Creating an estate plan for your wealth is just as important as planning for retirement.
Yet often, financial planning can become obsessed with the retirement stage, focusing exclusively on the income you’ll have to live on once you finish working.
In reality, thinking about what comes next is extraordinarily important. Your family will be responsible for your money when you pass away, so an estate plan is more about them than it is you.
In particular, creating an ironclad will to make sure your wishes are carried out, and putting Lasting Powers of Attorney in place to protect you and your family in the event that you lose capacity, are two practical things you can do to secure your wealth and, consequently, your family’s future.
Writing a comprehensive will is key to your estate plan – and remember to update it over time
Your will is the cornerstone on which your entire estate plan is built. But worryingly, according to insurance firm Canada Life, nearly 30 million UK adults do not have a will in place at all.
Dying without a will in place sees your estate become subject to the “rules of intestacy”. This means your wealth and assets will be divided according to common law, which may not reflect what you want to happen.
That’s why you should create a will sooner rather than later, so that this legally binding document can come into effect and carry out your wishes as you intend.
In your will, you can lay out exactly what you want to happen with your money and assets, including who gets what and how much.
These decisions can be particularly important if you’ve remarried or have stepchildren, as there may be more individuals who think they’re entitled to your wealth.
So, by creating clear, comprehensive instructions in your will, you can help to prevent disputes between your family members and beneficiaries.
You can also select an executor in your will. This is the person who will be responsible for administering your estate on your death. So, it’s important to choose someone who’s trustworthy and capable of managing the processes involved in dealing with an estate.
In many cases, it can be sensible to pair them with a professional, such as your financial planner, so that they’re able to make informed decisions with the help of someone who’s been there and done it all before.
You should also regularly review your will. There’s no hard and fast rule for how often you should do this, but a sensible estimate can be to do so either:
– After major life events, such as having children, retiring, or getting divorced
– Every two years.
By doing so, you can be confident that your will best reflects your current wishes for your wealth.
Creating a Lasting Power of Attorney protects both you and your family
As part of your will, you should consider creating a Lasting Power of Attorney (LPA), too.
An LPA allows you to appoint a trusted representative(s), known as an “attorney”, to legally make decisions on your behalf in the event that you ever become unable to do so for yourself.
This could be because you’ve become mentally incapacitated in some way, perhaps from a disease such as dementia. Or you may have been physically debilitated from an illness or in an accident.
Either way, not being able to make decisions or look after yourself means you’ll need to rely on someone to help you. That’s where an LPA comes in.
There are two types of LPA you can put in place. The first is for your health and welfare, allowing your attorney to make decisions about your medical care or living circumstances.
Meanwhile, the other is for financial matters. This allows your attorney to make decisions regarding everything from money, tax, and bills, to your pensions, investments, or property.
You can choose to have either type of LPA, or both if you’d like to secure yourself for every eventuality.
It’s vitally important to put your LPA(s) in place before you actually need it. Otherwise, you may suddenly become unable to make important decisions about your living circumstances or finances.
Even if you never need to rely on it, having an LPA in place can give you the peace of mind that someone you trust will make decisions for you with your family’s best interests at heart.
Discuss your estate plan with your financial planner
Perhaps the most important thing of all is to make sure you discuss your estate plans, including your will or LPAs, with your financial planner.
It’s vital to share a copy of your will because your planner needs to be able to understand the wishes outlined in it, and check that what’s included is aligned with what you want to happen to your wealth.
Additionally, they’ll be able to check and confirm that the choices you’ve made don’t inadvertently have a negative impact on anyone, such as a surviving spouse.
Your planner can also look at other areas of your estate that might go under the radar if they aren’t aware of what’s included in your will.
For example, your planner might note an Inheritance Tax (IHT) liability, and be able to provide suggestions to help reduce the tax bill your family will currently be left with.
Alternatively, they might make recommendations to safeguard your wealth, perhaps recommending putting assets into trust to ringfence money and assets for your intended beneficiaries.
Having these measures in place is only useful if they suit you and your financial situation. So, working alongside your planner helps to seamlessly link your retirement and estate planning.
Work with us
If you’d like to find out how we can help you build an estate plan that protects you, your family, and your wealth for generations to come, please do get in touch with us at Cordiner Wealth.
Email firstname.lastname@example.org or call 0113 262 1242 to speak to an experienced adviser.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.