Good Estate planning will ensure that the assets you’ve built over your lifetime pass easily and tax-efficiently to your chosen beneficiaries. Yet there are a number of areas which frequently catch families out. Steve Wright, our Estates Director, takes a look at 10 of the most common mistakes when it comes to Estate planning.
Estate planning is different for every family. You might be keen to share your wealth during your lifetime and see your family and friends enjoy or you may prefer to hold onto your Estate until the time arrives for your family to inherit. There’s no right or wrong plan – it all depends on you, your family, your assets and your wishes.
Yet what we do see are some simple, and sometimes costly mistakes, where families haven’t understood what could happen if they don’t think ahead or plan well. Here are some of the most frequent hurdles which can seriously impact your plans.
Mistake 1 – I don’t need a Will
If you feel your wishes are straightforward, with everything passing to your spouse, you might assume that you don’t need a Will. This notion is risky for a number of reasons. Although your spouse or civil partner would automatically inherit any joint assets, complications can easily arise – especially if you’re unmarried or have children. In these situations, the laws of intestacy, followed when no Will is in place, would, depending on the amounts involved, see your Estate shared between your spouse and children or, if you’re unmarried, with your nearest living relatives. You may prefer to delay any inheritance to your children particularly if they are only just 18 or in the early stages of their career. And you may leave your unmarried partner having to fight for the right to continue to live in what was your shared home.
Mistake 2 – I’ll draft my own Will
A Will is a powerful legal document. Managing the process yourself could lead to errors or omissions, which could make it vulnerable to being challenged. Simple mistakes could make your Will invalid meaning your wishes might not even be followed. This could mean a lengthy legal process for your family and additional costs. One of the most common issues is failing to get your Will signed by two independent witnesses – again which can lead it to be declared invalid.
Mistake 3 – my Will is drafted so it doesn’t need updating
It’s good practice to review your Will every five years, or as and when there are significant changes in your family. Circumstances can quickly shift, and you may need to add beneficiaries as your family grows or amend your plans if your children are no longer minors. If you’ve only included a single beneficiary, and they predecease you, your Estate may pass to a distant family member or ultimately the Crown unless you’ve updated your Will.
Mistake 4 – my divorce means other documents will be updated automatically
If you were married it is likely that your spouse will have been included in your Will. On divorce, your Will will be read as if your ex-partner died on the date of your dissolved marriage/partnership, thus bringing forward the distribution of your estate to other named beneficiaries. That may or may not be your intention, so a review is essential. You should also consider your pension and life assurance arrangements.
Mistake 5 – I’ve set out my plans pretty clearly
If you have particular wishes about your Estate, or the gifts you want to make, be specific. Plans which are too vague can create uncertainty and dispute. Your Will should clearly state what’s being gifted and who are the beneficiaries. Using phrases such as ‘I’d like to leave the bulk of my Estate’ or ‘My friends should each receive £500’ are unclear but specifying ‘Each of my grandchildren should receive £10,000’ is a definitive statement.
Mistake 6 – a Lasting Power of Attorney is just for old people
The need for a Lasting Power of Attorney (LPA) can come at any time as a result of an accident or illness. As a result, an LPA shouldn’t just be something you set up as you reach retirement age or even older. LPAs also ensure that you can nominate the right person to make important decisions if you can’t – a common misconception is that your next of kin will automatically be entitled to do this which isn’t necessarily the case.
Mistake 7 – I don’t need to worry about my digital assets
All too often families make good plans but fail to think about some of the digital footprint they’ve created. Online accounts, social media profiles and photo libraries on mobile phones can be totally inaccessible unless you leave your access details with someone you trust or include a note of important passwords with your Will. Most social media channels allow you to nominate a legacy contact who will be able to manage and archive your online profile when the time comes.
Mistake 8 – it’s unnecessary to share plans with my family
Being open and honest about your plans for your Estate is vital. If your children expect to inherit the family home, but you’ve decided to leave it in trust for your grandchildren, arguments can quickly escalate. Sharing your specific plans and wishes can offer enormous peace of mind to your loved ones when the time comes, when they can be clear they are managing everything exactly as you wanted.
Mistake 9 – we’ve appointed each other as executors
Ensure that you have chosen wisely who you wish to appoint as executors. For a married couple, for instance, have you covered the scenario of you both dying at the same time? Who would you want to act in that scenario?
Mistake 10 – my Estate will cover the gifts I’m leaving
Look carefully at whether your Estate has enough cash to cover any specific gifts noted in your Will. Your pension and life insurance can be managed outside of your Will, passing directly to named beneficiaries. So if you’ve specified cash gifts to charities, with your assets tied into the family home you’re leaving to your children, the house may need to be sold to pay the legacies.
These are some of the main pitfalls which can impact your Estate plans. Working with a professional can help ensure that your Estate plans are robust and can be followed easily when the time comes.
To discuss any aspect of your Estate planning please contact your nearest office.