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Top 5 estate planning tips

View profile for Oscar Scotney
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Estate planning is not an isolated task - life changes quickly and your estate planning should evolve with it. Below are our top 5 estate planning tips to help safeguard your assets, minimise inheritance tax and give you peace of mind for the future:

  1. Review the value of your estate;
  2. Make a Will;
  3. Lifetime gifting;
  4. Explore the use of trusts; and
  5. Put in place Lasting Powers of Attorney.
  1. Review the value of your estate - Inheritance Tax is charged at 40% on the value of your estate over the nil rate band (currently £325,000). Soaring house prices and inflation means that many people have now been pushed over (or even further over) the tax threshold.
     
  2. Make a Will – without one, the intestacy rules will apply, regardless of your wishes. The following mechanisms are examples of how we can draft a bespoke Will, tailored to your circumstances:
  1. Life Interests – you control the ultimate destination of your estate, protected from care home fees, second marriages and redirection. The ‘life tenant’ enjoys financial security for life whilst your assets are protected for the ultimate beneficiaries.  
  2. Rights of Occupation – ringfence your property (or your share in a property) for a beneficiary whilst granting a joint owner or partner the right to occupy it for their lifetime, rent-free. On their death, your property passes to your chosen third party, protecting it from care home fee assessments and redirection after your death.
  3. Discretionary Trusts – your estate can be directed into a Discretionary Trust. You choose the Beneficiaries, and your Trustees manage your estate in the most tax-efficient manner. Assets can be retained, invested, or appointed out when the beneficiary reaches a suitable age to inherit. This safeguards your estate from divorce, bankruptcy, and other misfortunes.

Our trustee corporation - Roythornes Trustees Limited - can act alongside your chosen trustees as an independent, non-vested third party with the legal expertise and understanding of your wishes to aid the smooth and tax-efficient administration of your estate.

  1. Making outright gifts during your lifetime - lifetime gifting will reduce the value of your estate and mitigate the effects of any inheritance tax liability arising. Making use of your £3,000 annual exemption means that you can see loved ones enjoy their inheritance during your lifetime. Watch out for the 7-year rule - if you make a gift over £3,000 and then die within 7-years, the value of that gift will still be included in your estate (potentially subject to 40% tax!).
     
  2. Creating a trust during your lifetime - move value outside of your estate, provide an income for beneficiaries and protect assets for future generations. You maintain control and avoid the risks associated with making outright gifts. Trusts provide the flexibility to retain, invest and appoint out assets and give future generations a mechanism to undertake their own estate planning strategies.
     
  3. Lasting Powers of Attorney (“LPAs”) - without one, your loved ones have no automatic entitlement to manage your affairs during your life if you lose capacity. LPAs allow you to appoint your own trusted attorney(s) and avoid the uncertainty and costs associated with applying for a Deputyship Order.

There are two types of LPA:

  1. Property and Financial Affairs – your attorney(s) can make decisions about your financial dealings and manage your property matters. Attorney(s) can make decisions straight away or, if you would prefer, only if you lose capacity to make your own decisions; and
     
  2. Health and Welfare – your attorney(s) preside over your health care and welfare decisions including refusing or consenting to life-sustaining treatment.  Attorney(s) can only make decisions if you have lost the ability to make them on your own.

Estate planning is an important but often overlooked exercise. If you would like to discuss undertaking your own estate planning, whether this be putting in place your Will, amending an existing Will, putting in place LPAs or exploring the use of trusts then please get in touch with one of our Private Client team.

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