When you think about estate planning, what initially comes to mind? If you were to say, making a will and Inheritance Tax planning and perhaps trust creation, you would not be alone. Many people believe estate planning begins and ends with preparing for what happens when they die. But in actual fact, there is a lot more to it than that. Here we explore some of the most common estate planning mistakes people make, with a view to helping you understand the subject in more detail.
Estate planning is one of the most important processes you will go through in your lifetime. It is important, because without making plans for the future, it could turn out that your wishes are not fulfilled, your assets are not protected, and your loved ones are not adequately provided for.
It is essential to realise that wills and Inheritance Tax planning are by no means the ‘be-all and end-all’ of estate planning. Whilst they are of course vital elements, there are many other things you will need to consider and arrange. With this in mind, let us now explore some of the top estate planning mistakes.
Mistake #1: Assuming that estate planning is only for older people
Many people think that estate planning is only for the more mature asset owner. But when it comes down to it, anything could happen to anyone at any time. Illness, injury or death do not discriminate over age.
What if you passed away whilst your children were still young, or you left a disabled dependant behind? Whatever your age, if you own property or other assets, or you have children, then you should be thinking about estate planning, putting trusts in place to take care of your dependants financially, and appointing guardians who you trust to bring your children up in line with your wishes and values.
Mistake #2: Failing to plan for the worst
It is easy to assume that everything will take care of itself when you die, that everyone will get on and treat each other fairly. But in reality, life is not always as straightforward.
Estate planning can help to remove the drama that can sometimes ensue following a death, making it clear who should get what and how your wishes should be followed.
Mistake #3: Making assumptions about jointly owned assets
It is actually quite common for people to assume that jointly shared property or other assets will pass without issue to the surviving owner. This is not always the case, however.
For example, if your property is owned as tenants in common, then there is no right of survivorship. This means the property will pass to whoever you name as beneficiary in your will. If there is no will, then it will pass via the intestacy rules to whoever is first on the list.
This can throw up all sorts of issues, especially if you have been cohabiting and are unmarried or not in a civil partnership, as the survivor’s share in the property could pass to the deceased’s parents. A will is the only way to avoid this issue.
Mistake #4: Failing to keep your will up to date
Things change, and so should your will. There are certain times when it is vital to update your will, such as when you marry, divorce or have children.
Once you have made your will, be sure to review it every few years, and always consult a legal specialist whenever there is a major change to your personal circumstances. Some events, such as marriage or divorce, can render a will void, so be sure to avoid this common estate planning mistake.
Mistake #5: Overlooking tax planning strategies
One of the top estate planning mistakes is failing to factor in tax planning strategies. For those who decide to make a DIY will, crucial Inheritance Tax planning advice is often missing. This could mean that the beneficiaries of your estate end up paying a great deal more tax than they need to.
Strategies such as lifetime gifts, trusts, making use of the residence allowance, changing the way your property is owned and making use of pensions are all ways of potentially reducing an Inheritance Tax bill, leaving more for your loved ones.
Specialist tax planning advice is crucial though, as every situation is different, and where some strategies may work well in one case, they may not be suitable in others.
Mistake #6: Failing to make arrangements for illness or incapacity
Estate planning is not just about making arrangements for what should happen when you die. Critical illness and mental incapacity are also important considerations.
What would happen if you were all of a sudden unable to work due to illness? Would your spouse be able to manage the mortgage repayments or rent?
What about if you temporarily or permanently lost mental capacity? If you fail to appoint someone you trust to manage your finances or make health and welfare decisions on your behalf, then the responsibility will fall to the court, which can become a costly and time consuming process.
Making a Lasting Power of Attorney is a vital part of the estate planning process. These documents allow you to appoint a trusted person to make important decisions for you should you become unable to do so. Be sure to never make the mistake of leaving this crucial aspect out of your estate plan.
Mistake #7: Failing to carefully consider who to appoint as executors and trustees
An important part of the estate planning process is deciding on who you trust to act on your behalf in good faith. You will need to choose executors to administer your estate, attorneys to manage your finances and make decisions on your behalf should you become unable to do so, and trustees to manage any trusts you set up.
Not only will you need to choose people you trust, but also those you know will be willing to take on the role you set them, and have the time and ability to handle it. Remember that bereavement and illness are difficult times, so you will need to factor in whether those you appoint into the various roles will be able to cope during times of emotional strain.
Mistake #8: Neglecting to make an estate planning checklist
One of the most common estate planning mistakes is failing to plan adequately in the first place. Before you take estate planning advice from a specialist, be sure to go through the process of making an estate planning checklist.
This activity will help you prepare in terms of identifying your goals, working out what assets you have and setting out who you need to provide for. Once you have your checklist in place, it will make the whole estate planning process that much easier for you.
Mistake #9: Overlooking the importance of taking professional advice
Something that forms one of the biggest estate planning mistakes has to be failing to take professional advice.
Without expert advice from qualified, experienced estate planners, you could quite easily miss something that could save you and your beneficiaries a great deal of time, money and worry.
A team of estate planners comprising legal specialists, financial advisers, investment managers and tax planners will be able to provide you with comprehensive, holistic advice that is focused on your best interests, taking into account your individual goals and unique circumstances.
Only the experts have in-depth knowledge of the tools available to ensure your loved ones are provided for and your assets protected, so be sure to always take professional advice when planning your estate.
Estate planning expertise from respected chartered financial planners
If you would rather avoid the top estate planning mistakes, talk to Partridge Muir & Warren. Our experts have been providing specialist estate planning advice Surrey wide since 1969.
We have at your disposal our own in-house team of legal experts, financial planners and tax advisers, all poised to provide you with the comprehensive advice you need to ensure your loved ones are provided for, and your assets are protected.
To learn more about how we can assist you with all your estate planning needs, please get in touch.