What is estate planning?
Estate planning is about deciding on the best way to leave your estate to those you love after you die. And to help ensure your loved ones are provided for.
Nearly everyone has an estate, no matter how big or small it may be. It includes your main property and any other properties you may have, money and savings, shares and investments, life insurance policies and any other personal possessions, such as cars and jewellery.
When you die the Government charges tax on your estate and it could be a pretty significant amount. This is called Inheritance tax.
Here's a short video clip from a recent retirement seminar where we shared some useful information about Inheritance Tax Planning. It includes some helpful tips on how to minimise any tax your loved ones may have to pay. The audience found it particularly useful, so we thought we’d share it with you…
What are the benefits of estate planning?
- Your loved ones are taken care of - first and foremost estate planning helps ensure your family are provided for.
- You chose where your estate goes – your estate plan will outline where you want your assets to go after you die, so there will be no confusion about your wishes.
- You can try and reduce the amount of tax - estate planning will help minimise the amount of tax paid, so you can leave more to your loved ones.
Do you have a will?
Estate planning and will writing are often confused for the same thing. Although they go hand in hand, having a will is part of good estate planning.
- The majority of adults in the UK don't have a will.
- And looking more specifically at parent the majority don't have a will or have one that is out of date.
If you die and don’t have a will, your estate will be distributed as the courts see fit which may have been very different to what you wanted.
There may be a misconception that wills are ‘automatically’ updated for example, when you have children or get married but they are not. You have to create a new will or update if your circumstances change.
What happens to your pension when you die?
Pensions don’t automatically ‘sort themselves out’ when you die and what happens to your pension depends on many things like what type you have, what options you have chosen and how old you are. So a good starting point is to get in touch with your provider to check the rules of your pension, or if there's any restrictions if you're already taking an income in retirement.
What happens to your State Pension when you die?
You can find out the rules about what happens to your State Pension here.
It’s easy to feel overwhelmed…
When it comes to estate planning there is a lot to consider, many tax implications, complex rules and let’s face it – it isn’t a nice subject. But there is no need to do any of this on your own.
A financial adviser will be able to chat you about what you want to happen to your estate and explain how it all works . They’ll do all the research about your existing pension rules, look at how to minimise the tax that has to be paid, see if you have or need life cover and look at other aspects of your finances. Then they put together a personal recommendation.
Whether you have your own adviser or would like to speak to one of ours, financial advice can be very beneficial. Especially in areas like estate planning when there are some fairly complicated tax rules.
We recommend you use Pension Wise, a free impartial guidance service from the government to help you understand your options at retirement.
Visit pensionwise.gov.uk or call 0300 330 1001 to book a phone or face-to-face appointment.