Estate Planning: Common but unfounded reasons people leave it too late!

Most people want to give their money to a relative, friend or charity when they die. However, putting off your Estate Planning for too long could see a disproportionate amount go to the taxman.

With more money being raised by Inheritance Tax than ever before, here we’ve covered 5 of the most common reasons people give for putting off their Estate Planning and why these shouldn’t be stopping you from making a start.

I might need the money myself

One of the main concerns people have when it comes to Estate Planning is the thought of giving too much away and leaving themselves short in the long-term.

Most of us have spent our lives, at least the later part, being very careful with money and making sensible plans for our retirement. So, simply to start ‘giving away’ money to family, friends or a charity, can seem unnatural. However, speaking to an Independent Financial Adviser should help to shed some light on how much you can actually afford to give away.

By looking at your assets (including savings), income and expenditure, an Adviser will be able work out how much you can realistically gift whilst still having enough for the rest of your retirement and any unexpected costs that crop up such as long-term care.

You’re superstitious when it comes to talking about death

Death is a dark subject and most people don’t like thinking about it – this is in case they somehow manage to tempt fate. If we think about it rationally though, planning for the inevitable will not make our death occur any sooner.

It will, however, help to ensure that more of your wealth goes to your loved ones or a cause close to your heart, as opposed to the taxman. Careful Estate Planning is also likely to help your family and friends avoid any significant administrative issues in relation to your wealth when you die.

Your beneficiaries are not ‘responsible’ enough yet

A lot of parents can recall times when their children (or grandchildren) have been immature and reckless – even though this may not be the case now.

Similarly, you may have much older children who have fallen into money troubles, are going through a divorce or are otherwise unable to manage their money properly which would make gifting to them outright now is not a good idea.

Unfortunately, delaying making gifts could be costly as for most large gifts you must live for at least 7 years after making a gift before it will reduce your Inheritance Tax Liability. For this reason, if you don’t feel that your beneficiaries are responsible enough to use your hard earned cash wisely at the moment, you may want to consider gifting into a Trust.

This would essentially allow you make a gift now, improving your chances of reaping the IHT advantages, whilst still controlling when and how your beneficiaries receive it.

I want to surprise my loved ones

A lot of people dream about leaving an unexpected lump sum or property to their loved ones when they die. Whilst this would be a lovely gesture, unfortunately, it would not be one that is Inheritance Tax efficient and could cost them up to 40% of your wealth.

As mentioned previously, if you decide to make gifts during your lifetime and live for 7 or more years after, Inheritance Tax on these sums can be avoided. Also, if you’re estate is likely to exceed £2 million when you die then your beneficiaries may not benefit from the Residence Nil Rate Tax Band. Tactically making gifts prior to your death could of course reduce the overall value of your estate to below this threshold.

I want my beneficiaries to experience their own success

If your beneficiaries are just starting out in their career or are beginning a new business venture of their own, you may want them to experience the gratification that working hard and making their own money brings. In this case, giving away ‘too much’ could deprive them of the satisfaction and self-confidence that comes from generating their own success.

In these circumstances, you may choose to gift them so much now but put more aside in a Trust which could only be accessed if they were to experience financial hardship in the future.

Ready to start your Estate Planning? Call us on 01244 347 583 or email  to arrange a free consultation.

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