Estate planning: The key advantages

Money
06 June 2016
Estate planning is the only way to decide what to do with your money if anything should happen to you - and it offers other advantages such as helping to minimise inheritance tax liability.

Estate planning is essential if you want your wishes to be followed regarding what happens to your legacy in the event of your death.   

Planning ahead is always an important thing to do throughout your life - and this is particularly the case with regard to your estate. 

There are many aspects of estate planning to give serious consideration, such as will writing and putting your money into a trust, in addition to minimising the taxation on your legacy.

This is not a straightforward matter, so it is a good idea to seek the support of an independent financial adviser, solicitor or accountant for guidance on these topics. 

Here are just some of the things you might want to give some thought.

Will writing

One of the main purposes of writing a will is to appoint those who you'd like to manage your estate in the event of your death - your executors. 

It can also outline how you would like your funeral to be conducted and dictate who is to receive what from your estate - and this includes instructions for special bequests, such as cherished personal items. 

Support on this matter is available from professional will writers. These are often employees of law firms, so your family solicitor is a good place to start. 

If you do not wish to do this, then there are will writing packs available online that can help you do this yourself. 

Trusts

Trusts could be seen as an extension of will writing, in that the term refers to a set of instructions that are drawn up to make either an individual or several people responsible for looking after your property or money - all for the benefit of another group. Administrators of this trust are trustees and the latter group are beneficiaries. 

This can be a very complicated matter, as there are many different types of trust available, including discretionary trusts, interest in possession trusts and parental trusts for minors. 

Seeking professional advice on these matters is advisable, as this will help you to get a better understanding of the implications of your plans. 

One of the main attractions of trusts for many people who use them is that they can help you to reduce your tax liability, but they are not the only means of doing so. 

Inheritance tax

Inheritance tax is the money paid to the government after your death - and how much you pay depends on the value of your estate. Inheritance tax is currently 40 per cent on estates worth over £325,000.

Everything you own and plan on leaving to friends, family and loved ones counts as your estate, which is what makes planning ahead so important. 

There are several means of reducing the impact, including by giving gifts and sums of money away each year before you die, or by donating to charity. 

However, this is a highly complex area and advice on the subject is essential. 

Advisers

Clearly, advisers have a lot to offer in every area of estate planning, so it is a positive step to think of some questions you might like to ask them to ensure everything is clear to you. 

Some questions worth considering include: Who can access my money if it is left in a trust? Who will administrate my estate after I die? How do I make sure everything goes to the people I want it to? 

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