Planning your estate and choosing who will deal with it when you pass away can make a difficult time much easier for your family.
If you die without appointing an estate administrator or without making a will, this could cause problems and disputes between family members. In fact, dying without planning your estate properly may be more common than you think: there are over 14,000 estates that haven’t been claimed in the UK.
Here at First4lawyers, our specialist solicitors are available to help you plan your estate and ease the strain on loved ones after you die.
What is estate planning?
Estate planning is the process of naming those you want to receive the things you own when you die and making a plan in advance.
What is inheritance tax?
Inheritance tax is usually paid on an estate when somebody dies. It must also sometimes be paid on gifts or trusts that the deceased person makes during their lifetime.
Most estates don’t have to pay inheritance tax because their total values are less than the threshold (£325,000). The tax rate on inheritance tax is 40% on the amount over this threshold. Charitable donations may reduce this rate to 36%.
Can I avoid inheritance tax?
You can’t avoid it completely, but even if your estate is over the threshold, you can pass on some assets without having to pay inheritance tax. Examples include:
- Spouse/civil partner exemptions – Your estate will not owe inheritance tax on anything you leave to a spouse or civil partner who lives permanently in the UK. This also applies to any gifts you give them while you are alive (even if the value of the gift is over the threshold).
- Charity donations – Any gifts you make to a 'qualifying' charity – either when you’re alive, or in your will – will be exempt from inheritance tax.
- Annual exemptions – You can give away up to £3,000 each year. This may take the form of a single gift or several presents which add up to that amount.
- Small gifts – You can give away small, tax-free sums of up to £250 to as many people you like.
- Wedding and civil partnership gifts – Gifts to someone getting married or entering into a civil partnership are tax-exempt up to a certain amount. Each parent can give cash or gifts worth £5,000. Grandparents can each give gifts or cash up to the value of £2,500. Anyone else can give gifts or cash up to £1,000.
I’m not rich or old – should I still conduct estate planning?
The fact is that everyone has an estate. Yours includes everything you own, including personal possessions, property, savings and more. Planning your estate is good practice and can reduce the strain for those you love the most when you pass away.
Who should I choose to look after my estate after I’m gone?
The ideal choice would be someone who is well-organised, good with paperwork, dependable and able to stick to deadlines.
Most people refer by default to family members, but you can choose a trusted friend. It would be advisable to make sure they are in good health and preferably younger than you. This will make it more likely that your chosen executor will still be alive when you die and thus be able to deal with your affairs.
Alternatively, there are professional probate solicitors on hand to ease the burden by taking on the responsibility for the process of estate administration after your death, with the cost of using services like these taken from your estate.
You should make sure that the person you wish to make executor is aware of your wishes and that they are comfortable with the idea of dealing with your estate after you’re gone.
What should my estate planning involve?
In addition to your physical and financial assets, you may wish to draw up a will that includes:
- The name of a guardian and an inheritance manager for children under 18.
- Directives for your care if you become incapacitated before you die.
- Provisions for family members with special needs.
- Provisions for loved ones who might be irresponsible with money.
- Instructions relating to the transfer of your business.
I want to organise probate and estate planning – do I need a solicitor?
To provide a better future for your loved ones when you die, it would be wise to seek expert inheritance tax and estate planning advice.
The specialist family lawyers probate solicitors at First4lawyers can help you deal with a range of issues around estate planning. Just make contact with one of our friendly advisors.
Whether you need us to assist you in drafting a will, minimising inheritance tax, setting up a trust, or anything else – our experts are here for you.