Estate Planning: Why it Matters, and How To Get Started

“When the hurly-burly’s done, when the battle’s lost and won.” (One of the witches in Shakespeare’s Macbeth)

Another year draws to a close! If you’re taking a break, now’s a great time to get started on an estate plan – or to update your existing one.

Estate planning is one of the most important steps you can take to protect your assets and to ensure that your loved ones are cared for after you’re gone. It goes beyond just having a will, although that is of course an essential first step when it comes to executing your plan. An estate plan ensures that all your wishes are documented, clear, and legally binding.

Why must you prioritise an estate plan?

Having a well-thought-out estate plan is essential for several reasons:

• Protecting your loved ones: An estate plan ensures that your loved ones are provided for in the way that you choose.
  
  
• Structuring your estate: Your planning will help you decide upfront how best to structure your estate, your asset-holding entities, and so on.
  
  
• Reducing costs and delays: A proper plan can minimise the expenses and time needed to administer your estate.
  
  
• Tax efficiency: Thoughtful planning could help reduce taxes on your estate, preserving more of your wealth for your heirs.
  
  
• Avoiding disputes: By clearly stating your wishes, you can help prevent costly and bitter family disputes over your estate. Our law reports are full of them!

What you’ll want to include in your estate plan

Everyone’s situation will be unique, but a comprehensive estate plan typically encompasses:

• Your will (“Last Will and Testament”): This is your essential first step, setting out who your executor will be, who will inherit what, appointment of guardians and trustees and so on. It’s the central hub around which the rest of your plan revolves.

• Trusts: Trusts are tools for controlling how and when your assets are distributed to your heirs. They are especially useful for minor children or anyone who needs special care. They can also be used in planning for tax efficiency, but this is a specialised subject requiring advice tailored to your situation.

• Power of Attorney: This authorises someone you trust to make financial or legal decisions on your behalf if you need them to. Bear in mind that it will fall away when you die, or if you lose mental capacity.

• Living Will/Healthcare Directive: This outlines your preferences for medical treatment if you cannot communicate, helping to guide loved ones and healthcare providers.

• Beneficiary nominations: Certain assets, like living annuities and life policy proceeds, will be paid out directly to the beneficiaries you nominate. It’s also a good idea to nominate beneficiaries for all your pension products – fund trustees will not be bound by your nominations but they will at least be made aware of your wishes.

9 steps to creating your estate plan

With that list in mind, it’s time to get started! Here’s how…

1. Define your goals: Determine what you want your estate plan to accomplish, such as providing for specific loved ones, the welfare of your pets, charitable donations, the preservation of family heirlooms and so on.
   
   
2. Family dynamics: Be mindful of potential issues that could arise, such as blended families, estranged relatives, minor children, and any other loved ones with special needs or circumstances.
   
   
3. Take stock of your assets and liabilities: List all your assets, debts, financial obligations and the like. Remember that if you are married, your chosen “marital regime” (matrimonial property system) will determine which of your marriage’s assets are yours to bequeath.
   
   
4. Consider cash: Deceased estates can take a long time to finalise, so make a plan for your family to have access to funds in the interim – life policies, family trusts, and separate bank accounts are common recommendations.
   
   
5. Tax implications: Our tax laws can seriously impact your estate, so it’s crucial to understand how to minimise taxes. If you have assets in multiple jurisdictions, it gets even more complicated.
   
   
6. Choose your representatives: Appoint trusted individuals as executors, trustees, guardians, and agents for powers of attorney.
   
   
7. Draft your plan with professionals: Work with us to draft and review all the necessary documents, ensuring they correctly and clearly reflect your wishes, and that they comply with all our laws.
   
   
8. Leave an information and documents file: It will help your executor and heirs a lot if you leave them a comprehensive file of all the important information and documents they will need.
   
   
9. Review everything regularly: Life changes, so diarise regular reviews and updates of your estate plan to reflect any significant changes. These could include marriage, divorce, the birth of a child, the death of a beneficiary, changes in assets and liabilities, changes in business operations, any new laws and taxes. The list goes on...

If you need any help getting started, feel free to reach out – we’re here to help you every step of the way.