What is estate planning and why is it important
Many people will think planning what happens to your estate when you die is the extent of ‘estate planning’, when in fact there are a host of tools that not only enables the family and any business you leave behind, to understand your wishes, but to implement them more easily and at less cost.
Making plans for your death during your lifetime is not a process many enjoy, it often brings a tear to my clients’ eyes, as well as mine. We are human, the thoughts of your family being left behind, especially when it comes to children, are ones we try to actively avoid. During a recent client meeting with young parents, the subject of guardianship was raised and we had to pause for a few minutes because not only were my clients getting upset at the thought, I also needed a minute to collect my thoughts, as I remember the pain of planning guardians for my own children.
However, once you have worked through your wishes, have seen that we are equally as human and emotional as our clients, and when plans are set in motion, a weight is lifted and our clients all admit that it wasn’t as hard as they had imagined.
As mentioned, estate planning involves a number of tools that allows your estate to be organised, managed and distributed according to your wishes, and not only when you have passed but during your lifetime too.
Here are our most common services.
Wills
We recommend every client has a Will. Many feel that they do not need to sort this as what they own is either not substantial enough or will go to their family anyway. That may be true, the rules of intestacy would mean that if you’re married or in a civil partnership, your other half would receive the majority of your estate, and your children would then only receive half of the remainder.
But what happens if you have separated from your partner, and do not wish for them to receive the majority? Or maybe you have made a gift to one child, perhaps a deposit for a property, and you would like to make sure your other child receives the same amount.
Or, more commonly, you have a long-term partner, whom you have built your life with, but are not married or in a civil partnership. If you die without making a Will, their whole life can be turned upside down in an instant, losing any right to their home or potentially financial support. They can of course make a claim against the estate, but this is costly and not always successful.
You may also wish to make sure that your estate is not lost to care fees for your partner. The government has introduced a cap to the cost of care, but this could still easily deplete a person’s estate, especially if they had previously inherited their partner’s share. By simply writing your Will so that your half of your property is left to your children (or others if you prefer), but allow your partner to remain in the property for the remainder of their lives, your half will be safe from care home fees, potential creditors and even from your partner leaving it to someone you never intended or wished to receive your estate.
When looking at your estate we also assess the potential amount that will be payable inheritance tax and can discuss ways in which this can be mitigated, so your family are not at risk of having to pay thousands in tax from your estate.
Lasting powers of attorney (LPA)
As strange as it sounds, we are always happy when our clients tell us they have an LPA in place. It is music to our ears because it means they have planned for a possibility where they are still alive but are unable to manage their estate. This is certainly not a nice thing to be thinking about, but so very important.
The recent pandemic has shown just how important these documents are, especially to families. If you have an LPA in place that allows those you trust most to manage your affairs when you are unable to, perhaps due to sickness, it can save you and your family hundreds if not thousands in fees and and immeasurable amount of time, frustration and upset.
An LPA for your financial and property affairs allows bills to be paid, utilities to be arranged or swapped and even property sold if the need arises. It also allow bank accounts to be managed, which is especially important if your family wishes for you to go into private care or receive private nursing, meaning that they do not have to borrow money that is otherwise accessible.
A health and welfare LPA allows for decisions to be made about the type of care you receive, where you live, as well as many other welfare decisions, without those closest to you having to argue with professionals to justify why they feel it is the best decision.
Without an LPA your loved ones would need to apply to the courts for an order to allow them to make these decisions on your behalf, which is not only costly but takes time. The time it takes could mean months of bills not being paid, or your family having to wait for you to be moved to a care facility that they know you would have preferred or is easier for them to visit.
Trusts
Trust can be very useful tools to protect assets and money from being squandered or lost, and can help mitigate the amount of tax paid on an estate. Please note it is not a way to avoid tax, this of course is illegal.
It may be that you wish for your estate to be put in trust for a vulnerable person, so that there are funds available for their care but the full amount cannot be taken out and spent without the thought of what happens in the future.
You may have teenagers you know would quite happily spend their whole inheritance on nights out or fast cars (not to stereotype but this happens more than people realise), so you would prefer that a more responsible person manages the funds until a point they feel the recipient understands the value of what remains.
Or as mentioned previously, you may wish to protect your estate from ‘sideways inheritance’. This is when your estate is left to your partner, with the intention it will go to your children when your partner passes, but instead they remarry or in their Will, leave the whole estate to another person, meaning your children miss out. Of course they could make a claim against the estate, however this can be costly and is not always successful.
There are so many ways having a chat with a Private Client solicitor can help plan for what happens to your estate both before you pass and when ‘you leave earthside’ (as one client described it). There may be options or circumstances that you had not even considered!
So, no matter how small you may consider your estate, or uncomplicated, it is always worth having that conversation before deciding it is not worth making a plan.
When you are ready to have an initial informal chat about how estate planning may help your family, please contact us at Tiger Law on 01233 227 355 or admin@tiger-law.com.
