Estate Planning Guide

The Ultimate 2021 Estate Planning Guide

Check Out Our Step-By-Step Guide to Estate Planning. Life Doesn't Always Go as Planned So Be Sure to Prepare for Whatever Comes Your Way.

The Guide to Estate Planning

When the word estate planning and trusts come up, most people immediately relate it to the wealthy. What most people don’t realize is that you don’t have to be Mark Zuckerberg’s cousin or related to the Royals to consider estate planning.

Your estate includes everything you possess, and it doesn’t matter the size. Maybe you have 40% shares of a small firm, a Self-Invested Personal Pension scheme, or a home worth £10,000. It doesn’t really matter. In the eyes of the law, that’s your estate, and you have the right to make plans necessary to ensure it’s effectively managed when you pass on.

Well, with that said, what does estate planning involve and why is it important? Here’s a comprehensive guide to illuminate the world of estate planning for you.

What’s Estate Planning?

Estate planning is the process of designating who’ll get your assets and investments when you die. It also involves figuring out how your firm or property will be managed when you get incapacitated. One of the main reasons for considering estate planning is ensuring that your beneficiaries receive your assets in a way that’ll reduce estate tax, gift tax, income tax, and other related taxes.

Here’s an interesting fact

According to estate planning experts, when you start the estate planning process, you establish a platform that allows you to fine-tune as your personal and financial circumstances change. The process can be tedious and will involve various estate planning costs, so sometimes you can give up. However, you need to ask yourself whether you want HMRC1 to be your beneficiary due to lack of proper planning or you want your kids to be happy and content when you’re gone.

Estate planning involves various assets and options, and here are some of the few that you can expect:

Range of Estate Planning Options

Range of Estate Planning Options

Deed of Variation

If you inherit finances that you don’t need, one of the most significant impacts you can expect is the increase in your inheritance tax bill.

A deed of variation2 is incredibly valuable to successful persons whose kids are starting their own lives. Therefore, planning for an unwanted inheritance to pass on to the next generation could be an ideal way of funding the deposit of their first house.


By putting capital in a trust, you no longer have the right of ownership, so it might not count towards your IHT (inheritance tax) bill when you pass on. A Trust is a legal arrangement where you offer cash to someone else to take care of, for the profit of a third person.

Did you know?

You can use the trust for various purposes which include:

  • Offering an income for your kids while maintaining control of the assets
  • Offering an income to your spouse or civil partner when you pass away
  • Preserving the cash for your kids and grandkids

Whole of Life

If it’s not suitable for you to offer cash way to your kids, to a trust, or even a charitable cause, you might want to consider the Whole of Life Policy. As long as you maintain the insurance premiums, this policy will pay the sum assured directly to the executors when you die and will be free from inheritance tax implications.

The capital can then be used immediately to pay your inheritance tax bill or increase the overall inheritance.


Not everyone has dependents, or perhaps your family is independently sustaining their lives. So, you might be confused about what to do with your estate. Well, most estate planning companies will advise on gifting or philanthropy.

Moreover, if your estate is liable for inheritance tax, one of the most effective ways of avoiding these implications is by giving money away to charity organizations, either directly or through setting up your charitable foundation.

And if that’s not enough,

When you give away considerable sums of capital to others, there’s up to a seven-year waiting period before any reduction in inheritance tax is offered.

Where Do You Start

Where Do You Start?

Naturally, the starting point in any estate planning discussion is the assurance that your desires and needs will be catered to. When the estate planning advisor and executor give you this assurance, you then move on to the next issue.

You then discuss your day to day living expenses and any future needs that might require extra income. You may also dive into matters that are out of your hands like the peaks and troughs of the investment market, or if there could be a need in the future for some form of long-term care.


When you’ve understood the process and requirements, then you start the process of estate planning.

Various Circumstances for Different Assets

Personal or Private Pension Schemes, including SIPPS, and income drawdown schemes are a unique proposal. Personal pensions and drawdowns are written under a Trust, and so they’re free from inheritance tax. That makes it an efficient investment.

Moreover, the rules concerning getting death benefits from a personal pension scheme or drawdown changed drastically in 2015. Today, if you pass on before you reach 75 years, the fund value can be paid to anyone, free from income tax. It can be anyone from your spouse, kids, grandkids, nieces, nephews, other family members, or that creepy guy who lives next door.

Turns out

After the age of 75, however, the fund will still be available to anyone. Still, the amount of capital received by your heirs will be considered as income and will be subjected to taxation accordingly.

To avoid paying a significant amount of income tax, this capital can be paid into the Nominee drawdown scheme so that income can be drawn more effectively.

Factors You Need to Consider

Factors You Need to Consider

Simply put:

Most people are so concerned about their cash running out. So, most spend too little or give too little away when they’re alive – a situation that leaves too much in your estate upon death.

The problem with this is that if you don’t consider some serious planning, you might find that the cash you’ve saved so diligently will get distributed in a manner that won’t suit anyone.

Therefore, the best solution will be to plan. While planning for your death might feel a bit weird and uncomfortable, once you come to terms with the fact that you’re going to give these assets away, it’s better to manage the situation and understand the implications.

With that, here are some things to need to factor in to help put your personal situation in a better light:

Taking Control

The first question that the estate planning company or advisor will ask is if you’ve already written a Will. According to a recent survey, almost 30% of people haven’t written or even considered writing a Will. Moreover, 15% of those haven’t updated theirs in the last ten years.

The second question you’ll be asked, if you’ve written a Will, is if your executor knows where it is. It doesn’t help if you dug a hole to prevent your greedy cousin from accessing your Will or if you kept it someplace secure if your executor or trusted child doesn’t know where to find it when you die. Thus, make sure that you’ve informed your executor where it is.

Lastly, it would be best if you considered who you want to benefit from your wealth when you pass away. In most cases, it might be your spouse. However, it’ll be more suitable or tax-efficient for you to leave it to your kids or grandkids. When it comes to this issue, it’d be crucial to take advice from a professional estate planning advisor since you can expose yourself to several problems.

Let me explain

For instance, incorrectly completing a nomination form for your pension fund, it can mean that our heirs will miss out on tax-free income in the future. So, to avoid this and other issues, be sure to get credible and unbiased advice.

Consider Your Emotions

They say nothing is certain in this world apart from death and taxes. So, when it comes to estate planning, it’s better to figure out how you want your property distributed when you can.

One of the best ways to plan for your future is by involving your close family members. They’ll weigh in on the issue and even help you figure out how to do it if you need their help that is. You see, with careful planning you’ll have the chance to see the sort of investments and property you’ll need for your income needs and have an idea of the amount you can give way. And, isn’t it better to offer these gifts to your family at a point when it would be useful for them?

Inheritance Tax Planning

Inheritance tax (IHT) is typically a voluntary tax. It can be hefty, but with careful planning, you can reduce or even avoid it entirely. Nonetheless, the advice is vital.

Tax on estates was established in 1796 to assist in the fight against Napoleon, so this isn’t new. It’s been there for a couple of centuries, and with high standards of living, it’s continued increasing from generation to generation.

All in all

Through careful planning over a certain period, can make sure that IHT is of no concern to you. Still, you should also seek advice to ensure that the biggest beneficiary of your property and investments upon death isn’t the HMRC.  

Common Questions

What’s Estate Planning?

How Does Estate Planning Work?

How Much Will Estate Planning Cost?

What Estate Planning Documents Does One Need?

In conclusion

Estate planning is something that many people take for granted. They think they will be around forever and don’t worry about it, but the reality is that you never know what’s going to happen. When you have an estate plan in place, you can rest easy knowing that your family will be taken care of no matter what happens!

The Guide to Estate Planning

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.