Estate Planning
Estate Planning Explained
We are seeing a ‘great wealth transfer’ and inheritance tax receipts are rising over time. In an increasingly uncertain world, its more important that every to protect your legacy and care for your loved ones.
See below for examples of some of the areas of estate planning in which we specialise.
Focusing on what matters most
Passing on wealth is about making sure your wealth goes to the right people at the right time. You want to feel safe in the knowledge that your wishes are fulfilled after you’ve gone. Better yet wouldn’t you like to make a difference throughout your lifetime?
With good estate planning you can pass on your wealth in ways that work for you during your lifetime and beyond. With the right advice and planning this can be done whilst minimising inheritance tax (IHT).
Passing wealth on in the right way
There are lots of ways to think about the what’s, who’s, when’s and why’s around passing on your wealth. The most common differentiator we see in our conversations with clients are the assets in question:
Unemotional assets: Cash, shares, bonds, funds. These are numbers on the screen with little emotional value and can be easily divisible.
Emotional assets: Properties, business, antiques and other sentimental items where value can be subjective and can’t be split or divided easily.
Getting the Basics Right
In conjunction with any estate planning, we will ensure to liaise with a solicitor of your choice, or we can introduce you to one of our preferred partners. A solicitor will help assist in drafting any documents as they are required such as:
Will: A document and can be updated regularly to offer your latest wishes around who receives what.
Lasting Power of Attorney (LPA): Both ‘health and welfare’ and ‘property and financial affairs’ to enable others to make decision for you when you are no longer able to do so. Sometime a third LPA for business ventures may be required.
Trusts: To offer more control over what happens to different assets.
Valuing your estate and tax liability
Before we can assess any potential tax liability, first we must understand the value and composition of your estate. For UK domiciled individuals all assets worldwide, are deemed to be in your estate for inheritance tax. This can include, property, cash, investments, business interests and personal possessions like jewellery.
Pensions are not usually deemed to be in the estate as they are trust based. It’s important to confirm that you have a trust-based pension, otherwise assets could be paid out on death and subject to IHT.
We will then help assess this total value against any ‘Nil Rate Band’ and ‘Residence Nil Rate Band’ if you own your own home. Following this, we will be able to estimate your inheritance tax liability.
Any gifts already made can be considered to see if they would be added back into the estate if you were to pass at different points in time.
How we help
Life Insurance: Sometimes overlooked as many think their age will be a barrier to them. Term assurance can be an easy way to not only protect an estate plan by providing money to pay inheritance tax should anything go awry, but also to make it very easy to do so when the policies are written into trust. With good planning and reducing IHT liabilities and having them for as short a period as possible this doesn’t have to be an expensive solution.
Gifting strategies: There are a multitude of different gifting allowances for different circumstances, and using these each year can really add up. In addition, gifting from regular income helps ensure that your estate isn’t growing over time. We can assist in drawing up a gift strategy and recording these gifts to demonstrate what was gifted when and to manage any IHT liabilities as a result.
Trusts: Trusts offer a controlled way to distribute assets, and there are many different types of trusts that can be used depending on your needs. The blending of different trusts can help you gift early but give you the option of taking back some of your assets later, to be spent as and when they are needed. Many of our account types can be written into trust easily and we can also set up accounts to be placed under a trust of your choice with your own solicitor.
Tax Advantaged Investments: Estate planning principally focuses on the reduction of inheritance tax. Very quickly through it can create a need to explore other taxes that may arise as a result. For example, selling or gifting a property may create a capital gains tax liability or creating a regular income to gift away could increase your income taxes. Eclipse Financial Planning has developed a strong understanding in this area. Sometimes these investments can carry more risk but they come with a variety of tax reliefs and exemptions that can significantly improves ones financial outcomes when included in a wider estate plan.
Intergenerational wealth planning
Estate planning is often the first opportunity to connect the generations and embark on intergenerational wealth planning. This is the conscious decision and the conversations and actions that come with it, to engage the family as a whole take on the responsibility of building protecting and building upon this initial wealth, leveraging from the resources and knowledge accrued already.
What does a good estate plan look like?
Bringing these different areas together can be challenging. We feel its most important for our advice to work around you. At its core our service is designed to help you find the balance between the 3 common needs of estate planning:
In estate planning there is often a trade-off of one area when favouring another. You will have your own preferences. With enough time, and clarity over your wishes we will build a tailored plan to help you optimise accordingly.