A simple guide to Estate Planning
Estate planning can feel overwhelming with lots of legal jargon to unravel, and support required from solicitors and law firms. Here, we tackle the complicated questions so you can feel confident in your estate planning journey.
What is your estate?
Your estate is a combination of your savings, investments, property and any other assets (vehicles, insurance policies, personal items etc). In short, it is anything that can be passed to a beneficiary after you have died.
What is Estate Planning?
Estate planning involves the organisation of wills, probate, trusts, lasting powers of attorney and advanced healthcare directives. It is undertaken when a person is alive – at any stage of adulthood – in preparation of their death or incapacity. A solicitor is usually engaged to manage these affairs.
Why is it important?
Estate planning ensures that in death, your affairs are handled in accordance with your wishes – your assets will be passed to those you choose, and where viable, they will be transferred in a more tax-efficient manner. It is also extremely important should you become incapacitated. In this event, health and/or financial directives will be managed by a person you have entrusted.
What happens if you don’t have a will?
Without a will in place, there is no guidance on how you wished your affairs to be managed and no way to identify who you may have wanted to leave your assets to. You will be declared to have deceased ‘intestate’ and your estate will be divided and distributed according to standard legal requirements. There is a strict order of priority for family members to take control of the estate.
Who is the executor of a will?
The executor of the will is the person named in your will who is responsible for dealing with the estate.
What is a Trust?
A Trust is a legal arrangement that means you have effectively ringfenced assets for another person. For example, you can put savings into Trust for a child. You can also put a house into a Trust to ensure it remains within the family after you have passed away. Trusts mean the beneficiaries of your estate can avoid probate which can be stressful and time consuming. To set up a Trust you should engage a solicitor.
What is probate?
This is the legal term that describes the right to deal with someone’s estate when they die. Probate proves that a will is valid. It must be granted before the executor of the will (or the next of kin, if a will doesn’t exist) can do anything with the deceased’s assets. This includes everything from putting a property on the market or making any financial plans. Without probate, no moves can be made. Probate is a specialist area of law and is dealt with by a probate solicitor.
Is a grant of probate something different?
A grant of probate is the official court document in the probate process – it is required for probate to be actioned and gives the authority to access bank accounts, sell assets and settle debts after someone dies. A grant of probate only exists when there is a will and must be applied for by the executor of the will. In cases where no will exists and a next of kin is applying for probate, the document is known as a grant of letters of administration. It can take 16 weeks to grant probate and a further 3 to 6 months to deal with the estate.
What is a Lasting Power of Attorney (LPA)?
An LPA is a legal document that lets you appoint someone to make health and financial decisions on your behalf once you are no longer able to do so.
What is inheritance tax?
If the value of your estate is below £325,000 inheritance tax will not need to be paid. If your estate exceeds this threshold, inheritance tax can only be avoided if the assets above £325,000 are left to your spouse, civil partner or to a charity. If these criteria are not met, it will need to be paid. Standard inheritance tax on assets above the threshold is 40%.
Source: http://gov.uk/
What are the key steps of estate planning:
There are several steps to follow:
- Take inventory or assets and value them
- Create a will
- Form a trust
- Make your medical decisions
- Decide on life insurance and long-term care insurance
- Keep your paperwork safe and in one easily accessible place
- Engage an attorney
Would you like to plan your estate? We are a friendly and experienced firm of solicitors in Essex with lawyers who specialise in estate planning. Get in touch today for expert advice – our Wills, Probate and Lasting Powers of Attorney Team is ready to take your call.
The contents of this article are for the purpose of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.