What are tax and estate planning, and why are they so important?

Estate planning is commonly confused with writing a will, but there’s more to it.

Many of us spend our lives accumulating assets such as cash, investments, property etc., but don’t take the time to plan what happens to these after our passing.

Estate planning is simply thinking about what should happen to your assets when you die or are unable to make your own decisions. And once you’ve made an informed decision, ensure it’s legally documented.

Almost two-thirds of UK adults don’t have a will in place[1], so they haven’t taken any steps to document what should happen to their estate.

Just the thought of tax and estate planning[1]  might leave you confused or reluctant to sort out your affairs. A YouGov study in 2021 found that 41% of Britons fear their own death.[2]

It’s not a pleasant thought at all. And neither is thinking about adding stress and confusion to the aftermath of your passing.

Having a basic will in place is one thing. However, speaking to an estate planning advisor will ensure you’re given the facts based on your situation and eliminate any nasty surprises regarding your estate. [2] [3] 

So, why are tax and estate planning so important?

1)  Peace of mind

Current UK life expectancy is 81.65 years.[3] So whatever age you are now, it makes sense to take some time out of your life to take care of what you’ve worked for.

It’s not only your peace of mind but that of your family. You may not understand the law around estate planning, but our advisors can explain it to you clearly.

If you don’t take estate planning seriously now, you could be letting down those you love the most at the worst possible time.

We understand it isn’t easy to think about. And it’s something that you’d rather keep putting off. However, many people leave it too late, and you can’t turn back the clock.

2)  Tax-efficient estate planning can save money

Most people would prefer not to pay taxes on their estate when they pass away. There’s currently a tax-free threshold of £325,000[4] where inheritance tax isn’t due. However, depending on the value of your estate and who you’d like to benefit, you might need advice on estate planning and inheritance tax.

If you choose to do nothing, it might be less hassle and worry just now, but it could mean your family miss out on thousands of pounds they could have had after you’re gone.

Do you really want more of your money to be lost to tax when it could benefit your family? If the answer’s no, then speak to an estate planning advisor[4] [5]  as soon as possible.

3)  There’s no argument over your wishes

If you die without a will in place[6]  (known as dying intestate), your loved ones will be in limbo. It doesn’t matter if you’ve told them what you’d like to happen, it needs to be written in a legally binding document.

Some laws and procedures need to be followed when someone dies intestate. Unfortunately, this can be a lengthy process, and the outcome may not be what you and your family want to happen.

Family disputes after bereavement are, unfortunately, all too common. However, taking a proactive approach to tax and estate planning can go a long way to preventing these.

4)  Preparing for the unexpected

An estate planning advisor will also discuss your options if you cannot manage your finances. For example, if you have a bad stroke or accident, you may want to nominate someone to look after things on your behalf.

Many people have strong feelings and beliefs about medical care too. If there’s a type of treatment you’d like or wouldn’t like to have, this will need to form part of your tax and estate planning review.

5)  Doing what’s right for your children

Estate tax planning can also include advice on setting up trusts for when your children are older. Whether you’re a single parent or have a spouse/partner, naming guardians for your children if they’re under 18 is essential. The alternative is that the courts will decide what’s best for your children if there are no living legal guardians. 

Estate planning and inheritance tax can be complex, depending on your circumstances. So when you know you have to take action for the sake of your family but aren’t sure where to start, we can help.

When you take out a protection policy with us, you’ll have access to our complimentary estate planning service with a will included. Take the first step now by getting in touch.[7] 

[1] https://www.unbiased.co.uk/life/family-matters/what-if-i-have-no-will

[2] https://yougov.co.uk/topics/society/articles-reports/2021/10/06/yougov-death-study-fear-dying

[3] https://www.macrotrends.net/countries/GBR/united-kingdom/life-expectancy#:~:text=The%20current%20life%20expectancy%20for,a%200.15%25%20increase%20from%202020.

[4] https://www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-thresholds-rates-and-who-pays-avrxm3k7kgxw

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