Almost everyone has an estate. Your estate includes everything you own, including your car, home, other real estate, bank and savings accounts, investments, life insurance, furniture, and personal belongings. Regardless of size or value, everyone has an estate and something in common—it cannot be taken with them when they die.
When that occurs (and it will, sooner or later), you’ll probably want to exercise some influence over how those items are distributed to the individuals or organisations that matter most to you. To guarantee that your intentions are followed out, you must provide instructions specifying who should receive anything of yours, what they should receive, and when they should receive it. Naturally, you’ll want this to occur at the lowest possible cost in terms of taxes, legal fees, and court charges.
This is Estate Planning—making a plan in advance, designating who you want to inherit your possessions after you die, and taking efforts now to make carrying out your plan as simple as possible afterwards.
Estate planning guarantees that all of your assets – physical, financial, and digital – are inherited by the individuals to whom you wish to leave them following your death. If you die intestate, the law may disregard your personal ties or preferences while distributing your possessions.
It is also worth remembering that as part of an effective estate plan, it is vital to have a Will drawn up. In this article, why do estate planning, we take a look at these issues in more depth and describe the mechanism involved.
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What are the main points to consider?
- The importance of a Will
A Will is a legal document that sets forth your wishes regarding the distribution of your property, other assets and the care of any dependent children. If you die without a Will, those wishes may not be carried out. Further, your heirs may end up spending additional time, money, and emotional energy to settle your affairs after you’re gone.
Wills can vary in their effectiveness, depending on the type, although no document will likely resolve every issue that arises after your death.
In theory you can write your Will on the back of an envelope. However, as it is a legally binding document it must meet certain criteria. It needs to be witnessed and signed by two independent adults and dated. These witnesses cannot inherit anything from your Will or benefit from your Will in any way (although they can act as executors). Your Will should also name your executors, who are authorised to gather in your assets and divide them up according to your instructions. This process is known as probate. As long as the executor is not a witness, they can be a beneficiary of the Will.
It is worth remembering that as your life can change over time, it is very important that your Will reflects this. Update your Will regularly as your family commitments or the value of your estate changes. You may even want to exclude or include certain individuals or parties (such as charities) and this must be included in your Will.
- What is a Power of Attorney?
A power of attorney is a legal document that allows someone to make decisions for you, or act on your behalf, if you’re no longer able to or if you no longer want to make your own decisions.
There are different types of power of attorney and you can set up more than one.
Ordinary power of attorney
This covers decisions about your financial affairs and is valid while you have mental capacity.
Lasting power of attorney (LPA)
An LPA covers decisions about your financial affairs, or your health and care. It comes into effect if you lose mental capacity, or if you no longer want to make decisions for yourself. You would set up an LPA if you want to make sure you’re covered in the future.
Enduring power of attorney (EPA)
EPAs were replaced by LPAs in October 2007. However, if you made and signed an EPA before 1 October 2007, it should still be valid. An EPA covers decisions about your property and financial affairs, and it comes into effect if you lose mental capacity, or if you want someone to act on your behalf.
LPAs are an excellent idea for business owners. An LPA enables the business owner to appoint individuals to manage their financial affairs if they’re ever in a position where they are physically or mentally unable to do so. This will be vital to the smooth running of a business if the owner can’t sign documents or is incapable of making decisions.
If a business owner hasn’t signed an LPA appointing attorneys, a Court application may be necessary, The Court will appoint a Deputy to manage the business owner’s affairs. The Deputy won’t know and may not agree with the business owner’s wishes. This potentially causes conflict with business colleagues and other parties.
Legislation provides that a company director will automatically cease to be a director if they lack the physical or mental capacity to act as a director. However, where the director also holds shares in the business the attorney can potentially act on their behalf to secure the appointment of new directors, enabling the business to continue or be sold.
- Joint Ownership of Assets
If your only real asset is a jointly owned property, you might expect that joint ownership will ensure that it is properly transferred to the person you wish to inherit it when you die. This is not always the case, though. For instance, if you hold a property as tenants in common, there is no right of survivorship, and the property will pass to the beneficiary named in your Will. If you do not have a Will, your estate will be distributed according to the intestacy regulations. This can cause complications; for instance, if you are currently cohabiting and unmarried (and not in a civil partnership), your half of the property may pass to your living parents rather than your partner. Making a Will is the solution.
- Succession Planning
Lifetime gifts, when properly timed and arranged, provide the best opportunity for everyone involved to lock in the current, relatively favourable inheritance tax system.
You may wish to incorporate family trust structures into your estate planning. When evaluating existing structures or establishing new ones, it is always worthwhile to assess how they will interact with family dynamics. Appointing competent and ethical trustees is critical..
- Notifying beneficiaries
If you’re making any difficult choices in your Will regarding assets, it may be tempting to distribute them to beneficiaries while they still have chance to object. Even if your Will is expected to be uncontroversial, we would not advocate this. You may alter your mind regarding the contents of your Will – or life events may compel you to do so. This could become confusing for everyone and require you to update the beneficiaries whenever you make a change.
- Other Considerations
If you want to prevent estate planning complications, don’t forget to plan for your digital assets. Today, property includes the virtual, ranging from bitcoin to banking app passwords. Ensure that your future plans include guidance on how to deal with these.
How we can help
We have a proven track-record of helping clients plan their estates and draft their Wills. This includes relatively straightforward estates but also complex estates where assets are held all over the world and there are multiple businesses to consider. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Private Client Solicitors
It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to a member of our new enquiries team today, simply call us on 0345 9401 045 or click here to make a free enquiry . We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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