Estate planning can seem like an intimidating area, but it needn’t be if you follow the signpost questions you need to ask of yourself – and the wider family – set out in this simple guide.
Estate planning issues are easy to shy away from, not to mention difficult to unpick. Olivia West, Private Client Manager at 7IM, sets out how families can settle questions around inheritance in a series of manageable steps.
Death is one of the few guarantees we get in life and yet it’s a topic that a lot of us don’t want to look directly at. This failure to acknowledge or accept our own mortality can mean that we do not adequately prepare for it.
There are plenty of articles detailing all the granular points you should consider when estate planning. However, a lot of them omit a key ingredient that is essential to making it a success, that is involving those that are due to inherit wealth
But, there’s nothing like a modern-day plague to highlight our own impermanence. This and the rising panic about how the government stimulus is going to be paid for has caused much talk about accelerating plans to pass on wealth to younger generations.
There are plenty of articles detailing all the granular points you should consider when estate planning. However, a lot of them omit a key ingredient that is essential to making it a success, that is involving those that are due to inherit wealth. If there is a shift towards passing on wealth during your lifetime these conversations become unavoidable, so how are they best approached?
At a high level, estate planning considers what you have, what you need and what is left. So, before you start giving money away or talking about it, it is essential that you have completed the necessary groundwork to ensure you have enough to last the rest of your life.
The first step is the most simple and that is to take stock of your assets; what do you have and how is it held? Do you have any large liabilities and, if so, what would happen to these on your death? Do you have any protection such as life assurance or death in service through an employer?
Once you have a clear picture of what you have, the next step is to work out what you need. This might seem like an impossible calculation but most things in life are quantifiable – including care in later life. “Which” have a “care cost calculator” that provides average costs for a residential care home, nursing home and at home care based on your postcode.
The importance of these calculations cannot be overestimated, and as with any big financial decision we would urge you to call on the services of professionals such as a financial planner
The importance of these calculations cannot be overestimated, and as with any big financial decision we would urge you to call on the services of professionals such as a financial planner. They can assist with a cash flow plan and discuss not only how much you need, but explore the most efficient way to draw an income.
That vast numbers don’t have an up-to-date will in place underscores how difficult people find thinking about inheritance and estate planning issues. Not only is that storing up trouble for those left behind, it also stymies some of the best techniques for passing wealth down the generations efficiently. Getting ahead of these issues saves a huge amount of money – and stress – in the long run and you can start small. Why not take advantage of a no-obligation consultation with an expert who can set out some options? Your family will thank you for it.
Once you have done the above you should have a clear idea about any shortfalls or excesses. If you have cash or assets “to spare” then comes the time to consider how and where you wish to distribute this.
The following points are a starter for ten when talking to family and/or potential beneficiaries. These conversations should be fruitful whether you are gifting during your lifetime or after. Any conversation around money you put off will still happen after you’ve gone, but without you as an adjudicator.
Any conversation around money you put off will still happen after you’ve gone, but without you as an adjudicator
If your family politics are complicated having a neutral party present in these discussions can help diffuse any emotive reactions. This could be the executor of your will, if they are not a beneficiary, or a professional such as a financial adviser, lawyer or mediator
Tax rules are subject to change and taxation will vary depending on individual circumstances. This article does not constitute advice or a recommendation; please consult a financial adviser.
You should be aware that the value of investments may go up and down and you may receive back less than you invested originally.