Estate Planning – things to consider

An overview of things to consider when planning how to pass on your wealth

What you are going to leave behind you at the end of your life is something that everyone needs to think about seriously at some point. Whether you want to guarantee that your extensive collection of Star Wars figurines get the care they deserve, or you want to make it as easy as possible for your family to convert your estate into assets that will help them reach their goals, estate planning is important.

But estate planning is not simply a matter of dividing up your possessions. It can also be about making sure your current assets are organised in the right way to help you achieve what you want to. You may not be aware of the potential utility of the assets you have been sitting on top of all these years.

In essence, estate planning involves working out what you have, where you want to go, and how you would like to get there. To make sure you get the process right, there are certain steps you are going to need to take.

Working out what you have

One of the easiest ways of finding out what you have – your net worth – is to use the tried and trusted format of probate. Although this may sound a little macabre to some, it helps to identify your assets, debts and tax liabilities, providing a snapshot that can be used as a starting point for discussion.

Your net worth can be deduced by using the following formula:

assets + gifts – debts = net worth

Your assets

Your assets are anything you own that have value including:

  • money in a bank or building society account
  • property and land
  • personal belongings, such as jewellery
  • furniture
  • cars
  • shares
  • trusts
  • pensions that include a ‘lump sum’ payment on death
  • a payout from a life insurance policy
  • jointly owned property, bank accounts or other assets.

If you don’t own your home but have the right to live there rent-free under the terms of a will, this is counted as an asset.

Contact us today to talk about your assets.

Gifts

When thinking about gifts, you need to think about the market value of any cash or assets you have given away in the last 7 years.

Add your assets and gifts together, plus the value of any payout from a mortgage protection policy to the value of your estate. Then deduct your debts and liabilities.

Debts & Liabilities

Remember you are creating a snapshot of a moment in time, so you can deduct anything you personally are responsible for paying such as household bills and bills for goods and services you’ve received but not yet paid for (e.g. building work) as well as loans, outstanding credit card balances and overdrafts.

Mortgages and joint property

Deduct your share of any mortgages or secured loans on a property from the property’s value.

Debts owed to close friends or family

You can only deduct these if they’re legally enforceable.

This is when either:

  • the deceased person and the lender made a written or verbal agreement about repaying the loan
  • there’s evidence that the person was making repayments.

There are other debts and liabilities which can be deducted for probate matters, such as certain gambling debts and funeral expenses, but thankfully, we don’t need to consider these now.

You now have a rough guide of your net worth as it stands today. You may be surprised that it’s not more. This is because some insurance policies and death in service benefits are not included. However much they could all potentially enhance your estate for those left behind, they cannot be accessed by you and therefore do not officially form part of your estate for estate planning purposes.

Talk to us about the value of your estate today. – Call 01233 630000  to speak to one of our experts.

Estate Planning guide

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