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What are the key considerations when it comes to Estate Planning for women?

As women tend to live longer than men, it is essential they have complete control of their estates.  To ensure they achieve and keep that control, we would like to look at the key considerations when it comes to Estate Planning for women.

Our first tip regarding estate planning for women is always to act as soon as possible.

Why is estate planning so important for women?

Although women are fantastic at organising their homes and families, far too many still don’t have appropriate estate planning in place.  This is often because they have made assumptions about what will happen to their family, finances, property and businesses when they die or feel that the plans their husband left in place will take care of everything on their behalf.

This is definitely not the case.

Estate planning is crucial for all of us, not just for the wealthiest among us.

Aside from the fact the probate process will end up becoming more complicated and taking far longer than you’d want it to, if you haven’t gone through the estate planning process, your assets are not guaranteed to be passed on in the way you want them to be.

If your children are under 18, the responsibility for their future care may not be given to the person you want it to be.

You will undoubtedly end up paying more tax if your affairs are not properly structured.

Your property and/or businesses will not enjoy the tax relief they should.

What is estate planning?

Estate planning is more than just having a Will drafted or having your Will updated (though  you should be doing both!).  It is a comprehensive and complete analysis of what you have so you can find the best and most financially sound and tax efficient way to protect and pass on your assets when the time comes.

Ensuring you have a professionally drafted and up to date Will is a large part of this process, but you should also consider:

  • All the legal aspects

Writing a Will may be at the top this list, but you also need to examine and catalogue all your assets (property, financial, and material assets plus all savings, pensions and stock/shares) and your liabilities (debts, funeral expenses, school/university fees etc.).  You will only find the most effective and tax-efficient way to pass these on once you have the complete picture at your disposal.

This could involve using gifts and trusts or moving into alternative investment options, none of which should be progressed without specialist legal advice.

  • Power of Attorney

Who will assume responsibility for your personal, financial and business responsibilities if you become incapacitated?

  • Guardianships and childcare

Who do you want to look after your children and any other beneficiaries and how and when will they receive their inheritances?

  • All your financial assets

This includes not only your savings but also any pensions, life insurance policies, stocks and shares.

  • All your other assets

Again, the common misconception is estate planning is only for the super wealthy, it isn’t.  If you take an inventory of all your assets, you could surprise yourself as to what you have in terms of property, collectables and heirlooms, art, jewellery and vehicles.

IHT considerations for women

According to a study by Fidelity International, women’s estates are exposed to £430m more in inheritance tax (IHT) than men’s.  In part this is due to the likelihood of women living longer.  This makes them more likely to inherit money and other assets from their husband and/or other family members.

This means women must do what they can to mitigate the threat of a higher than necessary IHT liability by discussing the following opportunities with an experience specialist Wills, Tax and Trust lawyer:

  • Maximum tax efficiency

Wills need to be structured to take full advantage of the complete IHT exemption on any transfer of assets between spouses and generally make sure all parties’ affairs are as tax efficient as possible.

  • Re-evaluating your position after major life events

Things like births, deaths and marriages can have monumental impact on your Will and what you want to achieve.  This is a vital time to revisit your estate plans.

  • Using ‘gifts’

Wealth can be passed to family members free from IHT if the person making the gifts is still alive seven years after the gifts have been made.

  • Lifetime giving

While there are limits to how much you can pass on via lifetime gifts, they can still be largely made free from IHT if the person making the first is still alive seven years later.

  • Property

Making sure that if your estate is passed under the intestacy rules, everything has been done to avoid the potential of paying 40% IHT if the estate is valued at over £270,000.

  • Exploring trusts

Trusts can often prove effective in keeping assets outside an individual’s estate and although the assets in a trust carry an IHT liability of 20%, there are ways to make sure they make best use of the nil band rate for greater tax efficiency.

  • More tax efficient investment options

Sometimes investing in stocks, opening financial/savings products and increasing pension payments can be more IHT-efficient.

  • Your country of residence

If you could be classed as non-domiciled in the UK, your non-UK assets would be outside the scope of IHT and can therefore be disposed of much more tax efficiently (although you do need to be mindful of local tax regulations).

If you would like to begin the estate planning process today or arrange for a review of your Will and your personal circumstances in case improvements could be made, please email deniece.lines@collinshoy.com.