Estate planning is a complicated process, and often misunderstood by people. Many estate planning solicitors take the time to fully inform potential clients about estate planning fundamentals.
They also often find that this is necessary for clients who already have an estate plan, as they often don’t fully understand its ramifications. Understanding the basics of estate planning is vital for everyone, as it breaks up a complex process into smaller parts that are easier to understand.
Estate planning is far more than just filling out paperwork. It’s about making important decisions that go towards creating legal documents that put your specific final wishes into writing, and helping to create peace of mind for you and your family.
The fundamentals of estate planning
Understanding the following fundamentals will help you have a clear picture of your estate plan:
- The purpose of an estate plan
An estate plan isn’t just for your property after you die; it’s also about planning ahead for your property should you become mentally incapacitated. Often, planning for potential mental disability is ignored during the estate plan process, but it’s important in light of longer lifespans with increasing incidences of degenerative disease.
- How taxes affect your estate plan
Your estate plan attorney will be able to explain Inheritance Tax (IHT) and other government policies that will affect your estate plan. It’s important to thoroughly understand these as you go through the process of developing your plan.
- How your property is titled
Knowing who officially owns your property sounds simple, but it’s something that can be easily skipped over. This is particularly relevant to those with multiple properties, such as investors and landlords. Who owns the property will lead to who might inherit it after your death. Matching your estate plan to your real wishes, rather than automatic processes is important to ensure your estate reaches your loved ones after your death.
- Considered a revocable living trust
This trust is a legal document covering the following phases of your life: what happens to your property and estate while you’re alive, what happens to it if you become mentally incapacitated and what happens to it after you die.
It can be a tool to help minimise IHT but also to keep your estate plan a private matter within your family. Estate planning isn’t a ‘one size fits all’ process and it’s important to consider all factors involved before deciding whether to opt for a revocable living trust.
- Learn about different options for paying beneficiaries
When you have a plan sorted to care for you and your property if you become incapacitated, it’s time to focus on who will inherit your property – and how they will inherit it.
There are different ways you can leave property to beneficiaries, including in a lump sum, in stages, in lifetime discretionary trusts and many others. Providing for minors is different to providing for adults, and it’s also possible to limit the ways your property can be used after your death.
- Review your estate plan regularly
When you have created your personal estate plan, it’s not a good idea to shelve it and ignore it. Things will happen throughout your life that will affect it, from getting married or divorced, having children or grandchildren, suffering the loss of a loved one, moving to a different country or buying/selling a business.
Reviewing your estate plan on a regular basis is recommended, so that you can make sure that you are meeting your personal goals.