No matter your net worth or the scale of your financial portfolio, estate planning will always play an essential part in your wealth management strategy. Estate planning advice and developing a plan that will futureproof your finances for both yourself and your family can be provided whether you’re in the early stages of managing your assets, or if you need to get your affairs in order.
What is Estate Planning?
Estate planning is an effective solution to preparing your finances and ensuring your assets are protected for your loved ones once you are no longer here. This includes creating an undisputable will, clearly outlining your wishes, making funeral plans, and obtaining a clear and concise view of your total assets.
This is often an important issue for those reaching the later stages of their life, as doing so will help to ensure your finances are effectively organised and transferred in an orderly manner. As well as help to greatly reduce or avoid inheritance taxes liabilities where possible and legal to do so.
Estate planning advice is highly recommended for individuals who are considering their financial management later in life. Without a plan in place, your wishes regarding the distribution of your assets can become clouded, making it a complicated process for your executor to fairly achieve.
The Benefits of Estate Planning
- Gain clarity on the total value of your estate
- Minimise any potential inheritance taxes you may face
- Ensure your loved ones are looked after
- Keep your assets protected and ensure your wishes are fulfilled
What is Inheritance Tax?
Inheritance tax is a tax that your estate may be liable for in the event of your death. It is calculated based on the value of your total remaining assets over the sum of £325,000. This amount includes properties, savings, and belongings. It is, however, far too simplistic just to take this figure without the consideration that there is no inheritance tax between spouses or civil partners and there is an additional residential nil rate band of £175,000 which can be applied where property is left to specific members of your family and on top of that there is the facility for these bands themselves to be inherited by a spouse on death meaning this figure can often be as high as £1 million but careful planning and how these additional allowances stack together is essential.
As of 2022, the current rate of inheritance tax is 40%. These rates and rules may change over time, which is why it is crucial that you implement effective estate planning to protect your assets against the impact of inheritance tax; this will allow you to leave more to your loved ones once you are gone.
If your assets are currently valued in excess of the inheritance tax threshold limits and you are worried about how you can protect your assets and finances, get in touch for unbiased and impartial estate planning advice.
Why Estate Planning Advice Important to Keep Your Assets Protected
Depending on the complexity of your situation, you may opt for impartial estate planning advice to develop a solid strategy for your finances. Typically, this is a very straightforward process, however, it is imperative that you are aware of and understand your options so you can make a decision that works for you.
Having an estate advisor can be incredibly useful for this reason. By clarifying your personal wishes and reviewing any assets, businesses, savings, pensions, investments or life insurances you may possess, an estate planning consultant will be able to understand your financial status, identify inheritance taxes you may face, and provide comprehensive advice on the most effective way to protect your assets and pass them onto your loved ones.
With the help of estate planning advice, you will gain a bespoke estate planning strategy tailored to your unique wishes. These plans may be liable to change as legislations change, however, an estate advisor will assist with ensuring your plans are up to date and ready to implement when required.
What is Typically Found in an Estate Planning Strategy?
An estate planning strategy is developed to ensure your finances are used and distributed to their optimal capacity, and inheritance tax is avoided where you are able to. Often they will include trust funds, various investment structures, the gifting of assets, spending advice, and a variety of policies to protect your assets.
Trust Funds
Trusts are traditionally set up for children that are not yet financially independent. They are fully protected from inheritance tax and can be set up at any time – making them a fantastic way to avoid or reduce fees.
Setting up a trust fund may also benefit those with life insurance policies – without a trust in place, your life insurance payout is added to the total value of your estate and therefore taxed. However, when it is set up through a trust it cannot be included in your inheritance tax valuation.
Investment Strategies
Your estate advisor may offer insights into investment strategies you can opt for should you wish to go down that route.
Gifting Assets
Gifting assets is one of the best ways to avoid inheritance tax. This may include distributing money early on rather than waiting; legally you are permitted to give cash gifts up to £3000 per year, with forward estate planning this may be a viable option to put you below the inheritance tax threshold, or greatly reduce the tax you have to pay. You can of course gift whatever you like, there are no limits on the gift itself but usually where gifts are made in excess of £3000, amounts over this may be brought back into your estate for the calculation of inheritance tax, depending on how long you live! Once again there are exceptions, gifts out of regular income, certain gifts on marriages et cetera can all be exempt if properly documented.
Financial and Spending Advice
When receiving estate planning advice you may wish to discuss your current and future spending plans in order to develop a financial strategy that allows you to continue to maintain your lifestyle, while spending intelligently and ensuring your estate is not wasted.
For more information and comprehensive estate planning advice tailored to your exact situation, give us a call on 01329 233364, or email [email protected] today.
