No one likes to think for too long about the subject of death. But if you take time to address the issue of what happens to your property and possessions when you die, then you can spare your family a lot of aggravation, and possibly save them a lot of money as well.
Work out how much your estate is worth – you should firstly determine exactly how much you are worth. Your estate on death will include: any properties you own, savings and investments, life insurance, pension funds, motor vehicles and household contents. The last of these, ‘contents’ could include a number of very valuable items such as jewellery, artworks or antiques.
Consider who you would like to benefit – would you like to leave everything to your spouse/partner, or do you wish to leave something to children, grandchildren or other relatives; or to any other person? Would you like to leave something to a favourite charity?
Write a will – if you die without making a will, then your family will have no say over how your estate is distributed. Quite simply, in these circumstances, your estate will be distributed in accordance with the law. It is also recommended you seek expert advice from a solicitor who specialises in will writing.
Consider making use of trusts – trusts allow assets to be looked after by one person on behalf of another. An example of when you might set up a trust is if you want to leave something to someone aged under 18, but want to have an adult manage these assets on their behalf until they come of age. You should seek professional advice before setting up a trust.
Inheritance tax – the reason it is so important to work out what your estate is worth is that any estate that totals more than £325,000 is subject to inheritance tax at 40% on the excess. So for example, if your estate was worth £525,000, then your estate on death would be reduced by 40% of £200,000, which is £80,000.
Gifts during your lifetime – many people take steps when they are alive to reduce their inheritance tax bill, by making gifts to relatives or other parties. However, you cannot wait until you are very ill or very old to do this, as these gifts will still be taxed at 20% should you die within seven years of making them.