It is easy to fall into the trap of believing that estate planning “is only for the wealthy”. However, most people want to ensure that their home, savings or other belongings of value pass to the right people in the right way and at the right time. A properly drafted Will ensures that your assets are available to benefit the people you choose and that if necessary, are protected for the future.
Below are some common traps clients fall into:
This sounds obvious, but one of the most common estate planning mistakes is to not have a Will at all. This usually has undesirable tax implications and often means that your assets will not pass onto the people you want them to. Death does not always come when expected, so it’s important to prepare as early as possible. This will ensure that your personal and financial affairs will be handled according to your wishes when you pass away.
An Outdated Will
Marriage, divorce and changes in relationships mean that many people’s Wills become invalid or unenforceable without them realising or making a new Will. We advise clients to review their Will every five years to ensure that it remains appropriate.
Inheritance tax (IHT)
Many clients fail to appreciate the impact of inheritance tax and miss out simple steps such as making lifetime gifts (outright or to trust) or structuring their Will appropriately to minimise IHT. Specific opportunities exist in relation to clients with business assets. Specialist advice is always required to mitigate any tax payable. A worse mistake is deciding yourself without the benefit of advice to make gifts. For example, many clients give away their home and continue to live there, not realising that it is not only useless from an inheritance tax perspective but also creates other significant tax problems and increases the amount of tax payable overall.
Children from first marriages often get disinherited because assets have passed to a stepparent first. A properly drafted will can enable you to provide for a spouse during his or her lifetime whilst still making sure that on their death your estate passes to your children and not anyone the spouse may choose to leave it to.
Not Updating Asset Ownership
It may be that you own some assets in your name, and some in joint ownership with your spouse, your children, or someone else. Every now and again, it’s crucial to review your plans. Perhaps there have even been changes in the law that make different ownership a better option. Many people should review their plans to see if they still relevant to their current situation. It’s one of the biggest estate planning mistakes that is easily avoided.
Powers of Attorney
Failure to make a Power of Attorney in time means that clients will not be able to choose who handles their estate if they are unable to do so themselves. Choosing the right person for this role can have a significant impact on how assets are protected for the next generation.
Picking the Wrong Executor!
It is vital that you trust your executor(s) to deal fairly, practically and cost-effectively with your estate and avoid any possible disputes which can give rise to significant delay and legal costs. Picking the wrong executor is one of the biggest estate planning mistakes as it could have an irreversible impact on your assets, which can bring additional stress to an already painful time to your family. It’s important to thoroughly research your options before making a decision.
Our specialist Estate Planning Team ensure that our clients deal with all of the above issues in good time and minimise the overall cost of inheritance tax and legal fees relating to death and the transfer of assets to next generations. For more information to help you avoid estate planning mistakes, don’t hesitate to contact us today.