We spoke to one of Northern Ireland’s leading Estate Planners Abbey Financial Services about the most important areas you need to consider when you're planning your estate.
According to recent studies, the average person only spends 30 % or so of their wealth. This means the remaining 70 % is left sitting in the bank account or as physical assets (i.e. houses, investments).
With this in mind, it's important to understand the value of estate planning in the UK and how to go about it.
Planning
The best place to start is with a plan as this organises everything and makes it easier to manage.
You want to sit down and discuss your options with a legal professional to determine what's allowed and what's not. They will provide a personalised layout of what's needed to ensure the process is your favour. In general, creating a Will is important and most people don't get around to it as soon as they need to.
Don't assume the assets will go to a specific loved one. This isn't always the case and it's better to gain control of the process with the help of a legal document.
With the Will, it's also important to understand where it's going to be placed and how the Executor(s) will find it. This is essential and cannot be ignored.
There shouldn't be a situation where assets are listed in the documents but aren't easy to access. This is why planning is important and becomes an integral phase in the estate planning process. The goal should be to list everything in one document making it easier to access whenever necessary. It will simplify everything and make it straightforward for the Executors.
Before moving forward with the Will, it's best to sit down and pinpoint who should benefit the most. This can be your spouse, children, friends, or anyone else. Having these details in mind, it becomes easier to plan a tax-efficient means of pushing the assets in their direction. A legal professional can assist in this regard shedding light on what's required.
Tax Details
The average person will want to know more about the taxation requirements with estate planning.
In the UK, there is an IHT or Inheritance Tax. This is a tax that has been around for centuries and is well-known among legal professionals. From a generalised perspective, there is a 40 % tax placed on assets that go above the established IHT benchmark. The bench market is set at approximately £325,000. This means anything past this amount will be taxed at 40 %. However, this does not apply to spouses and there are additional tax discounts on personal assets such as properties. A person is also welcome to make charitable donations without having to deal with the IHT.
If this is an issue for you, it's best to speak to a legal professional and analyse your assets one by one.
This is why estate planning is important in the UK because there are several details to account for well in advance. This is the only way to make sure the right decisions are made and your beneficiaries are in line to get what they are expected to.
