Financial Awareness Day: Why Estate Planning Matters for Your Financial Future

To mark Financial Awareness Day, Bethany Lane, Private Client Solicitor at Holmes & Hills, discusses the importance of estate planning and the practical steps individuals can take to protect their assets, minimise future complications, and ensure their wishes are respected.

Financial Awareness Day is dedicated to encouraging people to manage their personal finances and take steps to plan for their future.

Here at Holmes & Hills, we recognise that managing your assets can be hard and feel overwhelming at times. However, there are things that you can do from an estate planning perspective to ease your concerns about Inheritance Tax and ensure your estate is managed in accordance with your wishes.

Understand What Makes Up Your Estate

The first thing you need to know is what is in your estate. Without taking stock of your assets and liabilities, it is hard to plan for the future.

‘Assets’ could include residential property, bank accounts, savings accounts, ISAs, stocks and shares, pensions, life policies, or business assets.

‘Liabilities’ could include your mortgage, credit cards, or loans.

Estate Planning: Protecting Your Assets and Loved Ones

Once you know the value of your estate, you can then consider estate planning strategies.

‘Estate planning’ put simply, is putting processes in place to ensure your assets will be managed exactly how you wish if you do not have capacity to make the decisions yourself or in the event of your death.

There are three main estate planning tools that everyone should consider:

Updating Your Will

Your Will dictates how your assets are dealt with on your death. If you do not make a Will, your assets will be distributed in accordance with the Law of Intestacy. Making a Will ensures that your estate will be handled by and given to the people you have chosen, rather than in the way that the law dictates.

Updating your Will also gives you an opportunity to consider the Inheritance Tax allowances available to your estate which can potentially allow you to maximise their use and mitigate a future tax liability.

Creating a Lasting Power of Attorney (“LPA”)

An LPA is a legal document that allows your chosen attorneys to act and make decisions on your behalf, both whilst you have mental capacity and in the event that you are unable to do so. There are two types of LPA – a Property and Financial Affairs LPA and a Health and Welfare LPA.

A Property and Financial Affairs LPA  allows your trusted attorney to assist you in managing your finances (such as going to the bank or deciding who to investment with) as well supporting you with the management of your property (which could include acting in its sale).

A Health and Welfare LPA on the other hand can only be used if you are unable to make decisions for yourself. Your attorneys would be able to make everyday decisions as well as more significant ones (for instance where your live and the level of medical intervention you may need).  

Whilst you hope that your attorneys would never need to use your Lasting Power of Attorney, it is important to be prepared as you never know what may happen in the future. By choosing a trusted attorney, your best interests will always be at the forefront.

If you don’t have LPAs, and you are deemed to lack capacity, medical professionals will make health and welfare decisions on your behalf. In respect of your finances.  your loved ones will have to go through a lengthy and expensive court process to be appointed as your Deputy to be able to manage these for you. You will have no choice in who is appointed to act for you.

Setting Up a Trust

Trusts are a very useful estate planning tool but are only appropriate in certain situations. For example:

• If you have substantial assets, creating a Trust can be an effective way to reduce the size of your estate and allows you to decide how and when your beneficiaries can receive the funds. This is also popular if you have a blended family.
• If you have a vulnerable relative for whom you wish to provide for, setting up a Trust may be an appropriate way to pass your assets on to them. The value of the Trust will not form part of their own estate, so the Trustees can help them manage the money whilst ensuring that their needs are met.
• If you have received a compensation payment or an award arising from an accident or medical negligence, a Trust can be used to help manage this.

These are just some limited examples of when a Trust can be used. Every Trust is different so it’s important to seek advice from a professional before creating one

How We Can Help

If you would like assistance in estate planning, Holmes & Hills have a team of experienced probate and estate administration solicitors that can assist you with making the most of your estate.