Worried About Your Finances? Estate Planning Can Help
Life is brimming with uncertainties. You never know when your life might take a bad turn. With the years, one can become less capable of handling the day-to-day stresses of life adeptly. Hence, it is important to take charge of your life when you have ample time and the potential to do so.
From cash and other assets to properties, people try to make financial decisions that can keep them secure in their golden years as well as help their families after they’re gone. There are plenty of government and private services that assist in managing assets in the most efficient manner and estate planning is an important service provided to individuals at this crucial time in a person’s life.
The process begins with anticipating and arranging the finances when the person is able for the management and distribution of their estate during or after their death. The process of estate planning minimises estate costs immensely, skipping transfer and income taxes.
Why is it a Necessity?
If you reside in the UK and are searching for ways to secure your successors’ futures, then estate planning is an imperative process to consider. While estate planning might not dominate your list of financial priorities, it poses great importance in your life as with estate planning you don’t have to worry about your estate after your death.
Everyone wants to adequately provide funding to their loved ones when they are alive, but only a few know the best ways to do this. Making plans for your future and setting aside considerable monetary savings for your loved ones is a smart financial move. Of course, every individual has different sets of requirements and intentions when it comes to planning for the end of their life. The smooth and seamless process of estate planning ensures efficient management and transition of the estate to the next generation.
Safeguard Your Finances from Inheritance Tax with Estate Planning
Adhering to all the legal guidelines and utilising all the tax opportunities available to an individual, estate planning lends you a helping hand by managing all the financial procedures.
Estate planning is also a great way to safeguard your interests from inheritance tax (tax paid after death calculated if your remaining assets exceed the amount of £325,000). The majority of assets include property, personal belongings and savings. The current inheritance rate in the UK is 40%, which is quite a hefty portion payable if you have not followed the necessary procedure. Estate planning helps to avoid or receive some concession on this tax rate. The tax rates and rules of inheritance tax are subject to change so it’s important to stay updated regarding the procedures in order to protect your finances from the influence of inheritance tax.
Devices for Planning Your Estate
Estate planning involves several instruments considered to be estate planning devices that aid the entire process in various ways. Some of the major devices of estate planning are wills, trusts, beneficiary designations, powers of appointment, property ownership, Lasting Power of Attorney/LPA, etc. Out of these devices, wills and trusts are the most important tools that give the majority of the contribution to the process.
- Will: This is the most common estate planning instrument used for planning the distribution of the estate. Creation and execution of a Will should comply with the current laws.
- Trust: Used to direct the distribution of the assets after the death of the individual who created it, a Trust is yet another important tool in estate planning. A Trust is typically used to distribute funds among minor or disabled children.
Procedures
While the entire process of estate planning might seem a little strenuous, finding the right official and getting the appropriate services will make things so much easier. There are several factors that need to be considered and steps that should be adhered to while engaging in estate planning.
What You Should Aim For?
Though it is quite difficult to discuss the subject of your finances after your death, it is a crucial thing that must be done when you are physically and mentally healthy. There are three important steps that you as an individual must follow in order to contribute to the estate planning procedure.
Control What You Can
Rather than anyone else representing your finances or managing the process on your behalf, it is best to take charge of the situation as much you can. Control the things that are in your hands. Ensuring that your Will is updated and that your family knows about it as well as keeping full records of your assets are two key things you can do from your end
Understand the Tax Implications
As we all know, different assets are treated separately from a tax standpoint, and not everyone is good at managing taxes. Hence, it is important to get acquainted with the tax guidelines in order to safeguard your interests from any tax ‘glitches’. It is also recommended that you seek advice from a tax expert who can guide you on the tax matters during the procedure.
Consider Your Emotions
Before preparing your Will for the estate planning process, it is important to take your emotions into consideration and make a wise decision regarding your assets. Discuss the situation with your loved ones or those who will be affected by your Will.
Whether you are saving up for a happy retirement or any other important event of your life, there’s a common question that pops up: ‘What will happen to my money when I die?’. It’s not just your savings; pensions need to be managed as well as all your assets, including your house and estate, which need to be distributed after death.
Estate planning gives you the appropriate assistance in calculating, managing and distributing your estate among the necessary beneficiaries. If you haven’t taken estate planning into your consideration, then it may be time to begin thinking about this imperative process. It’s never too late to start thinking about providing for your loved ones.
