Everyone has an Estate – does everyone need a Plan?  

8 June, 2021

We Brits don’t like talking about inheritances it seems – particularly before the event.  But when (according to one recent survey) £5.5tn is expected to change hands through inheritance by 2055, we ought perhaps to ask whether we should.

Discussions around inheritance is all part of what has become known as Estate Planning. 

Tax is one part of it, but fair treatment of family members, or explanations as to why you have left your estate as you have are all part of it too. 

What exactly is an Estate Plan?  It is not a legally defined term, but it has come to mean identifying what you have, and where you want it to end up when you are finished with it – whether that is on your death, or increasingly as we live longer, during your life.

It will start with a conversation with your solicitor, accountant, or financial advisor, and in more complex cases might end up involving all three.  It typically ends with any or all of a Will, a letter of wishes, life insurance, deeds of gift, powers of attorney, perhaps even one or more trusts, and even a longer term strategy.

You will talk about the assets you have, their nature and value – a house, investments, a business etc; your family and those you wish to benefit, their needs and expectations; tax, how much and is there anything that can be done about it; how your assets can best be managed whether that is now or when you get older and are less able or interested in such things; what you might be able to give away while you are alive – to help those you want when they need that help the most – and more importantly what you need to keep for yourself for the rest of your own life.     

It might address apparent imbalances within a family whether that it is through differing abilities, levels of wealth, uneven spread of grandchildren.  It might highlight ways to benefit different children at different times, but equally overall.

And of course it might identify ways to save tax.   With Inheritance Tax at 40% on the value in excess of your IHT allowance (which at most is £1m, less for those with larger estates) this alone is worth a look.  

Must have, or nice to have?  That of course depends on your point of view.  There are some who will say no-one should expect anything from me and anything they get will be a lovely surprise, let the tax man take his share.  That is a perfectly fair position if there really is no-one with any expectation.  But it can be cruel to children who might naturally have a reasonable expectation of something. 

More commonly families will want to see what might have been made or inherited passed on responsibly perhaps enhanced, possibly diminished, but in as good a shape and way as possible.  And that is what a good Estate Plan will do.

Central to every Estate Plan is a Will.  A Will is essential to anyone with any assets of substance. Without a Will your estate will pass according to the laws of intestacy which prescribe who should inherit and who should handle things on the death.  To be fair those laws do deliver a reasonably fair result, provided you have immediate family, and you want them to benefit – but they are a one size fits all solution, and of course no two families are alike.   To make the Will fit your estate and your beneficiaries requires some thought – and that will be part of the Estate Plan.

For those who have more than they feel they will need an Estate Plan will extend to what could be given away now, or perhaps in the future as circumstances (your own and of those you wish to benefit) change. 

Briefly put, an Estate Plan is an exploration of how you can make the very most of what you have. 

For beneficiaries, actual or disappointed, knowing that what has been done has been properly thought our and planned can save a lot of ill-feeling, and in some cases actual disputes. 

And that is perhaps the best legacy of all.

This article first appeared in eprivateclient, the leading website and news service for private client practitioners. To read similar content click here: https://www.paminsight.com/epc/