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Eight estate planning tips

Do you know how you want your estate to be divided after your death? If you do, have you secured your wishes in a will?

    Planning for your estate is one of the most important things you can do to ensure your assets are passed down according to your wishes. Read on to discover the best ways to plan for your estate.

    What is an estate?

    Your estate is everything you own. This includes money, property, possessions and any pensions or investments in your name.

    Estate planning is finding the best ways to pass on your assets while minimising the amount of tax that will be deducted. Inheritance tax and other costs that can drive down the value of your estate and leave your family with large bills to pay before they can settle your estate.

    At The Bateman Group, we’ve been helping our clients plan their estates for over 50 years. Here are some of the main points to consider.

    Make a will

    One of the most important things to do when planning your estate is to create a will. A will is a legally binding document that will ensure your assets are distributed according to your wishes when you are gone.

    This helps to avoid any disputes between family members and other parties when it comes to settling your estate after death. A well-planned will also ensures that any family heirlooms or assets remain within your family and are passed on through the different generations.

    If you die without making a will, your estate will be divided up according to the statutory rules of intestacy, which may be different to your wishes.

    Plan for inheritance tax

    When your estate is redistributed after your passing it’s likely to be affected by an inheritance tax. The standard inheritance tax rate is 40% of anything above the £325,000 nil-rate band. There are some exceptions to this rule, for example if you leave your assets to your spouse, they are exempt from inheritance tax. And if you leave your main residence to your children or grandchildren, you’ll receive an extra £175,000 on top of the nil-rate amount.

    Plan ahead for inheritance tax to minimise how much it will affect your estate and your heirs.

    Gift Assets Early

    Consider gifting some of your assets while you are still alive. You’ll reduce your inheritance tax liability, and you’ll get to see younger generations enjoying your gift.

    Before you gift any of your assets or money, first assess your financial situation to work out how much you can afford to give away. Remember to factor in planned and unexpected expenses.

    Appoint a lasting power of attorney

    A lasting power of attorney or LPA, is an individual who can make important decisions about your finances and healthcare if you are not able to. This could be as a result of suffering a life-changing accident, illness, or ageing.

    A nominated LPA can ensure your estate is divided in line with your wishes after your passing. Be sure to notify your chosen LPA to make them aware of their responsibilities.

    Create a trust

    Trusts are one of the most effective estate planning tools available. A trust can be used to hold cash or other assets for another person’s benefit. There are different types of trust so you’ll need to select the best option for you.

    After 7 years, any assets placed in a trust will be exempt from inheritance tax. Additionally, beneficiaries of a trust can access any money held in it immediately after your passing – which could be useful for paying inheritance tax and probate fees.

    Take out a life assurance policy within a trust

    Often, a life insurance payout is subject to inheritance tax because it is included as part of your estate. However, when you take out the policy within a trust, the proceeds are paid directly to the beneficiaries instead of to the estate.

    Pay into your pension

    Any money held in pensions is also free from inheritance tax, making this a great way to pass on more wealth to your family. If you die before 75, your pension will be passed onto your beneficiaries tax-free. If you die after 75 though, they will pay tax on the proceeds at their highest income tax rates.

    Get the right advice

    When it comes to planning your estate, the options and advice can feel overwhelming. So, before you make any decisions, we advise you to seek professional advice. A qualified financial planner can help you to make the best choices for you and your family.

    Are you ready to speak to a financial planner? Call us now on 01926 405 883 or use our contact form to get in touch. 

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