Why estate planning is important

Everyone has an estate – the word just refers to everything you own. Your estate plan is a plan that you create to set out what happens to your money and possessions when you die. No one likes to think about this, but the fact is estate planning is crucial for your family’s financial future.  

Why should you figure out your estate plan now? Here are four good reasons:

• If the worst happens, having your affairs in order can give you peace of mind.
• It helps those you leave behind to carry out your wishes.
• If you have dependents relying on your estate, planning can ensure your wealth passes on without delays that could cause them hardship.
• You can pass your estate along in a tax-efficient way, which means your loved ones get to keep more of their inheritance.

Here are a few tips to get started.

Make a will and review it regularly

Don’t let this slide – if you don’t have a will you’ll need one. Did you know that if you don’t make a will, there are set rules about who would inherit your estate? Those rules may be different from your wishes. If you have no will, you’ll have no say over who gets everything you leave behind. If this were to happen, the consequences could be devastating for your loved ones.

If you’ve already made a will, remember that it’s important to keep it up to date. A change in family circumstances, changes in inheritance tax rules and wider legislation can all affect your will; so as a rule of thumb, you should look to review your will at least every five years.

Set up a Power of Attorney

A Power of Attorney lets you appoint someone you trust to make financial and/or medical decisions for you if you’re not able to do so. For example, if you become ill and can’t make financial or medication decisions, the person you appoint can do all that on your behalf. Sometimes people wrongly think because they have a will they don’t need a Power of Attorney (POA), but this isn’t true.

It might help to think of a will as something that helps your loved ones after you die, whereas a POA is designed to help you while you’re still living. Another common mistake is thinking that the POA means you’ve automatically handed over control to someone else; again, this isn’t the case. The POA is only triggered when you’re unable to act in your own interest, and it can be a temporary measure too.

If you haven’t set up a POA, don’t wait. If you become unable to make your own decisions, the court may appoint someone to manage your affairs for you and this may not be the person you’d want to be making decisions for you.

Know who stands to inherit your pension

The way your pension is passed on isn’t covered by your will. This surprises many people, but who gets your pension is entirely dependent on whose name you have written in your nomination of beneficiary form. This is a form that you will usually have completed when you set up your pension.

Over the years, it can be easy to forget who you’ve nominated to inherit your pension. This information can also quickly become out of date if your circumstances have changed. That’s why it’s important to check and review this information and make sure the pension is going to the right person. Get in touch with your pension provider if you need to get this information. They can also let you know how to update the form so your pension passes on to the right people.

Speak to your loved ones about your plans

It’s really important not just to have these documents (like your will and POA) and keep them up to date, but to tell your loved ones how they can get hold of them if they need to. By letting your loved ones know you’ve done this important planning, it can make it a lot easier on them at what could be a very difficult time.

Living for the present, but planning for the future

This article merely touches on a few points related to estate planning and only scratches the surface. The important thing is to remember that none of us know what the future holds, and it’s very important to take steps to create an estate plan if you don’t currently have one.

And sometimes there’s even a silver lining – it can be a big relief to know your affairs are in order because then you can concentrate more fully on what’s important, which is enjoying life and living each day to the fullest.

Could you benefit from financial advice?

Managing the transfer of your money and possessions after you’re gone is a complicated area with many financial and legal hurdles. But it doesn’t have to be difficult.

We recommend you speak to a financial adviser. If you don’t already have one you can find a financial adviser that's right for you here.