While estate planning may not be on people’s day-to-day agenda, it’s an important consideration when it comes to providing for any loved ones after your death. There are a number of ways to prepare your finances ready for when this inevitably happens and estate planning is a huge part of this.
Your estate refers to everything your own, from properties to bank accounts. Estate planning, otherwise known as ‘legacy planning’, is the process of valuing your estate and planning out how it should be passed on or distributed after your death. Many seek help from estate planning specialists to ensure they are thorough. On top of this, it’s important to get your assets valued regularly as the value of your house or pension may have changed since you last checked.
Why is estate planning important?
There are several reasons why estate planning can be beneficial.
- Saves time and money
By dealing with life admin such as estate planning earlier, it means you’ll save any stress later down the line. By writing a will that names an executor of your estate and ensuring any investment accounts you own have the correct living recipients in place on any paperwork, you’ll be helping the process massively.
- Avoids big taxes
By planning ahead and considering things like inheritance tax, you can prevent any beneficiaries from paying big taxes if you plan correctly, and legally, of course. Without a will, recipients may be liable to inheritance tax (IHT) that could have been avoided if the assets end up being distributed in accordance with intestacy rules.
- Protects children
If you have young children, writing a will is an important step in estate planning. Should anything happen to you, having a plan in place will mean that decisions aren’t made on your behalf. If parents die before their children are 18, having a plan in place will ensure they are cared for by a chosen guardian and that they receive the assets they are supposed to receive.
- Protects beneficiaries
Part of the reason why estate planning is so important is so that you have a clear idea of what your estate is worth. In turn, this will give you an overview to work with when deciding how to split it. A common misconception is that estate planning is something done by the wealthy. This isn’t the case. People may have assets beyond cash that they want to pass on to loved ones, such as stocks and shares or real estate. Make the most of having control over who receives which assets, because the choice will no longer be yours if you leave it too late – and the fate will be in the court’s hands, which may result in an, in your eyes, unfair distribution.