What are the risks of not having an estate plan?

In early 2022, research from LV= revealed the worrying extent to which UK parents neglected estate planning. This followed the revelation in December 2021 that lasting power of attorney (LPA) registrations had fallen significantly during the Covid-19 pandemic.

Regardless of your circumstances, not giving due time and consideration to estate planning brings significant risks.

Let’s explore what these are.

1.     Not having someone you trust in charge of your affairs

We often perceive estate planning as relating exclusively to what happens after we die. However, should you lose the capacity to make decisions for yourself, having someone you trust in place to manage your affairs and make decisions on your behalf is crucial.

Creating and registering a lasting power of attorney (LPA) ensures that you have arrangements for this to happen if and when necessary. One of the biggest misunderstandings around financial matters and healthcare decisions is that people assume their spouse will automatically gain the authority to make decisions on their behalf should they lose the capacity to do so. However, without an LPA, they would need to apply to the Court of Protection for a deputyship order.

While waiting to be granted such an order, your spouse could have issues in accessing your joint bank account or drawing down your pension on your behalf or not be able to make decisions about what healthcare you receive.

Having an LPA in place helps you avoid these scenarios.

Learn more about LPAs, or contact us to get started creating yours.

2.     Your estate isn’t distributed in accordance with your wishes

Writing a legally valid will is the only way to ensure that your estate will be distributed 100% in accordance with your wishes.

However, in addition to the statistics highlighted in the LV= research we mentioned at the start, 2020 IRN research revealed that only 4 in 10 UK adults have a will.

Even if you’ll only leave a small estate comfortably under the inheritance tax threshold – £325,000 as of the 2022/23 tax year – and would be happy for it to be distributed under the rules of intestacy, it is still advisable to write a will. You can nominate an executor for your estate while outlining any wishes that intestacy rules don’t cover, such as making a charitable donation.

Contact us to get started creating the relevant will for your needs.

3.     Your beneficiaries might pay more inheritance tax than necessary

For many, this is the number one reason to look at estate planning.

As of the 2022/23 tax year, any estates with a value exceeding £325,000 pay 40% inheritance tax on the value above the threshold.

The earlier you begin your estate planning activities, the greater your potential for lowering the inheritance tax burden on your estate. For example, you could start making gifts or writing assets into trusts to take advantage of the potential tax benefits.

Contact us now to speak to our estate planning specialists about how you can reduce your inheritance tax burden.

4.     Unmarried partners don’t inherit as you would wish

While most couples aged 30 and over are in a marriage or civil partnership, ONS data from 2019 highlights that a significant percentage of couples who live together are not.

Contrary to popular belief, unmarried partners don’t inherit under the rules of intestacy, apart from any jointly owned property. Therefore, if you live with your partner but don’t plan to marry or enter into a civil partnership, the only way to ensure they can inherit from your estate is to leave a will outlining these wishes.

If you have previously written a will but have since separated from or divorced your spouse or civil partner, you should update it, so your new partner inherits as you wish. For example, if you are separated but never got a divorce or dissolution, your new partner could be left with nothing while your ex-partner inherits most, if not all, of your estate.

Learn more about the importance of leaving a will, or contact us to discuss your needs.

5.     Your children’s inheritance isn’t managed as you would want

Many people think of estate planning as something they should do in later life.

However, it’s arguably even more important to have an estate plan if you’re relatively young and have children under 18. You can use your estate plan to write assets into trust until your children can legally inherit them should you die and leave instructions for trustees on how to manage these assets until that time.

Estate planning is a vital part of safeguarding your estate for children of all ages, but particularly if they’re under 18 and you’re the primary source of income or asset-holder in your family.

Contact us now to discuss placing your assets into a trust or any other elements of estate planning to ensure you safeguard your family should the worst happen.

6.     You don’t get the funeral you want

You might not care what your funeral looks like. After all, while you’ll most certainly be in attendance, it isn’t like you’ll be “there” to experience it.

But planning your funeral isn’t just about how the occasion looks and where it happens. The most significant element of funeral planning is making sure that most, if not all, relevant expenses are covered so your family doesn’t have to worry about this while mourning your death.

And if you want to plan a quirky, less traditional funeral, it’s never been easier.

Learn more about how LawPlus Solicitors can help you find a funeral plan or get in touch to discuss your options.

7.     Your surviving family end up disputing what to do

While most of what you’ll read about estate planning covers the topics we’ve included here, the thought of your surviving loved ones arguing about what to do is perhaps the most emotive point of all.

Although you might verbally inform your loved ones of your wishes, the only concrete way to ensure your last wishes are carried out to the letter is to leave instructions detailing what these are.

With an LPA, a legally valid will, a funeral plan and, if necessary and appropriate, a trust, you can avoid doubt about your wishes and ensure you enjoy every possible benefit associated with estate planning.

Contact us now to get started.

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