointed jointly with a family member. Ask EXACTLY what their fees are and how they are calculated before you accept them. We use The Probate Department Ltd as they will let the family help to keep costs down, and they are also happy to be appointed as a reserve, should the family need help.

Estate Planning Tips: 4) Trusts Can Keep Your Assets in the Hands of Those You Choose

If you own your home, then you should have a trust. Maybe not yet, but by the time your mortgage is paid off, you really should consider having a Family Trust put in place. Many think that Trusts are for the very wealthy. Trusts can help even those with smaller estates to protect the assets and ensure they go where you intend. Trusts can keep money protected from children until they are older, and they can often keep ex-spouses of beneficiaries from gaining access to the funds. The biggest beneficiary of many people’s estates is the Local Council, if that doesn’t motivate you to investigate Trust, nothing will!

Estate Planning Tips: 5) Consider Passing on Some Assets Before You Die

If you plan on leaving some of your estate to someone other than your spouse, it may make sense to start gifting it to them before you die. You can gift £3,000 a year in cash or other assets to one beneficiary (or two lots of £1,500 for example).  You can give an unlimited number of people £250 each year (but not the folk you gave the larger amount to. For more information on Inheritance Tax Planning, buy the book.

Estate Planning Tips: on to the next 20 Estate Planning Tips