misconceptions

1. You need to be wealthy to consider having an estate plans

Rather you need to consider the value you place on the wealth you have and the potential claimants on it after you pass away.

A potential stake in a relatively modest estate consisting of a £500,000 property and £10,000 in savings is sizeable enough to want to protect for future generations. If you don’t have an effective estate plan in place your beneficiaries could face several life threats such as divorce settlement claims, financial mismanagement, creditor/bankruptcy claims, long-term care fees, and generational inheritance tax.

2. It’s like writing a will

We define ‘estate planning’ as follows:

Anticipating and arranging the management and disposal of someone’s estate either during their lifetime or after their death with due consideration given to challenges the estate may face during probate and also in the event of that person losing mental capacity during lifetime.

A will only considers what your wishes are at the point of death. However, prior to death your estate needs to be organised to ensure you’re not overly exposed to various taxes – not just inheritance tax. Your estate may include a business, a property portfolio, offshore investments, insurance policies and more. An estate plan will consider strategic gifting, structuring and even investing. It will always require a professional who recognises a joined-up approach is needed. A will is rarely enough.

3. It’s a waste of time and money as my family will do the right thing

1 in 3 Britons are relying on an inheritance to pay off their debt. We are living longer too but we also have increased dementia rates. Thus all indicating the financial pressures are like to increase significantly over the coming years.

Frankly, you don’t know what your family will do because you don’t know the type of pressure they will be under after you’ve passed away. If you think that’s unlikely to happen to you, consider the fact that over 12.6 million (24 per cent) people would seek to dispute the wishes of a loved one by going to court to challenge the bequests if they disagreed with the division of their estate based on research by Direct Line. Also consider the fact that in 2005 the High Court only dealt with 15 inheritance disputes, in 2016 they dealt with 116, and in 2019, it dealt with 188 cases.

4. You’re too young

Unless you know when you are going to die, you don’t know what the future is going to bring. What you do know is the level and type of wealth you have today and you should also be thinking about your estate plan just as readily as someone considerably older. Our clients tend to be from the age of 35, which is a good age to start thinking strategically about how you’d structure your business and future investments, which will in turn allow you to avoid costly mistakes you would’ve otherwise made.

5. It’s very expensive

The cost of not doing anything could be far more expensive. Consider the fact that 100% of your estate could be lost to financial mismanagement, or upto 50% lost due to divorce settlement claim. Furthermore, that same wealth having already been taxed for inheritance tax on your death would be taxed again for inheritance tax on your beneficiary’s death. Income tax is not paid on the same wealth twice if you gifted it to someone – but that’s not the case with inheritance tax – this is what we call generational inheritance tax.

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