If you have assets including savings and property, the chances are that you have some idea of who you would like them to go to after your death – and that someone is not usually the taxman.
If you want to make sure the wealth that you have worked so hard for during your working life goes where you want to in the event of your death, estate planning is key. But where do you start, and how do you make sure your loved ones get the most out of your estate?
We’ve answered some of your frequently asked questions.
What is estate planning and why is it important?
Put simply, estate planning is the process of maximising your assets while minimising your liabilities with a view to ensuring that the maximum benefit possible passes in accordance with your wishes in the event of your death. Without it, dealing with your affairs may be unduly stressful, costly and time consuming for those who are left behind. If you die without a properly drawn Will, the question of who inherits from your estate may be unclear or worse not in accordance with your wishes and inheritance tax may also reduce your financial legacy.
Estate planning is the process of making sure that your family and loved ones are provided for adequately. A well-structured Will can ensure that assets are kept within the family and are passed on down the generations. It can also involve identifying and taking steps to reduce the potential inheritance tax liabilities of your estate and the creation of Lasting Powers of Attorney to ensure that your affairs are managed appropriately should you lose the mental capacity to deal with matters for yourself in the future.
Why make a Will?
If you do not have a properly drawn Will, the intestacy rules will govern who benefits from your estate whether this is in accordance with your wishes or not. For example there is no such thing as a common law husband or wife, so if you are living with your partner but not married or in a civil partnership, they may not inherit anything if you die without leaving a valid Will.
What do I need to know about inheritance tax?
Inheritance tax is charged at 40% on estates above the available threshold at the date of death. This threshold is currently £325,000 but the Government have recently introduced an additional allowance known as the Residence Nil Rate Band which will increase this tax threshold in qualifying cases. The rules relating to the Residence Nil Rate Band can be complicated and not everyone will qualify. It is therefore essential that professional advice is sought in order to ensure that all available allowances are utilised for the benefit of your estate in the event of your death. Any inheritance tax which is payable is usually paid out of the estate reducing the amount which is available for the beneficiaries of the estate. Certain exemptions are available for example in terms of bequests to a surviving spouse or civil partner or to a registered charity and special reliefs may be available in respect of agricultural or business property. A properly drawn Will should be constructed to make sure that any available exemptions or reliefs are maximised with a view to preserving as much of the estate as possible.
Why might a trust help?
A trust allows you to set aside assets either during lifetime or on your death for family or friends which is overseen by Trustees appointed by you. There are several different types of trusts, depending on your aim: they can be used to protect assets while you are still alive or after your death or to make sure that the maximum financial benefit possible will be passed on to your loved ones.
If you need advice on writing a Will or to speak to a solicitor who specialises in Wills, Trusts & Probate please call Farleys on 0845 287 0939 or contact us here.
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