Estate Planning

Kwasi Yeboah joins the Pension and Investments Podcast to discuss all you need to know about estate planning.

What exactly is estate planning and why is it so important?

Estate planning is the process by which we, as financial advisers, assist with the management and the disposal of a person’s estate. It can also involve making plans for the circumstances where the person might become incapacitated through the loss of physical or mental capacity.

There is an old adage about the only two certainties in life being death and taxes, and estate planning sets out to address both. It is about helping people decide who their belongings to go to throughout their lives and what happens in the case of loss of capacity or death.

What should be included in an estate plan?

The starting point for any estate planning is to work out what actually comprises the estate, and having a think about your desires and objectives. Who will you leave assets to when you are gone? Is there any scope for gifting assets while you are still around?

This is especially relevant if your estate is liable for inheritance tax. We will work out what tools are available to help you achieve your objectives and put the appropriate solution into action.

As with all planning, it is important to regularly review your plan to make sure that it remains appropriate and it is achieving what we want it to.

When should I start estate planning?

It can vary – people might start planning early if they have a large estate – perhaps they have recently inherited themselves. Other typical times are when you have bought a house and when you have a family. There’s little benefit to estate planning unless you have an estate to leave!

Another common time is as you reach retirement and start to think about what will happen when you are gone.

Do I need a will?

If you want to have a say in how your estate is distributed after you die, then it is a good idea to have a will. Otherwise relevant legislation will decide who your assets will go to.

Putting a will in place means you are in control of what happens. I always advise people to write a will and review it every few years or when there are any significant changes in your life; perhaps you gain a new family member for example. It is worth noting that divorce does not automatically invalidate a will, but a marriage will automatically revoke it.

Wills are fairly inexpensive to put in place, so it is certainly worth doing.

Will writing and Powers of Attorney are not part of the Quilter Financial Planning offering and we would refer requests for Will Writing, Powers of Attorney and estate planning to an external third party. Neither First Thought Financial Services nor Quilter Financial Planning accept any responsibility for the actions of a third party.

Do I need a power of attorney?

By setting up Lasting Power of Attorney you legally appoint someone to act as your agent if you are unable to make decisions for some reason.There are two types of powers of attorney, one for health and welfare decisions, and one for financial decisions.

These are as important, if not more important, to set up than a will. People are living a lot longer but they can lose mental and physical capacity as they grow older.

Do I need to consider care provisions in estate planning?

Care in later life in the UK mandates that people who have assets are expected to meet the vast majority of their own care costs. The UK government recently announced that it is looking to cap these care costs, but it is still an important consideration.

Any inheritance tax planning should be in the aftermath of ensuring you have made adequate care provision. Once this has been done, you can look to ensure that you can still pass your assets to the next generation.