Estate Planning: Myths That Just Won't Die!
Estate planning remains probably the most misunderstood area of Financial Planning. Some clients think they just need a little Financial Planning but not any Estate Planning. Some consider themselves too old or too young to even think about it. Policy changes from HMRC that hit the headlines do nothing to inspire confidence in a notoriously complex system.
What does Estate Planning mean to you?
It is important to redefine Estate Planning in your mind as a crucial part of Life Planning. It is about defining and living out your legacy during your lifetime, enabling you to enjoy the impact it has on the people and the organisations you choose to support.It’s about ensuring loved ones who depend on you or your income are protected in the event of your incapacity or your death, and it’s about ensuring your wishes are communicated clearly and can be met.
The most common misconceptions about Estate Planning:
1. Estate Planning is only for the very high net worth
Often people assume Estate planning is designed purely for the ultra-rich to protect their assets. However, if you own property and assets, have a bank account and investments, you have an Estate.If you have a spouse, minor children or other dependants, an Estate plan is critical for protecting their interests and their future needs. There are many potential aspects to an Estate Plan, but among the factors, you can consider are:
- They are protecting those who depend on you and naming guardians for minor children.
- Specify the recipients of all your property after your death
- Transfer property to your heirs in a tax-efficient manner, and manage all tax exposure
- Name your executors and potentially avoid probate
- Document the type of care you wish to receive if you become incapacitated
- Express your detailed wishes for your funeral arrangements and all related expenses payment.
2. Estate Planning is only about Distributing Assets after death
Legacy and incapacity planning are two areas that encompass far more than just distributing assets. Legacy planning is unique to you and your family. Being able to pass on a meaningful legacy is life-affirming. Incapacity planning helps plan and prepare for unexpected events at every stage of your life and can significantly impact on your loved ones.
3. A Will oversee the distribution of all of my assets
Your Will is a legal document that instructs how your property will be distributed after your death. It allows you to name an Executor, who is your representative charged with overseeing your wishes are carried out and ensures probate is correctly executed. Probate is the court process that's required to validate the Will and ensure all assets are rightfully transferred. However, certain assets sit outside most Wills, including life insurance policies or Pensions. These assets move directly to the named beneficiaries and are not subject to probate. That's why it is essential to review your account beneficiary designations from time to time. For example, if your Will and/or Trust names your current spouse as the beneficiary or co-Trustee since these assets sit outside a Will or Trust they are not governed by those documents, and previously named beneficiaries will prevail. In addition to a Will, it is essential to prepare a Power of Attorney to empower someone to carry out your financial or legal decisions if you are unable to act. A Living Will is also extremely beneficial. It is a written statement detailing a person's desires concerning future medical treatment in circumstances where they would be unable to express their informed consent. It can also include an advance directive. Living Will gives durable Power of Attorney to a decision-maker, remaining in effect during the extent of the incompetence of the person making it.
4. Once a Plan is Established, I Never Refer to it Again
Estate Planning is never a one-off proposition, as life is continuously evolving. Factors such as your preferences, goals and of course, families are changing over time. A marriage, a divorce or the arrival of a new grandchild, or perhaps tax law changes or significant economic events can all change our priorities. Consider, for example, your ex-spouse ending up receiving absolutely everything after your death because you didn’t update your Plan. Keeping family members and your Executors informed about where to find your legal documents, and your financial details are crucial. Communication is vital because it can mean the difference between loved ones hoping they did what you wanted and knowing with certainty that they carried out your wishes. For the total peace of mind that efficient Estate Planning brings you to need to contact an experienced, impartial and professional advisor. Contact us now, and we will arrange a free 30-minute telephone consultation for you.