What is Estate Planning?
Estate planning is something important to look at as you enter the later years of your life. It allows you to protect your assets for those nearest and dearest to you once you are gone.
When you make sure, your estate planning is in place; you can also help to avoid or reduce any inheritance tax you might have to pay.
Benefits of planning your estate well include a rock-solid will, ensuring your wishes will be laid out, your funeral wishes, and understanding your financial position.
Understanding Inheritance Tax
Inheritance Tax Levels
When you die, the inheritance tax will be calculated against the value of the assets you leave behind over the amount of £350 000. These include your investments, assets, and property.
Inheritance Tax Rates
The rate for inheritance tax is at 40%. Concessions are available but don’t rely on them.
Map Out Your Future
It’s essential to work out your estate planning needs as soon as possible to protect your assets from inheritance tax. It will help to protect your assets for your loved ones.
Estate Planning Explained
When you plan your estate, you are putting together a detailed outline of how you would like your estate looked after when you die. It also helps to look after your loved ones and will help to avoid inheritance tax. If you do not carefully plan your estate well, your relatives will be left with nothing.
The importance of Trusts and Estate Planning
Having a trust or will ensures that your family will be well looked after. It’s imperative to think about these things early on before it’s too late. It also ensures they will be protected from inheritance tax, and ensures your final wishes will be respected.
Checklist for Wills and Estate Planning
Your will and estate planning require the following:
- You need to write a will, assign an executor, and make sure your loved ones know of it.
- Have a detailed list of your assets and debts, this should include property, assets, and any savings you might have.
- Plan and set out any cash gifts you plan to give to guard against inheritance tax.¹
- Make sure you budget for funeral expenses and let your family know your final requests.
Ways to Avoid Inheritance Tax
There are various ways that you can avoid inheritance tax. Here are some of them:
- Give a gift to family or friends. You can give cash gifts up to £3 000 pounds a year. Some gifts are exempt from tax entirely, and these include gifts between spouses or partners, donations to universities or charities, and gifts donated over seven years before you die.
- Trust funds are fully protected against inheritance tax, and they can be set up anytime. They are also the perfect vehicles to protect your finances for your children if they are not financially dependent yet. It will also secure your life insurance through a trust fund.
- Wise spending. Live within your means, and you will be able to save for future expenses.
- Budget for essential costs. Save some money for emergencies such as your home mortgage or emergency home repairs, car repairs, or medical emergencies.
- Your inheritance tax level can increase to £650 000 if you’re married or living with a partner.
Estate Planning Advice is Essential
Sitting down with an independent financial advisor can help you to look at the best options for your estate planning needs. You can also get an exact look at your financial status and your assets. An estate planning lawyer can also help you best plan on ways to avoid inheritance tax.
Plan carefully With Estate Planning
It’s important not to give everything away when you look at your estate planning.² Make sure you keep some income for any surprises such as emergency expenses. If you have a medical condition and need future medical expenditure, make sure to budget for these.
Estate planning is a clearly defined plan that sets out your wishes when you die. It will help your executor to carry out your wishes and help your loved ones carry out your final requests.
The sooner, the better, it’s better to plan your estate now. This way, your assets will be distributed to your beneficiaries instead of having the state decide who gets what.
A will is a legal document that you need to draw up to lay out what your beneficiaries will get and what your final wishes are. Estate planning is the plan you create before you draw up your will.
The main benefit is you can avoid paying inheritance tax.
Estate planning is something we all have to do. It’s essential to look at your financial affairs and carefully plan out how you want your assets to be distributed when you die. Estate planning can help you to avoid paying inheritance tax and make sure your beneficiaries are well looked after.