The ability to make our own choices is something it would be very difficult to live without. In life, we get to choose who we treat and give gifts to. We choose how to bring our children up, and make decisions about our own health care and finances. But what about when we die, or become ill or incapacitated? Who will then make those choices for us? For those who would prefer to make their own decisions about the future, the importance of estate planning cannot be over-emphasised.
What is estate planning?
Estate planning is about choosing who will inherit your estate, and who will handle all your affairs once you have gone. But more than this, it is also about ensuring your loved ones are provided for in the best way possible, including reducing the amount of Inheritance Tax they pay.
It is also about taking steps to protect your assets, your children and other dependants should an unfortunate situation arise that renders you unable to take care of them yourself. It is about putting measures in place to ensure someone you trust is legally able to manage your finances and make decisions on your behalf should you become unable to do so due to illness, injury or incapacity.
Estate planning strategies include making a will, reviewing a will, Inheritance Tax planning, Lasting Powers of Attorney, appointing guardians, asset protection and more. Such strategies will depend on individual circumstances and goals.
Why is estate planning important?
Many people ask, why is estate planning so important? There are various reasons.
1. Choose who inherits your estate
Just because you are married or in a civil partnership does not mean that your assets will pass smoothly to your spouse when you die. Intestacy rules apply when there is no will in place which, depending on the size of your estate, could see a proportion of your assets bypass your next of kin.
If you are in a relationship, but not married nor in a civil partnership, then your partner will not be automatically entitled to inherit anything from you. Instead, your estate will pass in line with the intestacy rules. In the same situation without a will, if you jointly own property as tenants in common with an unmarried cohabitee, then your share will pass to another member of your family, leaving your partner in a precarious position.
Charitable donations are also only possible through a will. There really is no other way to choose who legally inherits your estate other than through estate planning and making a will.
2. Protect your children
If you have children, the importance of estate planning cannot be stressed enough. If something happened to you, how would your children be cared for, and by whom?
Estate planning is so important in this case because it allows you to make financial provision for dependants. You can set up a trust, or stipulate which of your assets should pass to the children when they reach a certain age. You may also appoint guardians in your will, so that you know your children will be taken care of by people you trust.
Without estate planning or a will, it will be down to the courts to decide not only who will receive your assets, but also who will bring up your children.
3. Protect adult beneficiaries
You may have dependants, such as adult children, who are perhaps disabled, or maybe just cannot be trusted when it comes to managing money.
Thinking about why estate planning is important in such cases, it allows you to put trustees in place to manage what your dependants receive. Estate planning will also allow you to ensure any disabled offspring are not left without their benefits because of an additional income.
4. Reduce your Inheritance Tax liability
Inheritance Tax has the potential to considerably reduce the size of an estate, possibly leaving loved ones with a lot less than perhaps you envisaged.
Estate planning is important because it allows you to take professional advice from a tax planning expert who knows which strategies can be applied to reduce your Inheritance Tax bill.
Whether it is a trust, lifetime gifting, residence allowance management, property ownership, charitable legacies or pension strategy, IHT planners know precisely how to make use of the various tools, allowing your loved ones to enjoy a larger proportion of your estate when you die.
5. Plan for illness or incapacity
Estate planning does not just apply to making provision for what happens when you die. Injury, illness or incapacity can strike at any time.
But if you do not have measures in place for someone you trust to take over your finances, or make health and welfare decisions on your behalf, then this will all fall to the court. This can prove to be a time consuming and costly business.
The simple strategy, and a key aspect of estate planning, is to appoint someone you trust via a Lasting Power of Attorney to make financial and welfare decisions on your behalf.
6. Make things easier for those you care about
Why is estate planning important? Because at the end of the day, it allows you to take care of those you love.
When you make a will, you get to choose who administers your estate, and you are also able to set out who receives what. This makes everything so much clearer for those you have left behind. You also get to make important decisions, such as who should take care of any children or dependants you leave behind.
At a time of emotional stress, your loved ones will thank you for taking the time to make their lives that bit easier.
For all your estate planning needs, look to Partridge Muir & Warren
At Partridge Muir & Warren, we know why estate planning is important. We have been providing the people of Surrey with bespoke, independent estate planning advice since 1969, and have continued to serve many clients down numerous generations.
If you would like to discuss your estate planning needs with a member of our in-house team of legal experts, financial planners and tax advisers, we are ready to help.
To learn more about how we can assist you with fully tailored estate planning, please get in touch.