7 Common Estate Planning Myths That Aren’t Actually True
At Strathmore, we’ve been helping people to secure their family’s future for many years . We’ve served all kinds of families with different levels of wealth and a range of Estate Planning needs.
We’ve found out about and helped to resolve all sorts of requirements, designing Estate Plans catering for the needs of every family.
In that time, we’ve also heard plenty of Estate Planning myths that cause many people to not seek help when preparing for their futures.
Missing out on comprehensive Estate Planning could cause all sorts of problems, from an unclear Will creating disputes, to a lack of tax-efficient structures creating an excessive Inheritance Tax (IHT) bill.
These issues could see your family not inherit as much of your wealth as they should have, your wealth being squandered and HMRC being your largest beneficiary.
Here are seven of the most common Estate Planning myths, and why they’re not all that accurate.
1. “I Don’t Have Time”
One of the most off-putting parts for many people considering their future is the idea that it’s a time-consuming, laborious process. In reality, this isn’t accurate at all.
Once the core of your Estate Plan is complete, the majority of the work is already done. You should regularly review your plan, either every few years or when things change. But, otherwise, doing the bulk of the work early pays dividends later.
Working with an Estate Planner can be transformative here. They can almost entirely remove the burden from your shoulders, saving you time and from making costly mistakes.
2. “I Don’t Need to Start Yet”, or “It’s Too Late for Me to Start Planning”
Some people believe that there’s an age where it’s too early to start Estate Planning, or indeed an age you can reach where it’s too late to start making preparations for the future.
In fact, it’s never too early or too late to prepare for your future.
Of course, the sooner you start, the better; especially with regards to IHT planning where you may need to survive for a certain amount of years for any planning to be successful.
Whatever stage of life you’re at, it’s worth thinking about what you’d like to happen to your wealth when you’re no longer around.
3. “I Only Need Something Simple”
It’s understandable why the idea of a “simple” Estate Plan is desirable: it would mean less time and effort to create a plan that does everything you need it to do.
However, your circumstances can require more complex planning without you having realised.
There are many variables that could impact how simple your Estate Plan can be.
For example, if you hold your wealth across a wide variety of assets, or you’re in a second marriage, or you want to protect your inheritance from your beneficiaries divorcing or squandering it, then you may need to consider specific protection measures that ensure your money goes to those of your choice.
In these cases, Trust Planning and other similar structures could be important for ringfencing your wealth.
Your arrangements may be more complicated than you think. That’s why it’s often best to speak to a professional to help you work out exactly what you need in your Estate Plan.
4. “Estate Planning is Only for the Super-Rich”
Estate Planning has a reputation of being a tool for wealthy individuals to protect their sizable estates. However, just because those with more wealth have more to protect, it doesn’t mean it’s an entirely irrelevant consideration for you.
For example, you may not have any assets that you think need protecting, but your Will is still an absolutely essential document.
Your Will is the legal cornerstone that will ensure your executors carry out your wishes when you die. There are other considerations beside wealth that you could need to include in your Will. For example, you can decide who will become the guardian of your children if they’re still dependents when you die.
IHT isn’t necessarily just a concern for very wealthy individuals, either. The nil-rate band (NRB) – your tax-free allowance before IHT is due – is £325,000, or £500,000 if you pass your home to your children.
Realistically, this isn’t that much, especially when you take the value of your property into account. As a result, it’s not inconceivable for you to have money or assets above the NRB, meaning they could be subject to IHT charged at 40%.
From this perspective, Estate Planning is a worthwhile consideration for anyone, no matter how much money they have.
5. “I’ll Transfer Everything to My Children”
Strictly speaking, it’s true that your children are the default beneficiaries of your Estate if you die without a Will and your partner has already died or you’re unmarried. However, this doesn’t offer any guarantees over who will get what, or how much, if you haven’t planned for their future.
What if one of your children thinks they’re owed more? What if you have stepchildren who you intended to receive something, but you’ve made no provision for them, and so they’re entitled to nothing under the law?
This may seem like a quick, straightforward solution, but it could cause rifts in your family if you don’t leave clear instructions that detail exactly what you want to happen. A lack of planning could also expose your children to heavy IHT payments, meaning they don’t receive as much as you would hope.
Estate Planning can remove the risk of disputes, as well as help reduce a potential IHT bill.
6. “My Partner Will Take Care of Everything”
People often think that they have nothing to worry about for their estate, as their partner intends to sort out everything for them. However, while this seems a convenient strategy, it could leave one of you in the lurch.
For one thing, it depends on which of you passes away first. If the one who was going to manage everything dies before the other, one of you could be stuck dealing with a complicated estate. With so much to think about, they may end up not doing things the way the other would have wanted.
And, if you’ve made no preparations and the surviving one of you loses mental capacity, there’s a risk that neither of your wishes will be carried out.
Even worse, if neither of you have Wills with clear instructions and you and your partner aren’t married, it could mean the surviving one of you gets nothing at all.
That’s why it’s often best to make planning decisions together. Consider creating structures that prepare for these outcomes, such as having Lasting Powers of Attorney (LPA) in case you’re no longer able to make decisions.
Professional advice can be indispensable here, ensuring there are no oversights and missing elements from your plan.
7. “There’s No Need to Review My Plan Once It’s in Place”
One common mistake many people make with their Estate Plan is not regularly reviewing it once it’s completed.
For one thing, your preferences might change over time from the choices you made in your initial plan, especially if it’s over a period of many years. Many people unfortunately pass away with a Will or Estate Plan that was written many years ago and would not have been their wishes today.
Economic events, such as an unexpected financial crash, could make you want to change how you want to pass on your investments. Or a change in tax laws could mean you now have an IHT liability when you didn’t previously. Reviewing your plan can help to keep you insulated from outside influences such as these.
Many life events can be a trigger for reviewing your plan, too. Getting married, having a child, selling your business, or receiving an inheritance of your own from a parent or older family member could all impact on how you want to manage your wealth for your family’s future.
It’s vital to review your Estate Plan regularly. A good rule of thumb is to review it every two years, or after a significant, life-changing event such as those above.
Let Us Help You Plan Your Estate
If you’d like to know more about how we could help you plan your estate, please do contact us.
Email firstname.lastname@example.org or call 01708 923 303 for more information.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation which is subject to change. Back to Blog Sign Up To Our Newsletter