Thinking about your death is never pleasant, but it is essential if you want to take care of your loved ones. With a good plan drawn up by legal professionals, you could avoid losing assets and prevent your loved ones from missing out on the gifts you want them to receive.
Estate Planning Essentials
Estate planning is a way to prepare your finances and assets for when you pass away. It ensures that your assets are protected and can even reduce the amount of Inheritance Tax to pay.
The essential building block of your estate plan is your Will. A Will dictates where you want your assets to go after you pass away and outlines any funeral arrangements you may wish to have.
If you don’t have a Will or estate plan, you have no say in where the inheritance goes, and your family doesn’t either. Instead, the rules of intestacy will apply, setting out a hierarchy of inheritance.
This can have serious implications for your family, especially if you want to support your partner or children financially. If the right people don’t inherit, your loved ones could lose out on everything you wanted to leave them. Although it can be contested, this can be a lengthy and expensive process that is difficult to handle without legal counsel.
An estate plan and a well-written Will eradicate these implications and ensure your loved ones receive their rightful inheritances. However, there is much more to estate planning than just a Will!
Estate Planning: Trusts and LPAs
Trusts and lasting powers of attorney (LPAs) are powerful legal arrangements that grant you more control over your estates and assets. They are great to include in your plan!
A trust is an arrangement for managing your assets for the benefit of a third party. They are held by trustees, who become the legal owners of whatever assets you place in the trust.
There are many different types of trusts to consider when estate planning:
- Protective property trusts – a protective property trust allows you to protect the share of your family home and leave it to your beneficiaries. Without one, you could risk your home being sold to cover high care fees in the future. This trust can also avoid sideways disinheritance. By putting your share of the property in trust, you ensure that your beneficiaries will inherit their intended share.
- Family protection trusts – a family protection trust gives your assets an extra layer of protection for your loved ones. In this form of trust you will still have access to you assets, even though the trustees will hold them. Upon death, the trust can bypass probate and ensure your loved ones inherit quickly.
- Right to occupy trusts – this type of trust is incorporated into your Will and allows someone to stay in your home even if you leave it to another beneficiary. For example, you could leave your home to your child and add a right to occupy the trust to allow your partner to stay in your home. You also have the option to include a clause that will end the trust, such as if your partner remarries after your death.
These are only a few of the trusts available to you when estate planning. It is a common myth that only wealthy people make the most out of trusts, but their benefits extend to everyone, no matter the size of the estate.
Many people feel they don’t need a lasting power of attorney. However, the future is uncertain, and there may come a day when it is necessary.
An LPA grants someone that you appoint (your attorney) the power to act on your behalf if or when you lose mental capacity. Mental capacity is defined as the ability to make your own decisions and understand the implications they will have.
There are two types of LPA: one for health and social care and the other for financial affairs. You can establish both to cover all areas of your life.
Accidents or illnesses can happen at any time, and having an LPA can provide great peace of mind that a trusted loved one will take care of your affairs if anything should happen. An LPA does not require you to give up all your rights to make decisions immediately – instead, you can choose to have someone make decisions for you right away or for your attorney to step in only when you have lost capacity.
Without an LPA, your loved ones may need to apply for a deputyship order if you lose mental capacity and cannot make decisions for yourself anymore. The Court of Protection usually appoints close friends or family as a deputy, although you will have no choice in the matter. This is also a costly option – standard LPAs cost £82 each to register, but a deputyship order costs £371 to apply for.
Your estate plan will be unique to you and your wishes. Don’t put it off – if you leave it too late, you risk costing your loved ones money in the future and having a limited say over what happens to your assets.
Get in touch with The Planning Bee to start your estate plan today. We advise you on all aspects of later-life planning, including Wills, trusts, and LPAs.