Estate planning: What is it and why does it matter

Have you thought about how you’ll use assets later in life or what you’d like to happen to them when you pass away? Planning for the future with an estate plan now could improve your long-term security and ensure your wishes are followed.  

While it can be difficult to think about long-term challenges and understand what decisions are right for you, an estate plan is important. It’s the process of organising your affairs to effectively manage your estate in a way that reflects your wishes, gives you peace of mind, and could reduce potential taxes.

An estate plan that’s tailored to you could mean you feel more confident about how your estate will be managed in a range of circumstances, including if you were unable to make decisions or pass away.

Over the next few months, you can read on our blog the steps you should take to create an estate plan and the things you need to consider.

If an estate plan is something you’ve been putting off, read on to find out why you should make it a priority.  

5 reasons you should prioritise creating an estate plan

1. An effective estate plan ensures your wishes are carried out when you pass away

One of the main reasons to create an estate plan is that it’s a way to ensure your wishes are carried out when you pass away. You no doubt have people or organisations that you want to benefit from your estate.

Without an estate plan, some of your loved ones may be overlooked or assets may not be distributed in the way you want. For example, you may want someone to inherit particular sentimental items, but this could be missed if your instructions aren’t clear.

Even if you’re married, in a civil partnership, or have children, you shouldn’t assume your estate will be distributed according to your wishes if you don’t take steps like writing your will.

2. You can use an estate plan to protect your beneficiaries

An estate plan ensures your wealth goes to those it’s intended for, and it can protect them over the long term too, whether you want to pass on assets now or through an inheritance.

You may want to consider things like what would happen if a relationship broke down. You may want to gift a property to your child, but if they divorced their partner, would it remain within your family? An estate plan can help you address concerns like this and put steps in place to protect your beneficiaries.

If your beneficiaries are children or vulnerable adults, an effective plan can also protect their best interests.

3. An estate plan can protect you if you lose mental capacity

An estate plan can be used to protect you in your later years. It could, for instance, include naming a Lasting Power of Attorney to act on your behalf if you’re unable to make decisions for yourself.

Thinking about needing extra support in your later years or losing mental capacity can be difficult. However, creating a care plan and ensuring your loved ones know what your preferences are can provide security when you need it most.

By making later-life planning part of your estate plan, you can take steps to ensure you have the necessary finances and legal documents in place to give you peace of mind.

4. An estate plan can help you focus on what’s important

One of the most valuable benefits of having a tailored estate plan is the peace of mind it provides. It means you can focus on what’s important, safe in the knowledge that your affairs are in order.

Knowing that your later years or loved ones will be secure, even if something happens, can help you live your life to the fullest and enjoy the things that are important to you.

5. It could help you reduce your estate’s tax bill

If your estate exceeds certain thresholds, it could be liable for Inheritance Tax (IHT). It could reduce how much you leave behind, but there are often steps you can take to reduce the potential tax bill. However, you need to be proactive.

An estate plan that considers IHT could mean you leave more behind for your loved ones or causes that you support. Depending on your circumstances, this could include gifting assets to loved ones now, making a charitable donation, or even spending more during your lifetime.

If you have any questions about IHT and your options for mitigating tax, please contact us.

Contact us to talk about your estate plan

Next month, read our blog to find out how to better understand the value of your estate and how it could change during your lifetime. It’s a process that could change your plans.

If you have any questions about your estate plan or want to work with us to create one, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only. The Financial Conduct Authority does not regulate will writing, estate planning, or tax planning.

Speak with our Financial Planners today

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