What is Estate Planning?
A question I am asked on a regular basis is what is Estate Planning ?. Whilst people are aware of the need to make a Will and are motivated to do so by their wish for their loved ones to benefit from their estate in the event of their death. They are often not aware that making a Will is only one part of fully protecting their estate.
A basic Will alone can suffice if one’s requirements are very simple and straightforward. For example, you are not in any way concerned about tax implications, business protection, bankruptcy, care home fees and providing financially for minor children to name a few.
However, if you are concerned about any of these examples or your situation with regards to your final wishes for your estate is more complicated then a full estate plan would be required.
This is because with a basic standalone Will the proceeds of one’s estate are gifted absolutely. Meaning that property, cash, land, investments, cars and anything else that makes up your estate in the event of death are lumped together and gifted absolutely to your named chosen beneficiaries.
What does Estate Planning Involve?
The process of full Estate Planning is doing exactly what it says. Planning ahead for the transfer of your estate after your death but in such a way that it meets specific goals and wishes that you would want to put in place to protect your loved ones and future generations. Also known as bloodline planning.
Some of these specific goals may include :
- Protecting your inheritance for marriage after death
- Planning for the potential of a home being sold to pay for care home fees
- Protecting your children’s inheritance from bankruptcy or creditors
- Planning for potential inheritance tax
- Protecting your inheritance if your children got divorced in the future
- Planning for the financial future of minor children
- Planning for a time when you may not be able to make your own health or wealth decisions
Although it can differ slightly depending on your personal circumstances and wishes the key tools used within an estate plan include:-
Single or Mirror Will
A Will is the only way to ensure your assets pass to those you wish to benefit. If you have no Will the laws of intestacy apply and the courts will decide where your assets go. (Intestacy or dying intestate means dying without a Will).
Trusts can reduce or eliminate inheritance tax payable and will increase the amount of inheritance passed down to your children. In simple terms, a Trust is a legal contract in which you (the settlor) give something you own to somebody (your beneficiary).
Power of Attorney
There may come a time in your life when you lose mental capacity and are unable to manage your financial affairs. Or personal welfare owing to some form of incapacity. By making a Lasting Power of Attorney (LPA) you can appoint someone you trust to make decisions for you should this situation arise. This person is called an Attorney.
Deed of Severance
A deed of severance is a document which ‘severs the tenancy’ of a property. So that instead of owning the property jointly they own it as tenants in common meaning that each person has a definite share in the property.
Estate planning should be carried out at a time when a person is legally competent. This means you must be at least 18 years old and of sound mind. you should also do this when you are still in good health. if you are considering estate planning for protection from long-term care fees you should also be mindful of deliberate deprivation