FAQs
Estate planning is the process of arranging for the management and distribution of one's assets and wealth after death, ensuring wishes are fulfilled and minimising taxes.
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What is estate planning?
Estate planning is the process of organising and managing your financial affairs and personal wishes during your lifetime and ensuring that your assets are distributed according to your preferences after your death.
Estate planning involves a range of tasks, legal documents, and strategies, including:
Will: A legal document that outlines your wishes for the distribution of your assets and properties, as well as the appointment of an executor to manage the estate.
Trusts: Legal arrangements that hold and manage assets for the benefit of specific individuals or entities (beneficiaries). Trusts can serve various purposes, including asset protection, tax reduction, and controlled distribution of assets.
Advance Healthcare Directives: Documents like healthcare proxies and living wills that specify your medical treatment preferences and appoint a healthcare agent to make decisions on your behalf if you become incapacitated.
Durable Power of Attorney: A legal document that designates someone to make financial and legal decisions on your behalf if you are unable to do so yourself.
Beneficiary Designations: Ensuring that beneficiary designations on retirement accounts, life insurance policies, and financial accounts are up to date and align with your estate planning goals.
Tax Planning: Utilising various tax-efficient strategies to reduce estate taxes, gift taxes, and income taxes, including annual gift exclusions, lifetime gift exemptions, and strategies like the use of trusts.
Charitable Giving Strategies: Establishing charitable foundations, trusts, or donor-advised funds to support philanthropic causes and potentially reduce tax liabilities.
Asset Protection: Implementing legal structures, such as irrevocable trusts, to protect assets from creditors, lawsuits, and potential financial threats.
Estate Administration: Managing the process of settling the estate after your death, including paying debts, distributing assets, and fulfilling legal requirements.
Business Succession Planning: Developing strategies to transition ownership and management of a family-owned business to the next generation while minimising tax implications and maintaining business continuity.
As laws, family dynamics, financial situations, and individual preferences change over time, estate planning may need to be modified as well. Estate planning documents must be reviewed and updated regularly to remain valid and in line with your objectives. To navigate the complexities of estate planning and make sure that your wishes are carried out as intended, it is frequently advised to speak with an experienced estate planning lawyer or financial advisor.
What is generational wealth?
Generational wealth, often referred to as family wealth or legacy wealth, is wealth that is passed down from one generation to the next within a family. It is the deliberate preservation and transfer of a sizable accumulation of assets, investments, businesses, or financial resources for the benefit of future generations.
When it is wisely and responsibly managed, generational wealth can continue to benefit heirs for many generations. It also carries obligations, such as the need for efficient governance frameworks, open lines of communication among family members, and a shared dedication to safeguarding and enhancing the family's financial legacy. In addition, social responsibility and philanthropy are typical components of generational wealth management, reflecting a desire to give back to the community and have an impact outside of the family.
What is an inheritance?
An inheritance refers to the assets, properties, money, investments, or possessions that a person receives from a deceased individual, typically as specified in the deceased person's will or through the legal process of inheritance when there is no will. Assets of all kinds, such as real estate, bank accounts, possessions, businesses, and more, can be included in an inheritance.
Receiving an inheritance may open up opportunities for financial security, investment, debt relief, or charitable giving and may have a significant impact on the recipients' financial well-being. However, they also bring with them obligations in terms of law and money, such as following tax regulations and managing inherited assets properly. People who anticipate receiving an inheritance or who intend to leave one should make thorough estate plans and, as necessary, seek professional advice.
What is a will?
An individual's wishes and instructions for the distribution of their assets, properties, and possessions (collectively referred to as their "estate") after their death are laid out in a will, also known as a last will and testament.
While a will can be an essential part of estate planning, it might not cover all assets. It is important to keep in mind that based on beneficiary designations or ownership structures, some assets, such as retirement accounts with designated beneficiaries, life insurance policies, and jointly owned property, may pass directly to beneficiaries outside of the probate process.
Making a will is a crucial step in estate planning because it gives people control over how their assets are distributed and ensures that their wishes are legally recorded. To address different facets of estate management and healthcare decisions, wills should be part of a thorough estate plan that may also include other legal documents, like trusts, advance healthcare directives and powers of attorney. A will should be written in consultation with an estate planning lawyer or other legal expert to reflect your unique objectives and situation.
What is a living will?
A living will, also referred to as an advance healthcare directive, is a legal document that enables a person to express their healthcare preferences and treatment choices ahead of time, especially in circumstances where they are unable to communicate their wishes due to a serious illness, injury, or incapacitation. A living will is a crucial part of advance care planning because it enables a person to express their values and preferences regarding medical care.
A living will should be discussed with both medical professionals and family members to make sure that everyone is aware of the patient's wishes and that the document is available when needed. Living wills should also be reviewed and updated regularly to reflect any changes in the person's health, values, or treatment preferences. A living will should be written or updated with the help of legal and medical experts to make sure it complies with local regulations and accurately expresses the individual's wishes.
What is a trust?
An agreement known as a "trust" enables an individual or organisation (the "grantor" or "settlor") to transfer assets or property to a different legal entity known as a "trust" for the benefit of one or more specified beneficiaries. Trusts are created for a variety of reasons, such as asset protection, estate planning, charitable giving, and the management of assets for minors or people who are unable to manage their own affairs.
Trusts are adaptable legal instruments that can be tailored to the specific objectives and needs of the grantor and beneficiaries. They provide some degree of flexibility and control over the administration and allocation of assets, as well as the possibility of tax, asset protection, and privacy advantages. Creating a trust usually entails working with a lawyer or other legal advisor to draft the trust agreement and make sure it complies with all relevant laws and rules.
What is power of attorney?
A power of attorney (POA) is a legal document that gives one person or organisation the authority to act in various legal, financial, or healthcare matters on behalf of another person (the "principal"). The recipient of the power is referred to as the "agent" or "attorney-in-fact." The power of attorney may be broad and cover a variety of duties or it may be more specific and apply only to certain choices and actions.
Powers of attorney are useful legal instruments for handling financial, legal, and medical issues, particularly when the principal may become unable to make decisions due to illness or injury. But it's essential to pick your agents wisely, make sure the document is legitimate, and speak with a lawyer to comprehend the precise rules and laws governing powers of attorney in your region.
What is probate?
The legal procedure known as probate is used to settle an individual's estate and distribute their assets to heirs and beneficiaries following their will, or in the absence of a will, under the laws of intestate succession. A court-supervised process called probate is used to make sure that a deceased person's debts are settled, their assets are properly accounted for, and their property is legally and orderly transferred to their rightful heirs.
Depending on the size and complexity of the estate, the laws of the jurisdiction where the deceased person lived, and other factors, the probate process can be difficult and time-consuming. Probate can occasionally be a drawn-out procedure that takes months or even years to complete.
Estate planning is frequently used to lessen the effects of probate on beneficiaries and assets. Certain assets may be exempt from probate by using techniques like setting up a revocable living trust, naming beneficiaries on accounts and insurance policies, and establishing joint ownership. The probate process can be managed and the final wishes of the deceased person can be effectively carried out by seeking the advice of an attorney who specialises in estate planning and probate.
What is a healthcare directive?
A healthcare directive, also known as a living will or advance directive, is a legal document that enables a person to specify their healthcare preferences and decisions in advance, particularly in circumstances where they are unable to communicate their wishes due to serious illness, injury, or incapacitation. A healthcare directive informs family members and healthcare professionals about the patient's healthcare preferences and the extent of medical interventions they wish to have or avoid.
People need to go over the details of their healthcare directives with family members and medical staff to make sure that everyone is aware of and respects their preferences. Healthcare directives should be accessible in case of medical emergencies and periodically reviewed to make sure they still accurately reflect the person's values and preferences. To make sure that a healthcare directive complies with local laws and accurately reflects the individual's healthcare preferences, it is advised to consult with an attorney or healthcare professional when drafting or updating one.
What is a lasting power of attorney?
In the United Kingdom, a Lasting Power of Attorney (LPA) is a legal document that gives one or more people the power to make decisions on behalf of another person, known as the "donor," in the event that the donor loses the capacity to do so themselves. LPAs are used to name dependable people to handle different facets of the donor's affairs and are a crucial component of preparing for potential incapacity.
In the UK, there are primarily two types of lasting powers of attorney:
Lasting Power of Attorney for Property and Financial Affairs: With the help of this LPA, the designated attorney(s) are given the power to handle all aspects of the donor's finances, including managing bank accounts, paying bills, purchasing or selling property, and making investments. It can be applied both when the donor retains mental capacity and when mental capacity is lost.
Lasting Power of Attorney for Health and Welfare: This LPA gives the designated attorney(s) the power to decide what the donor's medical care, living situation, and end-of-life care will be, as well as other matters relating to his or her health and personal welfare. It can only be applied if the donor is mentally incapable.
LPAs are crucial legal tools that help people in the UK prepare for potential incapacity and ensure that decisions about their finances and medical care are made by people they can trust and who understand their wishes. To ensure that the documents are properly prepared and adhere to all legal requirements, it is advisable to consult with a solicitor or other legal expert with experience in creating LPAs. The decision to create an LPA can also be clarified and supported if it needs to be activated by talking with family members and prospective attorneys.
Is estate planning only for the wealthy?
Estate planning is a crucial process for people and families of all income levels; it is not just for the wealthy. Regardless of the size of one's estate, estate planning's primary goal is to make sure that a person's assets and wishes are properly managed and carried out both during their lifetime and after death. This is true even if estate planning may involve complex strategies and financial instruments more frequently associated with high-net-worth individuals.
For people of all income levels, estate planning is crucial for the following reasons:
Asset Distribution: No matter the size of your estate, you probably have assets and possessions that you want to leave to close friends or family members. You can specify how your assets should be distributed through estate planning, ensuring that they go to the people or causes you care about.
Minor Children: Estate planning is essential if you have minor children because it allows you to name guardians who will look after them in the event of your untimely passing. Without careful planning, the court might decide these matters for you.
Healthcare and End-of-Life Decisions: This is covered by estate planning, which also includes creating living wills and advance healthcare directives. With the help of these documents, you can express your preferences for medical care and make sure that, in the event that you become incapacitated, someone you trust will be able to make healthcare decisions on your behalf.
Asset Management During Incapacity: Estate planning tools like healthcare proxies and durable powers of attorney appoint people to handle your financial and medical affairs if you become incapacitated. No matter how wealthy they are, everyone needs this because incapacity can strike at any time.
Avoiding probate: Probate can be avoided with careful estate planning, which can speed up asset distribution and cut down on the expense and wait time that comes with it. Estates of all sizes can benefit from avoiding probate.
Tax Planning: While estate taxes may primarily affect high-net-worth individuals, individuals at different income levels should also be aware of income tax and capital gains tax implications. Strategies to reduce these taxes and protect assets for beneficiaries can be included in estate planning.
Protection of Asset: As part of your estate plan, you can include safeguards against future lawsuits, creditors, and other financial risks. Asset protection is not just for the wealthy; even those with modest estates may find it to be crucial.
Charitable Giving: If you want to help out with charitable endeavours, estate planning can help by establishing charitable trusts, donor-advised funds, or bequests in your will.
Peace of Mind: Knowing that your wishes will be honoured and your loved ones will be cared for as you intend will give you peace of mind when you have a well-thought-out estate plan in place.
The estate planning process is adaptable and individualised to meet your unique needs and goals. The fundamental ideas of making plans for the future, providing for loved ones, and making sure that your wishes are carried out apply to everyone, even though it may involve the use of trusts, wills, and other legal instruments that can be more complicated for people with significant assets.
Whether you have a small estate or significant wealth, it's important to speak with an attorney or estate planning specialist who can assist you in developing a plan that is in line with your objectives and financial situation. Estate planning is a continuous process that needs to be reviewed and updated regularly to take into account changes in your goals, finances, and personal situation.
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