What is Estate Planning?

Why is it important?

It can be difficult to envisage a time when you are not around to provide for your family; preparing a Will, appointing people to manage your finances or thinking about where you will live in your retirement is often an avoided topic.

Research has found that in the UK:

• HMRC received £7.1 billion from inheritance tax in 2022 – 23[1]
• The number of UK adults with a Will is between 40 – 50%[2]
• The UK population over 65 is increasing rapidly with almost 1 in 5 people age 65 or older (18.5%)[3]

Planning who will inherit your estate and how they will do so, gives you and your family peace of mind so you can enjoy your time together in the present. Ideally, the process should start as early as possible.

What are the benefits of Estate Planning?

Wealth Preservation: Estate planning allows you to protect and preserve your wealth for future generations. Through strategies such as trusts, you can minimise the impact of inheritance tax (IHT) on your estate, ensuring that more of your assets are passed on to your heirs rather than being lost to taxes.

Control Over Assets: Estate planning gives you control over how your assets are distributed. You can specify who should receive your property, when they should receive it, and under what conditions. This helps ensure that your assets are used in accordance with your wishes.

Avoiding Intestacy: Without a proper estate plan, your assets may be distributed according to the rules of intestacy, which might not align with your wishes. Estate planning allows you to designate beneficiaries and heirs, reducing the likelihood of disputes and ensuring your assets are distributed as you desire.

Protecting Vulnerable Beneficiaries: If you have beneficiaries who are vulnerable, such as minors and individuals with disabilities, estate planning can establish trusts to protect and manage their inheritances until they are able to handle their finances responsibly.

Business Succession: If you own a business, estate planning can facilitate a smooth transition of ownership to your chosen successor, ensuring the continuity of the business.

Peace of Mind: Perhaps one of the most significant benefits of estate planning is the peace of mind it offers. Knowing that your affairs are in order and that your loved ones will be taken care of according to your wishes can relieve a significant amount of stress.

What documents do I need?

Will

A last Will and testament is a fundamental document in estate planning. It outlines how you want your assets to be distributed after your death and allows you to name an executor to carry out your wishes. Without a Will, your assets may be distributed according to the rules of intestacy.

Trusts

Depending on your goals, you may need to establish one or more trusts. A trust is a legal arrangement where one or more persons (trustees) hold and manage assets for one or more persons (the beneficiaries), those putting assets into the trust are referred to as settlors. Trusts can be utilised to control and protect family assets, protect those who are underage and to pass on assets either whilst alive or after death (a Will trust).

Power of Attorney

This is a legally binding document that allows you to appoint someone you trust as an attorney to make decisions on your behalf if you become mentally or physically incapable of doing so. A power of attorney could come in different forms, for example Ordinary, Lasting, Health and Welfare and Property and Financial affairs. You could have one, a few or all of the above depending on what you are seeking to achieve. Speak to an expert in the first instance as they will be best placed to advise you on what options best serve your long-term interests.

How do I get started?

It’s essential to consult an experienced solicitor or estate planning attorney to help you create and execute these documents properly. At Mullis & Peake, we have the knowledge and knowhow to ensure that your estate plan complies with UK laws and regulations and that your wishes are accurately reflected in your estate planning documents. Additionally, your estate plan should be reviewed and updated regularly to account for changes in your life circumstances and financial situation.

[1] HMRC Official Data & Statistics

[2] Lexology Research

[3] Office for National Statistics