Do I need to make a will?
Critical to estate planning is making a will. Irrespective of your personal circumstances – whether you have children or not, are divorced, have overseas assets – the only way to ensure your wishes are carried out following your death is to make a will.
Dying intestate will leave your estate subject to the rules of intestacy which set out who will inherit and by how much. It leaves your estate open to standard IHT liabilities. It also creates additional cost and administrative burdens on your loved ones, as well as potential complications in relation to claims on your estate.
The sooner you take action the more options and the more favourable the options there are open to you. Gifting for example can be tax-free, provided the gift was not made in the seven years prior to the death.
What are the benefits of a family trust for estate planning?
Trusts can be used to protect some or all of your estate for future generations on your death.
They can provide peace of mind while real life unfolds and you and your loved ones face changes such as relationship breakdown, bankruptcy, creditors, future care fees.
You may wish to protect your assets for children from a previous relationship, or avoid paying IHT twice when passed on from your beneficiaries.
Trusts also offer a degree of privacy as they are private documents and not publically disclosed, unlike probated wills.
For example, where a child inherits a substantial sum, if inherited outside of a trust, in the event of the child divorcing, the inheritance may form part of the divorce settlement at a potential loss of 50% to the former spouse.
Under a family trust however, the inheritance can be recalled in full as a loan. This might remove the sum from divorce proceedings, to be later returned intact following divorce settlement.
In another scenario, following the death of one parent, the surviving parent – the beneficiary of their spouse’s will – remarries. The second parent dies, and their new spouse inherits the full sum by default. The children of the deceased parents may receive nothing.
In this instance had a trust been set up by the original parents, the sum would have been called back by the trust on the death of the second parent, ready for the children to enjoy full benefit and bypassing the new spouse.