Have you considered a regular review as part of your will? Put in the simplest terms, if things have changed in your life over the last year they might impact the effectiveness of the plans that you’ve put in place to protect your children and family.
We have three key areas for you to consider as the early part of a review:
Family and your Estate Planning Review
There could be any number of events during 2021, and the Covid-19 pandemic does mean that there will have been tragic losses for very many families. But couples continue to get married, married couples divorce, spouses or partners may pass away, and of course, babies continue to be born.
All of those events mean changes to the people in your life and could impact your will. Are they to be included? Someone who passes away will need to be removed, or their children included in place. There are limitless possibilities depending on your family circumstances and relationships.
And let’s not forget your children. If you or your partner die while your children are young you will need to consider what arrangements you wish to make, the people you wish to put in place to care for them. This is likely to change, not least of which is what happens when your children reach the age of 16.
Income, Medical Treatment, and Mental Health
OK so the last two years may not have seen many people improve their income or financial position, but this is an area that you should consider. If your income increases you may move to a larger home. You will have more disposable income, could increase your investments or begin a property portfolio. Or you may have suffered a reduction in income, it’s important to consider this as well so that your will continues to reflect your current financial situation.
Your own health is important too. Have you fallen ill, or have you suffered poor mental health in the last year? Protecting your mortgage payments now is something you could consider as part of your estate planning now, along with the right structures in the form of Lasting Powers of Attorney to protect your interests now.
If you do fall ill and require long-term care, taking the right mortgage protection will ensure your home is protected. LPAs in place will protect your interests so that you are cared for in line with your own wishes, and medics and local authorities will have to respect those wishes.
Some of these are issues to consider today, for tomorrow, because they will affect your life, rather than your beneficiaries after your death. Of course changes in your assets could mean adjustments required to life interest trusts or property trusts that you may have in place.
Assets: Property, Cash, and Treasured Possessions
Your assets are likely to include your home, and valuable possessions like artwork or collectibles like antiques or even cars will have value. You may add to your assets by moving house to a larger home that is more valuable, or buying and selling cars, for example. These will impact the value of your estate.
You could own and run your own business which could also have value to your estate, and will need to be considered as well. And of course, any savings and investments may increase or decrease in value.
Your will should be as transparent as possible so that your beneficiaries are as clear as they can be about your final wishes. At a time when they will be mourning your loss, clarity is key.
Risk: Estate Planning, Wills and Probate
There is always a level of risk during the probate process. Are your final wishes clear so that your beneficiaries understand? Is your will written in a way that mitigates any possible legal challenges? Are you clear on who your executors will be so that applying for probate is a simple process?
And is your will written in the most tax efficient way possible?
Transparency, Clarity and Legal Challenge
You may have set up trusts or other instruments to pass on your assets in full. Are these set up correctly by a professional with the knowledge to do so? Getting the structure of your will wrong can have devastating effects on your beneficiaries. It can leave the potential for legal challenges open, tax may become an issue and your family may find themselves mired in court appointments.
Taking professional advice to put the correct structure in place will mitigate the risk of challenge, and means that the chances of any challenge succeeding will be far less. And people react to death in very different ways. And conducting a regular review to take account of your changing wishes and assets will mitigate this risk still further.
Setting up a tax efficient way of passing your assets along to the next generation, and even generations after your children requires professional support to get it right. But once done, you should be in a strong position to mitigate exposure to inheritance tax. The threshold changes over the years, so that’s the first point to review.
And your assets, especially property, are likely to increase in value. Inheritance tax applies to most assets, not just cash, so your family and loved ones could be left with a hefty tax bill, and lack the cash to settle it.
That means that they could be forced to sell assets, like the family home, to pay the bill. And once you die, any tax liability falls upon your estate and must be paid. At this point it’s too late to do much about it.
Putting the right structures in place, like trusts, when you first go through the estate planning process is important, but as already mentioned, those assets are likely to change in value over the years, so regular review will help you to understand how to mitigate a large tax bill for your beneficiaries. In 2021, the housing market has seen a dramatic increase in house prices, and this is set to continue for the next few years, so the value of your home will almost certainly increase. Have you considered this?
Parental Responsibility and Children
Guardianship is an area to keep under review. You must be happy with the instructions that you put in place to look after your children if the unspeakable happens. You may change your mind about the people you wish to care for your children under a guardianship order.
Or the money that you wish to leave to your children may change, especially if your income increases. Are the structures in place to pass this along robust enough?
Another important area to consider is sideways disinheritance. 50% of marriages fail, so many families are a blend of two sets of children coming together. If your will is a simple mirror will, when you die, the remaining spouse could change their will, and your children will be left with nothing.
Similarly, if you don’t change your will after a divorce, your former spouse could be the beneficiary of your will. Whilst the children you had together could benefit, your current spouse and step-children would almost certainly get nothing.
In a worst-case scenario, you could have had children, separated or divorced, married again, had no children, and divorced, married again and had children or become a step-parent.
You could have updated your will with your second wife, not subsequently updated your will, and upon your death, your second wife is the sole beneficiary to your estate. So your children AND stepchildren would receive nothing, so when you go through changes in your life, it is your responsibility to update your will to reflect on your new circumstances. This is a complex area and professional help here will pay dividends later on.
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