Estate Planning
It is human nature that we do not like to dwell on the prospect of our mortality and death but if you postpone planning for the eventuality until it is too late, you run the risk that your intended beneficiaries may not receive what you would want them to receive, whether due to extra administration costs, unnecessary taxes or squabbling among your heirs.
This is why estate planning is so important, no matter how small your estate may be. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, when you want.
Estate planning is simply the process of getting your affairs in order so that you make things easier for your surviving family members when the time comes. It doesn't have to be difficult, expensive, or depressing.
Estate planning is something you do for your family. Get it done, and you'll feel better knowing that you've taken care of them.
Second marriages present special challenges in estate planning. You and your spouse may have children from previous relationships, as well as children together. You each may have property and other assets you've brought to the relationship. If you're like most people, you want to provide for your spouse's needs, while ensuring that your property (or a proportion of it) ultimately will pass to your children.
Your wishes might change based on who passes away first, so think through each scenario, unpleasant as it may be.
All you need to do is take a few simple steps:
- Make a Will.
In a Will, you state who you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent.
- Make health care directives.
Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. An Advance Directive (“Living Will”) and/or a Lasting Power of Attorney (Health & Welfare), which gives someone you choose the power to make decisions about you and on your behalf if you are unable to.
- Make a Lasting Power of Attorney (Property & Financial Affairs).
With a Lasting Power of Attorney (Property & Financial Affairs), you can give your trusted attorney(s) authority to handle your finances and property if you become incapacitated and unable to handle your own affairs.
- Review pension and death in service provisions.
Nominating a beneficiary for a pension plan or life policy usually makes the benefit automatically "payable on death" to your chosen beneficiary and allows the funds to by-pass the probate process.
- Consider life cover.
If you have young children or own a house, or owe significant debts, your estate could be liable to Inheritance Tax.
- Review your affairs in respect of taxation.
Inheritance Tax (IHT) is payable on the value of your estate if it exceeds a specified amount – the Nil-Rate Band (NRB). The NRB is traditionally increased each tax year, however the Coalition Government has frozen the increase. Everyone should utilise their individual NRB and often the way a Will is structured can make the most beneficial use of the NRB and minimise IHT especially where the Will maker is married or in a civil partnership. Although not payable immediately and as a result of death, Capital Gains Tax (CGT) may be payable when assets are disposed of by either the personal representatives dealing with your estate or subsequently by trustees managing a trust fund created under your Will. Again, CGT might be reduced by careful planning and consideration in your Will. Surprisingly, Income Tax can be payable by your estate and beneficiaries and is applied at different rates depending upon the type of gift you make in your Will.
- Consider whether a Trust of Settlement is appropriate.
A Trust is a legal arrangement where Trustees hold property on specific terms for beneficiaries. This could be to preserve assets for future generations by retaining property in trust allowing the beneficiaries a right to use the property or receive the income from it but not the capital itself, or to protect family assets against divorce, creditors or insolvency.
Providing for everyone you love can get tricky. You need an estate plan that fits you and your situation. Without one, you have no way of making sure that what you want to happen will actually happen. Relying on your spouse and children to "work it out" is not a plan
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