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Getting your estate in order: everything you need to know

Later life planning is often something that people like to put off until, well, later life.  

There have been many surveys showing that this is the case – for instance, data from 2020 revealed that three in five UK adults did not have a Will in place, which equates to a staggering 31 million people. And while every person has their own reasons for delaying the estate-planning process, creating a Will not only ensures that an individual’s wishes will be met after they pass away, but it can also offer some added assurance that their family will be provided for should the worst happen.

Although talking about what happens after a loved one dies can be difficult, we have compiled some key considerations to bear in mind, which ought to make the estate planning process that little bit easier.

First steps to estate planning

Firstly, Britons should make a note of all their assets and debts. Usually, assets will include property, pension funds (including a lump sum payment on death), bank and building society account savings, National Savings and premium bonds, motor vehicles, jewellery, antiques, and other miscellanea. Debts, on the other hand, will likely come in the form of mortgages, outstanding credit, bank overdrafts, loans, and equity release.

As a person’s assets and debts will naturally change in value throughout their lifetime, it would be wise to have assets valued regularly, if possible, to ensure that estimations are accurate.

Dividing an estate

Next, retirees should think carefully about how they would like to divide their estate and decide on beneficiaries to hand over their possessions to – beneficiaries can include a partner or spouse, children and other family members, as well as friends and charities. 

The simplicity of this process will vary from person to person. There are many situations in which it will be possible to divide assets equally between beneficiaries or simply leave everything to one person, but often the process is slightly more complicated. 

Broadly, there are four types of legacy individuals can leave to their beneficiaries: a pecuniary bequest, which means that individuals leave a fixed sum of money; specific bequests, which leave specific items to beneficiaries; reversionary bequests, which specify what happens to the asset if the person it is left to dies; and trusts, which are used to protect property that adults wish to hand over to their family.

Often, people will use a combination of these bequests to write their Will. How they decide to split their Will depends on several factors, including the personal circumstances of beneficiaries and their relationship to these individuals. This process can be tricky, so retirees would do well to seek the assistance of a Will writer, who can cut through the jargon to help distribute their possessions.

Inheritance tax

Next, individuals should check whether they will have to pay Inheritance Tax. Only a small percentage of estates are large enough to incur these fees – according to HMRC, only one in 20 estates pay it. However, it is vital not to be caught off guard.

Usually, there is no tax to be paid if the value of an estate is below the £325,000 threshold, which is known as the nil rate band (NRB). This is also the case if people decide to leave everything above the threshold to their spouse, civil partner, or an exempt beneficiary (such as a charity); or if they give away their home to children or grandchildren – in which case the threshold is raised to £500,000.

Any part of a person’s estate over the NRB could be liable for tax at the rate of 40%, and as such, they should factor this into their plans when writing a Will. These rules can be difficult to navigate, so if Britons run into any problems, they should remember that they can seek regulated advice from a professional Will writer to guide them through the process.

Choosing somebody to execute a Will

Finally, individuals should choose someone, or a number of people, to execute their Will. There’s no rule against people named in a Will as beneficiaries, also being an executor. Quite the contrary, in fact, many people choose their spouse or civil partner to be the executor of their Will. However, some decide to use a professional executor, such as a solicitor, to act for them.

Executors must be aged 18 or above, and up to four can act jointly at any given time. Retirees should bear in mind that it is usually helpful to enlist somebody with specialist knowledge, but executors can appoint an expert later on if they so wish.

After producing an initial draft and getting any preliminary conversations with loved ones out of the way, people may find that their plans, wishes, or circumstances change over the years. In these cases, it is wise to commit to regularly reviewing their Will to ensure that it still meets their wishes.