Estate Planning Essentials: How To Protect Your Wealth and Assets

Estate Planning Essentials: How To Protect Your Wealth and Assets

Estate planning is a crucial aspect of protecting your wealth and assets for future generations. It involves making decisions about how your assets will be distributed after you pass away, ensuring that your loved ones are provided for, and looking at ways to minimise any Inheritance Tax (IHT) on your estate.

In this brief guide, we will discuss the outline essentials of estate planning, including the importance of creating a Will, the role of trusts, and how to minimise Inheritance Tax.

5 estate planning essentials that you should consider as you begin to plan for the future:

1. Creating a Will

A Will is a legal document that outlines how you want your assets to be distributed after your death. It is essential to have a Will in place to ensure that your wishes are carried out and that your loved ones are taken care of. A Will can be used to appoint a personal representative (also known as an executor) who will be responsible for administering your estate and to specify who will receive your assets. It can also be used to make specific gifts to individuals or organisations and to set up trusts for the benefit of certain beneficiaries. Without a Will, your assets will be distributed according to the laws of intestacy, which may not align with your intentions and, in some situations, can even lead to 1^st death tax charges for a married couple.

2. Trusts

Trusts are another important tool in estate planning. They can be created during a lifetime to move assets that are pregnant with gains as holdover relief is available to defer any gains; they can create a layer of asset protection for the beneficiaries; They can also be created on death in the Will. There are several different types of trusts, including discretionary trusts, life interest trusts, and bare trusts. Each type has its own advantages and disadvantages, and it is important to seek professional advice to determine which type of trust is best for your own individual situation.

3. Minimising Inheritance Tax

Inheritance Tax is a tax that is applied to the value of an estate when someone dies. In the UK, the current IHT threshold is £325,000. Any amount above this threshold is subject to inheritance tax at a rate of 40%. There are several ways to minimise the amount of inheritance tax that is payable on your estate, including gifting assets during your lifetime, making use of trusts, and taking advantage of the residence nil-rate band. Again it is important to seek professional advice to determine which type of trust is best for your own individual situation.

4. Life Assurance

One of the easiest ways to deal with any potential IHT liability is to consider a whole-of-life policy to cover the tax that may arise. It’s important to ensure that any policy is written in trust so as not to form part of your estate. Advice from a suitably qualified IFA should be sought on this.

5. Regularly Review & Update Your Documents

Lastly, you should be regularly reviewing and updating your Will and other estate planning documents. This is especially important if you experience any significant life changes such as marriage, divorce, or the birth of a child. It is also essential to keep your Will and other documents in a safe place, and to let your executor and other key individuals know where they are located.

Estate planning can seem daunting, but it is essential to ensure that your wealth and assets are protected for the future. By taking the above into consideration, you will be able to ensure that your loved ones are provided for, that your assets are distributed in accordance with your wishes and that you have taken steps to mitigate or reduce any potential IHT liability. It is important to seek professional advice on these matters to ensure any such plans are tailored to your particular circumstances.

If you would like any further information, please email me at paul.dell@raffingers.co.uk or click here.