estate planning

December 2023

Estate Planning – Advice & Services | December 2023

Estate Planning in the UK is one of the most important things you can do as you approach later life.  In this article we will help you get things right and explain:

  • What is inheritance tax
  • What is estate planning
  • Why an estate plan is important and what it involves
  • Where to get estate planning advice from a specialist
  • Where to find estate planning services

Topics that you will find covered on this page

For many approaching later life, concern over the impact inheritance tax may have on their relatives is a very real and important issue.  

Estate planning provides a viable and sound way to prepare your finances to ensure that your assets are protected for your loved ones once you’re gone. Estate planning also helps you to avoid or reduce the amount of inheritance tax you’ll pay. There are other benefits to estate planning and consideration of later life finance – such as arranging a watertight will, understanding and outlining your wishes, making funeral plans and obtaining a clear and comprehensive view of your assets.

At UK Care Guide we are committed to providing sound, clear advice for individuals and their families who are considering later life finance and the costs of care provision.

Here is a helpful video that explains more about creating an estate plan.

Who should make an estate plan?

Estate planning is essential for everyone in the United Kingdom with substantial assets or business interests.

It is essential to ensure that your wealth and belongings are dispersed in accordance with your preferences after your death. Estate planning enables you to determine how and when these assets will be transferred, while shielding them from taxes, legal fees, and other expenses.

It is essential for married couples and people with dependents, such as children or elderly relatives.

Estate planning enables married couples to shield their shared assets from probate court processes if one partner dies before the other.

In addition, it provides a safety net for people with dependents by guaranteeing that their long-term financial needs are met.

Those with substantial possessions or business interests must also arrange their estates. Without a will, the government may impose an inheritance tax on your estate, reducing the wealth you have to leave to your heirs.

Additionally, if you own a business, it is essential to prepare how to transfer it to your heirs or another corporation to assure its success and continuation.

The estate preparation process can appear complicated, but it doesn’t have to be. Consulting with a lawyer or financial adviser can help make sure that your estate is managed properly and according to your wishes.

Anyone in the United Kingdom can ensure that their loved ones are cared for after their death via thorough study and forethought.

When should you start estate planning?

Estate planning is the process of preparing for the distribution of a person’s assets upon death. In the United Kingdom, estate planning should commence as soon as possible to ensure that all necessary procedures are followed to guarantee the financial future of your family.

In general, it is advised that individuals begin estate planning upon reaching maturity and achieving financial stability.

This may involve purchasing life insurance, drafting a will, and establishing trusts or other legal papers. Having these assets in place helps shield your loved ones from potential taxes, creditors, and the long-term difficulties of managing huge sums of money.

For those who have already amassed wealth or who own property such as real estate, estate planning is even more crucial.

It is never too late to begin the process, but the sooner you begin, the more time you will have to ensure that all of your assets are secured and dispersed according to your preferences.

In addition to drafting a will and other legal documents, estate planning includes examining care options for family members who may require additional assistance in the future.

This may involve the establishment of a power of attorney or trust funds for adolescents or children with special needs. It is necessary to consider these matters in order to provide for your loved ones in the event of your passing.

What is the estate planning process and how long does it take?

Estate planning is the act of organising your finances and assets to minimise taxes, care for your heirs, and ensure that your desires are carried out after death.

In the United Kingdom, estate planning typically entails drafting or revising a will, appointing an executor, selecting beneficiaries and trustees, arranging insurance policies and other investments such as trusts or annuities, appointing power of attorney to handle financial matters during your lifetime, and establishing guardianship for minor children.

The length of time required to develop an estate plan relies on a number of variables:

  • the complexity of your assets
  • the size of your estate 
  • whether there are any disputes among beneficiaries regarding your assets
  • the complexity of tax law 

Depending on your scenario, drafting an estate plan can take anything from a few weeks to many months.

Consider the time required to speak with an experienced estate planning attorney and other specialists, such as accountants and financial consultants. Before making any recommendations, each specialist must analyse your financial facts.

In addition, you may wish to establish a trust as part of your estate plan. Trusts are particularly useful for complex estates because they give additional asset protection and ensure that beneficiaries are appropriately cared for. A trust typically has its own set of paperwork and may require additional time to properly create and execute.

What is inheritance tax?

Inheritance tax is a form of taxes in the United Kingdom that applies to the estate of a deceased individual. There are certain exemptions and reliefs that may reduce the 40% inheritance tax rate. In general, the levy applies to any assets over £325,000 possessed by an individual, including real estate, cash, and investments.

In addition to the basic inheritance tax rate, there are several exclusions and specific regulations that may apply based on the individual’s circumstances.

For instance, if a person donates 10% or more of their estate to charity, the rate can be further decreased.

Inheritance tax thresholds 

Inheritance tax is a tax paid upon death calculated against the value of your remaining assets over the amount of £325,000 –including property, belongings and savings.

Inheritance tax rate

The current rate of inheritance tax stands at 40%. There are some concessions available – but it’s important not to count on those as they are often dependent on your situation, which is subject to change.

Plan for the future

 Inheritance tax rates and rules may also change over time. More and more people are looking to protect their assets against the impact of inheritance tax, enabling them to ensure that they can leave more to loved ones when they pass away. 

If your assets amount to £325,000 or more and you are concerned about protecting property and finances such as savings and investments, organising estate planning as early as possible is essential. 

Here is a short video from which explains more about inheritance tax and how to avoid it.

What is estate planning?

Estate planning enables you to create a clear plan that details your wishes regarding how you’d like your estate to be managed upon death.

This will ensure that when the person looking after your estate applies for probate they will know what your wishes were. 

If you are looking at this after someone has died, we’d recommend that you read our guide which looks at all the things you should look at following a bereavement. 

This will prove to be incredibly helpful for your loved ones, who can then arrange your affairs accordingly. It also helps you to protect your family and any other beneficiaries from the impact of inheritance tax. 

When provisions aren’t made in advance, inheritance tax can be a nasty shock for family members. Fortunately, there are ways to protect your assets – provided you prepare in advance for the possibility of having to pay inheritance tax and make adequate arrangements.

Why is trust and estate planning important?

First and foremost, making a plan now offers you and your family complete peace of mind. The earlier you can start and make provisions for the future the better. 

These provisions could be made through wills or through the use of specialist trusts, such as a protective property trust.

It’s never nice to think about death and how you will arrange your affairs after you’re gone – but it’s crucial if you want to protect your assets from inheritance tax. 
When you consider estate planning early on you can be sure that your loved ones will be protected from inheritance tax. They’ll also have the freedom to carry out your wishes.

What does wills and estate planning involve?

Wills and estate planning can be roughly broken down into four key parts. These include:

– Writing a will and making executors, family members and friends aware of it.

– Making a comprehensive list of your assets and any debts. This list should include property assets, material assets and any savings or funds you will leave behind.

– Planning and/or recording cash gifts you plan to give to protect against inheritance tax.

– Making provisions for funeral expenses and outlining your wishes so that family and friends can make arrangements accordingly.

estate planning uk

What does estate planning cost?

When it comes to estate planning, the costs involved can vary a great deal depending on your individual circumstances.

The key factors that will affect the cost of your estate plan include:

  • the complexity of your estate
  • the number and type of assets you have
  • whether or not you require legal advice; and
  • whether or not you are looking at international investments.

Without considering all of these elements, it is difficult to estimate the actual cost of creating an estate plan. In general, though, basic fees for a UK based estate plan, with no outside interests, could range between £500 and £3,000.

This would include drafting the relevant paperwork, such as wills, powers of attorney, and trust deeds, as well as receiving expert counsel and registering the documents.

A sophisticated estate plan involving international investments may incur much greater costs and may necessitate the assistance of an expert attorney or financial advisor.

In this instance, fees may include continuing expenses such as tax guidance, asset management, and legal fees involved with the drafting of any agreements pertaining to overseas real estate or assets.

When it comes to estate planning, it pays to obtain professional guidance so that you can ensure that you have accounted for all of your unique needs and circumstances.

Although establishing an effective estate plan will incur some up-front expenses, it will save your loved ones a substantial amount of time and money in the long run.

How to avoid inheritance tax?

Estate planning is one of the best ways to avoid paying too much inheritance tax.

It could even help you to avoid paying it altogether. This is because when you are able to review all your assets early on and outline your wishes you can portion and divide them intelligently based on legislation and current rates of taxation

There are several key ways you can avoid paying inheritance tax.  These include:

1. Make gifts to family members and friends

Gifts are one of the best and most efficient ways to avoid inheritance tax.

If you can afford to do so, distributing money early on rather than waiting and leaving sums in your will is incredibly tax-efficient. This is because the overall amount of assets you leave behind (over £325,000) will be subject to inheritance tax. This is currently set at a rate of 40% – but this could rise unexpectedly.

You are permitted to give cash gifts of up to £3,000 a year – so with forward planning, you could give away a significant amount without paying tax. If you choose to give away more than £3,000 per year the additional amount will be subject to taxation.

Some types of gifts are exempt from taxation altogether. These include gifts between spouses or civil partners, gifts to universities or charities (subject to qualification) and any gifts given over seven years before your death.

"Trusts are a fantastic way to reduce or avoid inheritance tax payments altogether. Trust funds are fully protected from inheritance tax and can be set up at any time."

2. Set up a trust fund

Traditionally trust funds are set up to ring-fence assets for children and young people who aren’t yet financially independent.

But trusts are also a fantastic way to reduce or avoid inheritance tax payments altogether. Trust funds are fully protected from inheritance tax and can be set up at any time.

Trusts can be set up to provide advance payments drip-fed to family members to allow them to receive inheritance early. But trust funds also have benefits for those with life insurance policies, as they provide a significant amount of tax relief.

Without trust funds, in place your life insurance payout is added to your estate and taxed. When your life insurance is set up in trust it cannot be included in any inheritance tax calculation.

estate planning services

3. Intelligent spending

Spend within your means – saving for necessary future expenses whilst spending intelligently on items and experiences you will enjoy.

4. Provisions for necessary spending

Don’t forget to factor in necessary spending such as home improvements, mortgage payments, maintenance and other things you may need in the near or distant future such as a new car.

5. Don’t forget to research your individual situation

Inheritance tax rules and regulations vary depending on your personal status. For instance, for married couples or those in civil partnership, the threshold can potentially increase to double that of an individual

Why is writing a will in conjunction with estate planning important?

It is vitally important to write a will – even if you are very young and don’t have any health issues – as without one nobody can be sure of your final wishes.

Being without a Will also leaves you open to taxation and exploitation from relatives who may be entitled to take some or all of your assets against your wishes

Sitting down to write a will allows you to consider what you’d like to happen to your assets once you pass away. It also ensures that you nominate an individual or individuals to be in charge of carrying out your wishes – known as an executor.

If you die without making a will (also known as ‘intestate’), arranging your assets and affairs will become very complicated for your family.

Intestacy rules are incredibly complex. If a suitable beneficiary is not found the government may be entitled to seize the full amount of your assets upon your death. 

Several factors are in play – including your marital status, whereabout you live in the UK and the value of your estate.

A will is, therefore essential if you have clear wishes on how your assets are distributed after you pass away. You can leave property, money and personal items to named beneficiaries.

However, it’s important to bear in mind that without proper estate planning, your relatives and assets may still be affected by inheritance tax. You can also leave gifts to charity in your will if you have a cause or causes you wish to support.

Estate planning advice – Why is it important?

You may need tailored estate planning advice depending on the complexity of your situation.

In most cases it is straightforward – but understanding the different options available to you and deciding which ones to choose can be a daunting and difficult task.

Having a professional independent advisor on board can be incredibly useful for this reason. 

They will thoroughly review your assets and situation, taking into account any investments, property, pensions, businesses, life insurance and savings. 

This enables them to accurately understand your financial status and determine the impact inheritance tax may have on your estate. They’ll also take into account your future needs and personal preferences.

An independent financial advisor will then work with you to discover the most effective way to protect your assets for you to pass them on to those you love.

They will likely put together a bespoke estate planning strategy that may include various trust funds, investment structures and policies to cover your assets completely. 

Don’t forget that as legislation changes, you will need to arrange regular reviews with your financial advisor to ensure that your plans are still up to date and can still deliver for you when needed.

Consider care provision during the estates planning advice process

It’s important to remember to consider the possible future need for (and cost of) care when estate planning, as this will impact on your future finances.

If you tie all your money up in trust funds or give it all away as gifts, you may find yourself without the funds to pay for care in the future.

This is a difficult balance to achieve, which is why financial estate planning is important.  After all, you do not want to leave yourself short. 

Base your decision on realistic expectations, and assume that you may need some money set aside for care or additional support in the future. 

If you have ongoing health issues or an early diagnosis of a progressive disease such as Alzheimer’s, it’s especially prudent to get your finances in order now whilst you are of sound mind.

 It’s also key to make sensible and realistic provisions for the cost of care if it is likely that you’ll need support either at home or in the form of nursing or residential care.

How can effective estate planning reduce my inheritance tax bill?

Effective estate planning involves strategically organising your assets and finances to minimise the inheritance tax bill. 

Among other strategies, this can be accomplished by making lifetime gifts, establishing trusts, utilising the inheritance tax threshold, and making charitable contributions.

What is the inheritance tax threshold for a married couple or civil partner?

For a married couple or civil partner, the inheritance tax threshold can potentially double from £325,000 to £650,000, compared to the individual threshold. 

This occurs when the deceased partner leaves his or her entire estate to the surviving spouse or civil partner, allowing them to use both individual allowances.

How can a life insurance policy help protect my estate from inheritance tax?

A life insurance policy can be established in trust, separating the payout from your estate. This prevents the life insurance payout from being added to your estate’s total assets and taxed as an inheritance.

What role do living wills and durable powers of attorney play in estate planning?

Advance directives and durable power of attorney are essential to estate planning because they allow you to appoint someone to make decisions for you if you lose mental capacity.

These decisions can pertain to your healthcare, property, finances, and other aspects of your life, ensuring that your wishes are fulfilled even if you cannot make them yourself.

How can planning for life events and care costs benefit my estate plan?

Planning ahead for life events such as marriages, births, and care costs can help you allocate your assets more effectively, ensuring that your loved ones are provided for and potentially reducing your inheritance tax bill. 

This may involve establishing lifetime trusts, purchasing insurance policies, or developing individualised plans based on your specific circumstances.

What challenges do high net worth individuals face when estate planning involves assets held in multiple countries?

Exceptional net worth Individuals with assets in multiple countries face additional estate planning complications, such as navigating different tax laws and regulations, coordinating with foreign legal and financial professionals, and potentially lengthy probate processes. 

To ensure a smooth transfer of assets to the next generation, expert advice and planning assistance are crucial in these situations.

How can the residence nil rate band affect my inheritance tax liability?

The residence nil rate band is an additional exemption from inheritance tax that applies if you leave your primary residence to your direct descendants. 

Combined with the standard inheritance tax threshold, this exemption can help reduce your estate’s overall liability, resulting in substantial savings.

Why is seeking expert advice crucial for effective estate planning?

Because tax laws and regulations constantly change and each individual’s circumstances are unique, estate planning requires expert guidance.

Professionals can assist you in navigating these complexities, ensuring that your estate plan is tailored to your specific needs and includes the most recent information and strategies.

How can lifetime gifts and charitable donations impact my inheritance tax bill?

Donations and gifts made during one’s lifetime can significantly reduce an heir’s inheritance tax liability. Gifts made more than seven years before death are generally exempt from inheritance tax. In contrast, charitable donations are not subject to inheritance tax and can even reduce the overall tax rate on your estate if a certain percentage is donated.

What is the importance of planning for mental capacity issues in estate planning?

Planning for mental capacity issues is essential in estate planning because it ensures that your financial affairs and care decisions will be managed by your wishes, even if you cannot make them yourself. 

This can be accomplished through advance directives and durable power of attorney, which grant a trusted individual decision-making authority.

How can a bespoke plan benefit high net worth individuals in estate planning?

High-net-worth individuals can benefit greatly from a customised estate plan that considers their unique circumstances, including their assets, family dynamics, and financial goals.

This individualised strategy maximises wealth preservation and guarantees a seamless transfer of assets to the next generation.

Why is it essential for clients to regularly review and update their estate plans?

Clients must review and update their estate plans regularly to account for life events, legislative changes, and fluctuations in the value of their assets. This continuous process ensures that their estate plans remain effective, and efficient, and reflect their current needs and desires.

How does an insurance policy and life insurance policy play a role in estate planning?

Life insurance policies, in particular, can play a substantial role in estate planning. They can provide liquidity to cover estate taxes, care costs, and other expenses while providing beneficiaries financial security.

In addition, insurance proceeds can be used to equalise family inheritances or create a legacy for future generations.

What are the advantages of using lifetime trusts in estate planning?

Lifetime trusts can be a helpful estate planning tool. They provide increased control over the management and distribution of assets, as well as potential tax advantages and protection from creditors.

Individual needs and circumstances can be accommodated by trusts, ensuring that assets are held and managed under the grantor’s wishes.

How can planning ahead for care costs benefit my estate?

Planning for care expenses can benefit your estate by ensuring adequate funds for future medical and long-term care costs. 

This can prevent your assets from being depleted to cover these expenses, preserving your wealth for your beneficiaries and reducing the potential impact on your inheritance tax bill.

Why is it essential to consider multiple countries in estate planning for clients with international connections?

For clients with assets or family members in multiple countries, it is essential to consider each jurisdiction’s tax and legal implications. This ensures that their plan complies with international regulations, that potential tax liabilities are minimised, and that the distribution of assets across borders is managed efficiently.

In what ways can expert advice on constantly changing regulations assist clients during the time-consuming probate process?

Assisting clients in navigating the legal complexities and ensuring that all required documentation and steps are completed accurately and promptly, expert counsel on the ever-changing regulations can expedite the time-consuming probate process. 

This can result in a more streamlined and efficient probate process, benefiting the estate’s beneficiaries.

Meet the author

Rob Atherton

Rob Atherton

Rob writes and edits the content produced by the rest of the team. He has a degree in History from Leeds University and has producing, reviewing and editing the site since 2016

Meet The Team

Frequently Asked Questions

How does the inheritance tax threshold impact my estate planning?

The inheritance tax threshold, also known as the nil-rate band, establishes the amount of your estate that can be transferred to beneficiaries tax-free. In September 2021, the threshold in the United Kingdom will be £325,000. Using various strategies, such as lifetime gifts, trusts, and charitable donations, you can reduce the tax burden on your estate through effective estate planning. It is essential to conduct periodic reviews of your estate plan to ensure that it remains tax-efficient and reflects any changes in inheritance tax laws.

What is the residence nil rate band and how does it affect my estate?

The residence nil rate band (RNRB) is an additional inheritance tax exemption for those who leave their primary residence to direct descendants, such as their children or grandchildren. As at September 2021, the RNRB is £175,000, which, when added to the standard inheritance tax threshold of £325,000, raises the total tax-free allowance to £500,000 for an individual or £1 million for a married couple or civil partnership. Effective estate planning can help maximise RNRB benefits and minimise inheritance tax liability.

What are advance directives and why are they important in estate planning?

Advance directives are legal documents that outline your healthcare and end-of-life preferences if you lose mental capacity and cannot make your own decisions. These documents may include living wills and durable health care powers of attorney. Including advance directives in your estate plan ensures that your wishes will be honoured and that your loved ones will have clear direction regarding your medical care, potentially reducing stress and conflict during trying times.

How can high net worth individuals benefit from bespoke estate planning?

Individuals with a high net worth frequently have complex financial situations that require individualised estate planning solutions. A customised plan can account for multiple properties, international assets, and diverse investment portfolios. Expert guidance can assist these individuals in navigating the complexities of tax laws, asset protection, and wealth management, ensuring that their estate is efficiently structured and aligned with their long-term goals for the next generation.

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