Did you know your estate includes almost everything you own?
This includes your car, your house, and even your savings and personal possessions. Chances are this will be a lot for you to consider, making the importance of good estate planning is critical. If you haven’t thought about estate planning before, you’re not alone. Every year, many people fail to plan adequately, often resulting in financial loss to their loved ones.
If you’re one of the many, now is the perfect time to start thinking about estate planning by reading our guide below.
What is estate planning?
When you pass away, the question of what happens to your estate or assets becomes important. If you haven’t made a will and planned your estate, the state will decide who gets what and this could attract a hefty financial penalty in the form of higher inheritance tax. Estate planning ahead of time enables you to make these decisions. After seeking financial advice, make a will. This will ensure that your wishes are followed and your family and loved ones receive as much of your estate as possible, limiting the amount of inheritance tax paid to the state.
What is included?
Often, many people don’t think about estate planning because they think it simply doesn’t apply to them. And yet if you look at what’s included in an estate, you’ll see the potential wealth that your estate may encompass. Your estate could include property (such as the family house), any investments or savings, insurance, pension plans or employee death benefits, as well as assets such as your car, furniture, jewellery or artwork. It could also include any gifts or assets in trust that you’ve benefited from, as well as any gifts you’ve made within the last seven years.
Who needs to make an estate plan?
Most people should consider making an estate plan. In fact anybody that has children, property, or assets over ÂŁ5,000 should at the very least make a valid and up-to-date will. This will enable you to nominate your executors, as well as guardians for any young children. It will make sure that your estate is distributed to the right people and right organisations, and that your wishes are fulfilled. But estate planning is more than simply making a will; it also can also mitigate inheritance tax, as well as protect your property and any young or vulnerable beneficiaries using Will Trusts.
Whatever you do, do not put this off until you are older. Accidents and illness are a reality and can happen to anyone at any time. Don’t leave it too late – plan ahead. It’s never too early.
Inheritance tax
Seeking financial advice when planning your estate is therefore essential. Consulting the services of a firm that specialises in wealth management can prove beneficial, especially in the area of inheritance tax.  Inheritance tax (IHT) is a tax that’s paid on your estate when you die and can, in some cases, be payable on gifts or trust made during your lifetime. The estate value threshold for this tax year (2015/2016) is only £325,000, after which IHT is charged at 40%. This means the cost of inheritance tax can quickly add up, even for relatively modest estates.
Planning for inheritance tax
By employing the services of a wealth management company, you can plan your estate so that you can limit and, in some cases, even avoid the cost of inheritance tax altogether. Making an effective will could almost certainly help to reduce your family’s inheritance tax bill. In addition, there are a number of important exemptions that can be used to lower your estate’s value. This can include transferring assets to your spouse or civil partner, or leaving more than 10% of your estate to charity, which can reduce your IHT rate to 36%. You could also consider making certain financial gifts or investing in a trust, both of which, if managed correctly, will reduce the value of your estate and lower or even eliminate any inheritance tax liability.
If you are interested in finding out more about estate planning, contact us at Expert Wealth Management. Experts in estate planning, we specialise in inheritance tax planning, trust planning, gifting and charity donations.
Call us on 01993 772467 or contact us online to talk to us in more detail about how estate planning can protect your loved ones
