Estate Planning is the process of managing assets in the event of incapacity or death. Your possessions, property, pensions and money are all part of your estate.
It is important to carefully plan where you want your assets to go. Our Financial Advisers can guide you through any potential liabilities that you or your family could be faced with. Careful planning will help minimise taxes, court costs and legal fees.
Your estate plan should be regularly reviewed as your individual circumstances will change over time.
Everyone’s estate is different and therefore it can be beneficial to seek Financial Advice when starting your estate planning.
Below are some common mistakes people make when estate planning and how you can avoid them.
Not having an estate plan in place
The most common mistake you can make is not having an estate plan in place. Death is inevitable and you should ensure you have prepared properly and decided who you want your assets to go to and when.
Many people make the incorrect assumption that estate planning is only for the elderly or wealthy. Everyone should prepare for the unexpected and have an estate plan in place.
Not updating your Will*
You should update your Will every time your circumstances change, for example if you get married or divorced, have a child or acquire a new property.
Tax rules and allowances are constantly changing and could change the way that you want to give away your assets, therefore, it is important to review your Will regularly.
Having an up to date Will can give you peace of mind knowing your assets are all accounted for and will be distributed how you wanted.
Not making gifts to reduce your Inheritance Tax liability
Many people do not make the most of gift allowances to reduce the size of their estate before their death. Utilising gift allowances effectively can reduce your Inheritance Tax liability. In each tax year you can give away up to £3,000 in gifts without incurring Inheritance Tax, this is known as an annual exemption. This can be split between as many people as you like and can be assets or cash.
Choosing the wrong executor for your estate
Choosing the executor for your estate is a big decision and you should be clear about why you have chosen them. You may think someone you know well such as your child or spouse may be suitable to be your executor. However, you may find that it is better to use an independent executor, as they will be able to objectively handle the responsibility. Executors often have a lot of paperwork and large sums of money to handle and you need to make sure you are nominating someone who can cope with the emotional strain of carrying out your wishes.
Not including your digital assets in your estate plan
In today’s modern society, assets are virtual as well as physical and can often be forgotten. Estate planning can allow you to make arrangements to share passwords for online bank accounts and investments to allow them to be passed onto your beneficiaries. Your estate plan can also dictate what happens to your social media accounts.
Not using a Financial Adviser to help with your estate planning
Not consulting with a Financial Adviser when estate planning is another common mistake. Many people’s estates are complex. Tax rules and reliefs are constantly changing and a Financial Adviser can let you know if there are new reliefs that you can benefit from or if your estate plan needs to be adjusted due to new legislation.
Estate planning can be daunting and there may be assets you have that you forget to add into your estate plan. At Four Wealth Management, our Financial Advisers can review any plans you currently have in place as well as help you to start an estate plan.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
* Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.