You may think that Estate Plans do not need to be in place until you are near retirement age. This is not only untrue but could be very detrimental to the process of carrying out your wishes in the event of your death. While it may feel more comfortable to delay addressing your Estate Planning needs, if you have a family, assets or a business, regardless of your age, you shouldn’t put off getting your Estate Plan in order.[1]
What exactly is an Estate Plan?
Firstly, let’s have a quick recap on what an Estate Plan is. While a Will lays out your requests on what happens to your assets after your death, an Estate Plan is a more comprehensive strategy that often includes:
- Will: This legal document details your wishes for your estate on death.[2]
- Power of Attorney: This designates someone you trust to make financial and or healthcare decisions on your behalf if you’re unable to do so yourself.
- Business Continuity Plan: This ensures a smooth transition for your business in the event of your death.
- Trusts: These legal structures help trustees manage assets on behalf of beneficiaries, potentially minimising inheritance tax and protecting assets from misuse.
Why do you need an Estate Plan?
If you have assets or dependents, are an unmarried couple or own a business, an Estate Plan may be helpful in comprehensively detailing what you want to happen to your assets after you pass away.
Having an Estate Plan offers numerous benefits beyond simply ensuring your loved ones are cared for. Here are some key advantages:
- Peace of Mind: Knowing your wishes are documented provides comfort and reduces stress for your family during a challenging time.
- Minimise Taxes: Strategic gifting and charitable donations included in your Estate Plan can help to reduce your inheritance tax burden.
- Protect Your Heirs: Spendthrift clauses within trusts can safeguard your inheritance from being misused by beneficiaries.
- Philanthropic Goals: An Estate Plan allows you to designate funds for charities you care about, potentially creating a lasting legacy.
- Blended Families: Clear instructions within your plan ensure all beneficiaries, including children from previous relationships, are treated according to your wishes.
What are the benefits of an Estate Plan?
There can be several benefits to having an Estate Plan beyond ensuring your loved ones are taken care of and that your financial and healthcare decisions will be managed if that’s no longer possible for you.
Some further benefits to having one in place may include:
- The ability to gift money to a chosen good cause. Not only does this have obvious charitable benefits but it can also positively impact your inheritance tax (IHT) liability. The amount you leave to charity won’t count towards the taxable total value of your estate. Additionally, if 10% or more of your net estate is left to charity, this would cut the IHT rate on the rest of your estate by 4% (from 40 to 36%).
- Utilising a spendthrift clause in the trust/s you set up. This will limit the beneficiary or beneficiaries’ access to the trust assets according to specific terms set by you. These trusts help ensure that beneficiaries don’t misuse their inheritance, while also protecting trust assets from creditors.
- Achieving your philanthropic goals. If you wanted to go one step further than donating part of your inheritance to a charity and set up a foundation dedicated to a cause close to your heart, you can leave part of your estate to start up or fund the running of it after your death.
- Ensuring blended family members are taken care of by creating specific clauses for certain assets and beneficiaries. Without a comprehensive plan in place, unmarried couples may not be entitled to mutual assets. You may also wish to ringfence off part of your estate for your children to inherit, particularly if it contains assets that were obtained outside of your relationship. An Estate Plan can meet the complexities that are involved when there are multiple beneficiaries to consider.
Protecting your family and your assets is something many of us want to do but aren’t sure how. We understand that Estate Planning can seem overwhelming but the earlier your plans are in place, the more security and peace of mind you’ll have.
