If these shocking statistics are due to a lack of understanding and unanswered questions about Estate Planning, hopefully, this guide will clear a few things up and you’ll have a free initial consultation booked with Brunsdon Estate Planning by the end of the week.
Overview
What Estate Planning documents do I need?
- Last Will and Testament
- Trusts
- Inheritance Tax Planning
- Bloodline Planning
- Planning for Care Home Fees
- Probate & Estate Administration
- Power of Attorney
- Estate Planning for Business Owners
- Other
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Does everyone need an Estate Plan?
Everyone with assets or a family should execute a Will. The complexities of the Estate Plan will vary depending on the size of your estate. Ensuring your loved ones are financially secure and protected from big tax bills is key. A family member passing without a clear plan can tear up families and result in rash decisions to sell the property to afford IHT.
When should I begin the Estate Planning process?
Estate Planning is essential and should be considered as early as possible. In fact, many experts advise creating a plan as soon as you’re an adult, but once you have savings, a family, and property, the need increases massively. If you’re reading this without a plan in place, get in touch today.
How long does the Estate Planning process typically take?
The process can vary significantly depending on your needs and the complexities of your estate. Less complexed requirements, such as Wills, Trusts within the Will, Powers of Attorney etc can generally be completed, on average in 2-3 weeks. If Living/Pilot Trusts are required, then due to the additional legal intricacies, the completion time, on average is 4-8 weeks. Once your Estate Plan is in place it is important to review it regularly, especially if significant life events have occurred such as marriage, divorce, births or deaths. Find out more about our process here.
How much does Estate Planning usually cost in the UK?
The fees to speak to an Estate Planning expert will be based on many factors. The costings will be based on the complexities of the estate and planning required, as opposed to the actual value of it.
A basic Will, will require 2 witnesses and can cost upwards of £150. A Property Trust Will can cost between £500-600 and more for couples [2A]. And the fees for full estate administration can range from £4-6k but can be significantly more for a complex estate. [2B]
Lasting Will & Testament
Why do I need a Will?
Assets that have been placed in a Trust during lifetime are held separately by the Trustees and dealt with under the terms of the Trust and aren’t governed by the terms of a Will. A Will covers your estate on death and what you want to happen to any young children. A Will can also create a trust on death.
A Will allows you to share your wishes for how you want the money spent, funeral plans, and any other wishes.
Wills are predominantly public documents subject to probate. There is a Trust Registration Service which applies to certain types of trusts and the data held within it. The majority of trusts are private, apart from to those people with a ‘legitimate interest’.
What happens to my inheritance if I don’t have a Will?
Dying without a Will can be highly problematic.
Due to the laws of intestacy in England and Wales, if you die without a Will in place and you have children your spouse may not necessarily inherit your entire estate. This can lead to unwanted inheritors and family disputes and the potential for inheritance tax to be payable.
Who will be involved in my Will?
The key participants involved in your Will are:
- The Testator creates the Will with the help of a legal professional (and witnesses) to protect its legality.
- A Guardian may be appointed if there’s any chance a child may need caring for at the time of your death.
- The Executor follows the guidelines set out in the Will to carry out the testator’s wishes.
- The Beneficiary inherits the assets outlined in the Will.
Trusts
Why should I use Trusts?
A Trust is a legal document that moves the legal ownership of cash or assets to the trustees for them to oversee for the benefit of your chosen beneficiaries. Although amounts you gift into trust aren’t out of your estate for inheritance tax purposes until 7 years have passed (unless exempt gifts), they are legally owned by the trustees once passed into trust. This means that they aren’t subject to probate. They can also help your beneficiaries save money on fees and taxes as they help the living manage their assets giving the trustees ultimate control within the terms of the trust. The settlor of the trust will usually be one of the trustees.
Who will be involved in my Trust?
Trusts have three important participants:
- The Settlor is any person who adds money or assets into a trust.
- The Trustee legally owns the trust assets and administers them in line with the terms of the trust deed. The settlor will usually be a trustee.
- The Beneficiary can benefit from the trust – the type of trust and its terms will determine the beneficiaries’ rights.
What are the different types of Trusts I should consider?
The main types of trust are bare trusts, interest in possession trusts, discretionary trusts, accumulation trusts, mixed trusts, settlor-interested trusts and non-resident trusts. Each type of trust is taxed differently.
Inheritance Tax Planning
How is Inheritance Tax (IHT) calculated in 2022?
IHT is only paid on assets above £325k and charged at 40% on any amount above that. This threshold may be higher if you are entitled to the Residence Nil Rate Band or have a transferrable Nil Rate Band / Residence Nil Rate Band. There are Potentially Exempt Transfers (PETs) and Chargeable Lifetime Transfers (CLTs) which can impact IHT. Additionally, each tax year, you can also give away some money or possessions free of Inheritance Tax. How much is tax free depends on which gift allowances you use.
Can Estate Planning help me minimise and avoid taxes?
Yes, if your Will leaves everything to your spouse or civil partner or other exempt beneficiaries such as charities, you can avoid IHT. Gifting whilst you’re alive may also reduce your tax bill.
Can Inheritance Tax be paid in instalments?
IHT is often expensive, but luckily it can be paid in instalments in some circumstances and in respect of certain assets – https://www.gov.uk/paying-inheritance-tax/yearly-instalments. It must be paid in 10 instalments annually from six months after the deceased’s passing or when the asset is sold if earlier.
Bloodline Planning
Can I pass on an inheritance?
Once you’ve received your inheritance, unless otherwise stipulated in the Will, you can do what you want with it. A Deed of Variation can be used by a beneficiary of the estate who wants to alter or redirect their inheritance entitlement. People can have reasons to not accept a gift from tax issues to generosity.
What happens to any gifting within the seven years leading up to my death?
After seven years any non-exempt gifts fall outside of your estate and your nil rate band becomes fully available again (exempt gifts are immediately out of your estate). Therefore, you won’t pay inheritance tax on anything you gifted over seven years ago. There will be IHT to pay on any non-exempt gifts made within seven years of your death as they will have used up some or all of your nil rate band. If a gift, alone or cumulatively, exceeds your nil rate band the recipient of the gift must pay IHT on the excess but the tax is reduced (taper relief) if you survive the gift by over 3 years.
How can Estate Planning protect my young children?
Only adults can directly accept an inheritance under a Will. Amounts left to minor children will be held on trust for them.
Planning for Care Home Fees
What are the average care home fees in the UK?
The average care home fees in the UK range from £27-39k a year for residential care, and £35-55k per year for nursing care[3].
How can Estate Planning minimise my nursing home costs?
An asset protection Trust could protect your assets from care home fees. However legal guidance is essential.
What happens if I run out of money later in life?
It’s common to worry about what will happen if you run out of money; 60% of babyboomer s are more afraid of running out of money than dying[4]. Cashflow modelling can calculate how much money you’ll need in later life to sustain your lifestyle and pay for later life care. To continue living life as you know it, you need to take action now.
Probate & Estate Administration
What is Probate?
Probate is the word normally used to describe the legal and financial processes involved in dealing with the property, money and possessions of a person who has died.
How long does probate usually take?
It can take a while to wind up your estate and distribute your assets upon your passing. You can expect the process to take 8 to 12 months, but it can even take two years or more to settle the estate.
How can my Estate Plan help avoid Probate?
There are various means of avoiding probate –
- A Living Trust
- Name beneficiaries on your retirement and bank accounts.
- Hold property jointly.
Power of Attorney
What is a Lasting Power of Attorney (LPA)?
A Power of Attorney is a legal document granting a person authority to help you make decisions or to make decision on your behalf about you or your possessions. The terms will specify the reason and duration of this permission. You should consider appointing the following:
- LPA for financial decisions who will be in charge of your financial affairs if you ever become incapacitated. This would usually last until you regain control or die (your estate planning documents would then take over).
- LPA for health and care decisions. who will make medical decisions on your behalf. It’s also usually valid until you recover or you pass away.
What are the roles of an Executor and the different Power of Attorneys?
An executor administers your Will when you die whereas an Attorney protects your interests when you’re living. You can appoint more than one person as a Lasting Power of Attorney. You can also name replacement attorneys who can step in if one of the original attorneys becomes unable or unwilling to act.
Why do I need a Lasting Power of Attorney (LPA)?
An LPA is likely to be someone close to you so you can discuss personal matters and be clear on the care you want and your wishes moving forward. Having one in place can give you peace of mind that someone you trust is in charge of your affairs.
Estate Planning for Business Owners
Why does my business fall under Estate Planning?
Business owners need to consider who they want to take over the business should anything happen to them. People put their blood, sweat, and tears into growing and nurturing their business and it’s likely the main motivation was to provide for their family and ultimately pass it down.
Does my business fall within my estate and will my family have to pay IHT?
If the necessary measures aren’t taken to protect your business, it could end up falling within the value of your estate and leave your heirs with a large IHT bill. This can sadly result in the selling of the businesses just to pay the tax so it’s important to plan to ensure this doesn’t happen.
How can I keep my business within the family?
The best way to prevent losing the family business is by keeping a succession plan and Will up to date clearly outlining how you want your business distributed. You should include details about the running of the business and distribution of your shares – an effective plan will enable the business to continue running effectively once you’re gone.
Other Brunsdon Estate Planning
Do I need to find an estate planning expert near me, or can the process be remote?
Given the intimate nature of the planning process, we prefer to meet in person so we can get to know you and advise accordingly. We’ll always take the time to travel to you. Although, if it’s not possible, we can offer a completely remote service.
We have advisers who cover Gloucestershire and the North of England – book a free consultation here.
How should I choose the best Estate Planning expert for me?
Choosing the right professional to help you and your unique needs can be challenging. It’s a serious decision with a lot standing on it. It’s a somewhat unregulated market so finding someone with strong certifications and testimonials is important.
