Common Estate Planning Mistakes

22 April 2021|Related :

Whilst few of us want to start thinking about dying, ensuring you have adequate estate planning in place will make sure your assets are effectively managed for your beneficiaries. Unfortunately, many people commonly make mistakes when planning their estates, leaving behind lots of work, stress and complications for family and friends. In this guide, we will be taking a look at some of the most common estate planning mistakes and how you can avoid them.

Thinking You’re Too Young to Start Estate Planning

If you’re young, you may think estate planning isn’t something you’ll have to worry about for a long time, however, as with many things in life, unexpected occurrences can happen with very little warning. That’s why we would advise starting to plan your estate as soon as you have any assets.

Failing to Make a Will

Many people assume that a modest income doesn’t require a Will, however, where there is no Will, intestacy laws apply, meaning your assets could be distributed differently to how you would have wanted. An example of this is if you’re currently living with a partner but not married or in a civil relationship, your partner won’t be entitled to any of your assets when you die unless you have a Will in place that states otherwise.

Forgetting to Update your Will

Just because you’ve written your Will once doesn’t mean the job is done. Over our lives we’re often impacted by events such as marriages, divorces, births, deaths and falling outs.

Whether the person you once wished to leave your assets to is now your worst enemy or if you’ve simply changed your mind about some parts of it, it’s important to keep your Will updated so that it reflects your last wishes.

Making a Poor Choice of Trustee

Choosing a trustee is a very important decision to make as they will play a large part in the handling of your estate and are given great amounts or responsibility. The role usually involves lots of paperwork and handling large sums of money, so make sure you appoint someone who is able to cope with responsibilities such as these.

Forgetting or Failing to Use Gifts

Did you know you are able to give away gifts with a value of up to £3,000 without having to add them to the value of your estate? This is called your ‘annual exemption’ and can help to significantly reduce your Inheritance Tax bill.

Each tax year, you may also give away:

  • Wedding/civil ceremony gifts worth up to £1,000 per person (or £2,500 for a grandchild/great-grandchild or £5,000 for a child).
  • Ordinary gifts out of your income e.g. birthday or Christmas gifts, though you must be able to maintain your standard or living after giving the gift.
  • Payments to help someone else’s living costs e.g. an elderly relative or a child under 18.
  • Gifts to charities or political parties.

You are also able to give as many gifts as you like with a value of up to £250 per person during the tax year so long as you haven’t used another exemption on the same individual.

Informing the Beneficiaries

When writing your Will, it can be tempting to speak with your beneficiaries about your choices, particularly if some were difficult to make. Unfortunately, by doing this you are giving them the opportunity to try to change your mind or protest your decisions, potentially leading to multiple changes and causing confusion for everyone. This is why we wouldn’t recommend sharing the contents of your Will, especially if some decisions are controversial.

Failing to create a Power of Attorney

A common estate planning mistake is forgetting to plan for the run up to the end of your life. For example, if you are still alive but no longer have the capacity to make important choices about your will, you’ll need someone who you can trust to help you make key decisions about your health and finances.

This is where a Power of Attorney comes in. They help to make those important choices should you be unable to and can be a necessary part of the end process to help avoid the depletion of your assets or using resources that will keep you safe.

Creating a Will that Cannot be Used as a Legally Binding Document

When writing your Will, it is important to make sure it is legally binding. Scribbling a few wishes down on a sticky note is unlikely to provide any legal obligation and could result in confusion or mistakes. When planning your Will, make sure it is a clear legal document that will ensure your wishes are legally upheld when you die.

Not Seeking Professional Advice

One of the biggest mistakes someone can make when estate planning is failing to include all of the information that can help to save large amounts of time and money. With the guidance of a financial advisor, you can be absolutely sure that everything necessary is included in your Will and that it is completed in a way to ensure that all of your wishes will be legally carried out.

At Ryans, we provide a discreet estate planning service that includes:

  • Help with drawing up and reviewing your Will
  • Making full use of exemptions and lower tax rates on lifetime transfers
  • Optimising lifetime transfers between spouses
  • Transferring agricultural or business property
  • Transferring assets into trust
  • Arranging adequate life assurance to cover potential inheritance tax liabilities.

Looking to Plan Your Estate?

Nobody wants to leave added stress and complications for their family and friends once they have died and sooner you start making your arrangements, the better your chance of taking full advantage of all the opportunities available, maximising the amount that goes to your beneficiaries.

As morbid a topic of conversation it may be, it’s one that should happen before it’s too late, so let’s talk.

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