Wills and Estate Planning Essentials

Whether you want to make sure your children or grandchildren are financially secure, reduce your inheritance tax bill, or support a favourite charity, we’ve outlined five important steps you should take when making an estate plan. Read on for our Wills and Estate Planning essentials:

Step 1: Make a Will

The beginning of the estate planning process is usually making a Will. Although it can be a difficult topic to discuss, establishing who will acquire your assets and look after your young children after you’re gone is the best way to ensure that your wishes are met. If you don’t have a Will, your estate will be shared out according to the rules of Intestacy, which could go against your preferences.

When writing your Will, you’ll need to choose an Executor who will be legally responsible for the administration of your estate after you pass away. Being an Executor isn’t an easy task due to the complexities of Probate, which is why it’s always a good idea to appoint a professional Executor in your Will. They will be able to help you navigate the process while relieving your loved ones from the burden of managing your affairs at an already difficult time.

Step 2. Get to grips with estate taxes

As well as establishing what happens to your assets, estate planning can determine how much you pay in Inheritance Tax. For the tax year of 2021/2022, you don’t have to pay Inheritance Tax on the first £325,000 of your estate (known as the nil rate band), with 40% tax being charged on anything above that. This threshold increases to £500,000 if you leave your property to your children or grandchildren (known as the residence nil rate band).

There are several ways you can reduce the amount of Inheritance Tax you pay, including setting up a trust in lifetime and making gifts during lifetime, or if you donate some of your estate to a charity in your Will. Inheritance Tax is a complex matter and you should always seek specialist financial advice to ensure you are complying with the rules.

Step 3: Establish a power of attorney

A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint someone to make decisions on your behalf if you become incapacitated or unable to manage your own affairs in the future. You will need a property and financial affairs LPA and health and welfare LPA, and if you own a business, you may also want to establish specific Powers of Attorney as part of a succession plan.

• Assisting clients in acquisition due diligences, including a review of financial statements and investigation —through inquiries with target company management— of material events, commitments and contingent liabilities, and HR and tax matters

We always advise putting an LPA in place when you are drafting your Will for peace of mind and to give you the choice of who to appoint as an Attorney. Bear in mind that whoever you choose will be making important decisions about your health and finances, so it must be someone you trust, whether it’s a family member, a solicitor or a specialist like us.

Step 4: Consider setting up a Trust

It is a common misconception that Trusts are only for very wealthy people, but in reality, they can be an important part of estate planning and give you greater control over how your assets are preserved for future generations. Depending on your needs, you can choose from a variety of different Trusts. One of the most common is a discretionary trust, which can be created during your lifetime and offers flexibility to pass wealth to your beneficiaries when they need it. One of the benefits of a discretionary Trust is that it usually doesn’t have to go through probate, meaning funds can be made available to the family much more quickly.

If you do decide to establish a Trust, you’ll need to name a Trustee. It’s advisable to get professional assistance because of the ongoing legal and tax regulations involved in setting up Trusts.

Step 5: Review and update your estate plan regularly

It’s essential that you keep your estate plan up to date, including any beneficiaries and legal documents. An outdated or poorly drafted plan will mean that you risk your estate not being distributed properly, and it can also cause disputes among loved ones and result in complications further down the line.

As well as ongoing changes to tax and other legalities, your Will will likely need updating after significant life events such as getting married, divorce, buying property, having children, retiring or a change in financial circumstances. We recommend reviewing your Will at least every five years.

How ZEDRA can help

At ZEDRA, we offer a full range of end-to-end estate planning services to help you enjoy the benefits of your wealth and give you peace of mind for the future. For professional advice and support, contact our specialist estate planning team.