Losing a loved one is one of the most distressing life events. But by putting in the time to create a solid estate planning strategy, you can help to ease what is otherwise a very difficult and emotional time for your family.
Research reported by MoneyAge has found that inheritance disputes rose by 37% between 2019 and 2021, showing just how important it is to take the time to make your wishes clear and easy to follow.
If you have yet to create a plan for what you want to happen to your estate and want to avoid the pitfalls that can lead to stress and disputes after your death, read on to discover five common mistakes to avoid.
1. Leaving it until it’s too late
Research from Canada Life has discovered that, in the UK, 39% of those aged 65 – 74 do not have a will, while 22% of over-75s do not have a will.
If you die without a will in place, you risk having your assets distributed according to intestacy laws, which could be against your wishes. For example, under intestacy laws an unmarried partner would not inherit anything from your estate even if you have been together for a long time or even lived together.
It also makes the process of distributing your assets much more time-consuming and stressful for your next of kin. So, it’s very important that you make time to write a will at your earliest opportunity.
Estate planning is about more than simply writing a will though. You might also want to think about how you can reduce the amount of Inheritance Tax (IHT) that could be payable on your estate after you die if your assets exceed the threshold of £325,000 (£500,000 if you plan to leave your home to a child or grandchild).
By reducing the value of your estate overtime, you could save your beneficiaries from being taxed at a rate of 40% on anything above the threshold.
There are many different ways that you could reduce the value of your estate, and your financial planner will be able to help you choose the most suitable approach for you. One option is to gift money to your loved ones throughout your life.
Bear in mind, though, that financial gifts given within seven years of your death may be considered part of your estate when you die, which is another reason to begin considering your estate planning as early as possible.
2. Not having a Lasting Power of Attorney in place
A Lasting Power of Attorney (LPA) is a legal document that allows a person of your choosing to make important decisions for you about your healthcare and finances if you lose the mental capacity to make these decisions for yourself.
It can be helpful to organise this in advance, because if you lose your mental capacity and do not have an LPA in place, your family may need to apply to the courts for the authority to make your decisions for you. This can be time-consuming and costly at an already stressful and emotional time.
You can specify what type of decisions your attorney will be able to make for you, as the decisions are split into personal welfare and/or property and financial matters. They could make decisions about what will happen to your finances, where you will live, and the medical care that you receive.
An LPA must be submitted to and certified by the Office of the Public Guardian in Singapore. There are two forms: you should complete Form 1 if you want to apply for a standard LPA, and Form 2 if you would like to make bespoke requests in your LPA.
Ordinarily, Singapore residents would pay a $75 LPA application fee for registration using Form 1, but this fee has been waived until 31 March 2023. For Form 2, the application fee is $200. For permanent residents and foreigners, it costs $100 and $250 respectively to apply using Form 1, and $250 and $300 respectively to apply using Form 2.
There is a three-week waiting period once your LPA has been registered to ensure there are no issues with the application.
It is important to note that an LPA that is certified in Singapore is only recognised in Singapore, and vice versa. So, if you own property or spend a lot of time in a different country, you may wish to register an LPA in that country as well.
3. Lacking clarity about what you want to happen to your assets
An ambiguous will can be as difficult for your beneficiaries as having no will at all, so make sure you are very specific about your wishes.
You might be tempted to state that you are happy for your beneficiaries to decide between themselves what they want to happen to a particular asset, but this could cause disagreements or difficulties later on.
Another way to ensure your will is as clear as possible is to update it at key milestones in your life, including when you sell property, if you remarry, or if you have more children or grandchildren. By doing so, you ensure that everyone you wish to leave assets to has been included.
You should also think carefully to ensure that you haven’t forgotten any important items or assets from your will, such as jewellery, cars, and properties. It can be costly, stressful, and time-consuming for your family to decide what should happen to any items that are not part of your will.
4. Not including your family in the conversation
One of the ways to avoid disputes after your death is to make sure family members are aware of your wishes.
Just because you make the final decision, it doesn’t mean you can’t consider the opinions of your family. Make sure they are involved and that they feel heard.
As well as talking to them about your wishes for your property and assets, communicate your wishes about who will be the executor of your will. This means that no one will be surprised with this responsibility during an otherwise very difficult and emotional time of grief.
5. Not taking professional financial advice
Estate planning can be an emotive subject, so taking advice from an objective third party could help you to see things more logically.
Your planner can also help you to consider all aspects of estate planning. This includes what type of protection is most appropriate for you and how to reduce the value of your estate overtime to protect your beneficiaries from paying more IHT than necessary.
Working with a planner can also give you peace of mind that everything is in order, so that you can enjoy your retirement without worrying about what might happen after you die.
Get in touch
If you’d like to speak to someone about how you can prepare an estate plan, we can help. Either contact your financial planner directly, email us at firstname.lastname@example.org or fill in our online contact form to organise a meeting and we’ll get in touch.