Estate Planning

The Ultimate Guide to Creating an Estate Plan in the UK

Creating an estate plan is similar to getting into better shape. Everyone knows that they should do it, but most us never make the first move because the task is intimidating. We have created the ultimate guide.

As you, your parents, or other family members get older, there are several critical documents that you should already have in place. You might have heard of the expression "estate plan".  

In summary, an estate plan is a set of documents that lets you control your health and financial affairs when you are alive but not able to manage them; and take care of your financial affairs when you have passed away. There are four traditional elements that form a complete estate plan. However, there is an additional element we believe, in 2019, you ought to add to round out your own plan.  

These records all permit you to describe what is going to occur if you cannot look after things yourself.  You name people to take on your duties and responsibilities whilst equipping them with clear directions about what to do if something happens to you.

What makes up an estate plan?

  • Last Will and testament.
  • Lasting power of attorney for property and financial affairs.
  • Lasting power of attorney for health and welfare.
  • Advance directives.
  • Funeral wishes.
  • SecureTheFile digital archive (everything you need throughout your life and everything that your loved ones might need should something happen to you, including intangible or emotional assets).

Be cautious when reading about estate planning in different countries. Some countries include things like irrevocable living trusts and guardian designations that do not really apply to the UK.  

Last Will and testament

Sooner or later you will die and, whenever this occurs, things are a whole lot easier for your family and friends if you write a Will.  

Your last Will and testament performs two key functions. It permits you to create appointments; you can identify the individuals who will look after everything on your behalf (your executor).  You might even name guardians for your children. Your executor is responsible for collecting and securing your resources, using those resources to cover your taxes and debts, and then distributing the resources based on the directions in the Will.

If you have young kids, and both parents are involved in an accident, the kids will require guardians. Again, you are able to make that appointment on your Will, or you could leave the decision to a judge.  Regrettably, the judge understands very little about your loved ones and friends. 

Your last Will and testament also enables you to describe the distribution of your estate. Who would you like to benefit from your estate?  

Bequests in a last Will and testament:

  • A ‘pecuniary legacy’ or specific monetary gift, for example a charitable donation.
  • An item such as a family heirloom or a Rolex watch.
  • A percentage of your estate. All that remains after your specific gifts falls into your 'residual estate'.

Your last Will and testament generally runs around five or six pages and contains more detail about everything your executor can and cannot do, creates trusts for young beneficiaries and adds additional legal framework for your wishes.  However, at its core, your Will makes appointments and explains the distribution of your estate. 

Speak with your financial adviser regarding the creation of a Will.

Lasting power of attorney for property and financial affairs

The lasting power of attorney for property and financial affairs allows the individuals you select to help you with your finances if you lose mental capacity.

You might have bills to pay, you might be asked to co-sign on files, and you might have to transfer money from one account to the next. Luckily, you are ready to list an individual to look after things on your behalf if you lose capacity to do so yourself. You have to make the record when you are competent, and it will come into effect if you are ever no longer competent.  It is an important portion of your estate plan. 

You must register the lasting power of attorney for it to be considered a legally binding document. This can be done with the Office of Public Guardian (OPG). This costs £110 per document.

Lasting Power of attorney for health and welfare

The lasting power of attorney for health and welfare (LPA) is a document in which you select someone to be your representative in the event you are unable to make or communicate decisions about all aspects of your healthcare. In the most basic form, a health care power of attorney merely states: 'I want this individual to make decisions about my healthcare if I am unable to do so'. This individual can only make medical decisions on your behalf, and has no say in financial matters.

Advance directives

The lasting power of attorney for health and welfare does not explicitly state an expression of your wishes for end-of-life care. We would recommend you do this separately to ensure they are stated.

Funeral wishes

Do not overlook your funeral wishes. There is a common misconception that you ought to incorporate your funeral wishes as a part of your last Will and testament.  There are two or three reasons why this can be a bad option.  

Your funeral wishes are not anything more than a reflection of your wishes. They are not legally binding and do not need to go through the same rigorous registration process as you do with a Will.  Your funeral wishes are not a legal record but they ought to be part of your estate plan. Additionally, your Will takes some time prior to the probate court accepting it. In most circumstances, your funeral may have already taken place before the Will has gone through the official process and been accepted. 

As such, we recommend you include your funeral wishes as part of this estate plan but they should be explained in a separate document to be stored with your Will.

SecureTheFile digital archive

Traditionally, an executor went through your filing cabinet, studied your bank statements, your insurance coverage statements, and telephoned the number on the back page to ensure everything is correct. There was a high probability your estate would be dispersed over three or four corporations. It does not function like that anymore. You probably get your invoices via email, or maybe through the banking program on your mobile phone. You most likely have a range of charge cards, and bank balances. Maybe you have earnings coming in from an internet account. What makes matters worse is that now there is rarely a paper trail to such accounts. 

SecureTheFile is an all-in-one personal digital archive for your most important life documents. It is optimised to ensure your loved ones and trusted advisors have everything they need in a structured and intuitive way and puts you in full control of your data.

SecureTheFile can be used at any time. However it can be particularly useful during major life events, such as estate planning. We also offer expert content and guides to help you on your life journey, serving you when it matters most.

The six main categories in which to store your documents are: About Me, Financial Advisory, Personal Finances, Legal/Solicitor, Accounting/Tax, and Property & Vehicles. Within these, there are additional sub-categories to ensure your documents can be easily found and shared when required.