Keeping Your Estate Plan Up to Date
Before we do a deep dive in to why it is important to ensure you are regularly reviewing your estate plan, some of you may be reading this not knowing what an estate plan is. Don’t worry you are not alone; reports show that it is estimated only 44% of adults in the UK have made a Will1. A Will only covers part of your estate plan, if you want to learn more about this topic then head over to one of our recent blogs that looks at the question ‘Do I need an estate plan’? The answer might just surprise you!
Congratulations, if you have read this far then the chances are you are in the minority that have taken the time to make a Will, put Power of Attorneys in place and considered the impact that Inheritance Tax can have on the value of your estate. Bad news is that Estate Planning is not static, and it is increasingly important to ensure that you are reviewing it on an annual basis to guarantee it continues to meet your wishes and requirements. In this blog we will explore the most common things you need to consider while reviewing your estate plan.
Your Will
A will is the only way to ensure that your wishes are carried out when you pass away. However, relationships, assets within your estate, and views on philanthropy can change over time. Therefore, it is crucial to ensure that your will still reflects your current wishes. We recommend reviewing your will annually, along with your finances, to ensure that everything is up to date and any necessary amendments can be made.
Estate Value
Your estate comprises all your assets—cash savings, investments, property, and more. Since you last made an estate plan, you might have acquired new assets or let go of others. It's also important to reassess the value of your estate. You might be surprised by how it has changed. For instance, between May 2014 and May 2024, the average property value in the UK rose by over £95,000, according to the Land Registry2.
This means that if you own your home and haven’t reviewed your estate plan for 10 years, the valuation basis for your plan could be off by nearly £100,000, without considering any other assets. Knowing the details of your estate is essential for its effective distribution. If your estate has changed, you might need to update your wishes accordingly. Additionally, the value of your estate can impact your Inheritance Tax (IHT) liability.
Inheritance Tax
If the total value of your estate exceeds certain thresholds, it could be liable for IHT, which is charged at a standard rate of 40%. This can significantly reduce the inheritance you leave for your loved ones.
For the 2024/25 tax year, you can pass on up to £325,000 without incurring IHT, known as the “nil-rate band.” Additionally, if you leave certain property, such as your main home, to children or grandchildren, you can use the residence nil-rate band, which is £175,000 for the 2024/25 tax year. Combined, you can often leave up to £500,000 without IHT.
If you’re married or in a civil partnership, you can pass on unused allowances, potentially enabling you to leave up to £1 million without an IHT liability.
If your estate is valued above these amounts, then there are steps that can be taken to potentially mitigate this however the sooner this is done the better.
Allowances and Reliefs
Government policies on allowances and reliefs can change, affecting your estate plan. Keeping your plan updated with current rules helps maximise the wealth passed on to your loved ones. Working with a Financial Adviser can provide confidence that your plan accurately reflects current regulations and opportunities.
Your later years
Estate planning isn’t just about what you leave behind; it’s also about securing your future. Consider setting up a Lasting Power of Attorney (LPA) if you haven't already. An LPA designates someone you trust to make decisions on your behalf if you’re unable to do so, covering health or financial matters.
Additionally, think about potential care costs. Do you have a fund set aside for this? How might these costs impact your estate plan? Planning now ensures your wishes are known and provisions are in place.
Regularly reviewing your estate plan helps ensure it always meets your needs and wishes. If you think your plan might need an update, consider these questions and reach out to us for help navigating this complex area of planning.
For more help and advice or to receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Yorkshire Financial Planning on 01482 275540 or complete our contact form here.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
*Will writing and Powers of Attorney involve the referral to a service which is separate and distinct to those offered by St. James's Place and along with Trusts are not regulated by the Financial Conduct Authority.
1Two-fifths of UK adults not discussed instructions after death, new report finds, The National will Register, 19/04/2023
2 UK House Price Index, Land Registry, 24/05/2024
