Estate planning guide

When it comes to planning for the future, many people delay or avoid making key decisions – especially those involving things we don’t like to talk about, like death or incapacity.  In the short term, it can feel easier to kick the can down the road. However, failing to plan can leave your loved ones in a difficult position, both emotionally and financially. Not leaving clear instructions, such as a valid will, appropriate powers of attorney and up to date death benefit nominations, can lead to misunderstandings and have lasting consequences.

The reality of intestacy rules

As a financial adviser, I find that many of my clients during their review meetings mention that they need to update their will or admit they’re not quite sure what its main provisions are. Occasionally, though, I do still hear, “I don’t need a will everything will just go to my wife/husband or children automatically.”

Unfortunately, this isn’t always true. If you die without a valid will in the UK, your estate is distributed according to the intestacy rules, which are rigid and can be misaligned with modern family structures.[1] For example:

• Unmarried partners receive nothing under intestacy. There is no such thing as a ‘common-law spouse’ in UK Law.[2]
• If you’re married with children, your spouse may not inherit everything.
• Stepchildren and close friends are excluded entirely.

This can lead to unintended consequences, family dispute and financial hardship for those you intended to support.

Why having an up to date will matters

In England, we are quite fortunate to be able to write wills and decide who and how we distribute our assets to loved ones.[3] This isn’t necessarily the case for other countries where inheritance laws may be more restrictive.

By writing a valid will you get to:

• Choose who inherits your assets. You know your own family circumstances and the reasons behind how you wish to divide your estate.
• Appoint guardians for minor children. You get to choose who would be best placed, and willing, to bring up your children.
• Minimise inheritance tax through strategic planning.
• Make arrangements for more complex family dynamics.
• Set up trusts for vulnerable beneficiaries.
• Avoid delays and legal complications for your family.

However, a will isn’t a “set and forget” document. Major life events, such as marriage, divorce, remarriage, having children, or buying property, should prompt a review. An outdated will can be just as problematic as having no will at all. Seeking appropriate legal and financial advice is essential.

Changes in legislation may also need to be addressed. For example, the upcoming changes to pensions and inheritance tax. This can be complex and specialist advice should be sought.

It’s therefore vital to maintain up to date wills and review them. After all, once you’re gone, there’s not much you’re going to be able to do!

Don’t forget: Death benefit nominations

Even with a will in place, many people overlook another critical area: death benefit nominations on pensions and life policies.

These nominations tell your pension provider or insurer who should receive any lump sum benefits if you die. In most cases, these aren’t necessarily decided by your will as they don’t form part of your estate.[4] Owing to this, it’s important they are kept up to date as they can override your will.

Why they matter:

• Pensions can fall outside your estate for inheritance tax purposes – at least for now. Naming beneficiaries can provide more flexibility in how the benefits are received, which can improve tax efficiency.
• Without a nomination in place, the pension provider may exercise discretion over who receives the funds. This can cause delays or result in the benefits going to someone you hadn’t intended.
• Outdated nominations, such as naming a spouse who you have since divorced, can create problems. This can be more common than you might think. Many people still have legacy pensions or life insurance policies with old details. These issues often come to light during plan reviews and can usually be resolved quickly.

Trusts

Trust arrangements should be reviewed regularly and updated where necessary. This ensures the trust continues to meet its original objectives and remains compliant with current legal and tax requirements. Key reasons to review a trust include:

• Life events affecting key individuals, such as the settlor, trustees, or beneficiaries, may warrant changes. Events like marriage, divorce, the birth of children, or a death can impact the trust’s purpose or structure.
• Changes in legislation, such as updates to inheritance tax rules or new regulatory requirements, may affect how a trust should be managed. For example, recent rules require many trusts to be registered with HMRC.
• Investment or market changes may prompt a review of the trust’s investment strategy. If the trust holds assets, trustees should ensure that the investments remain aligned with the trust’s objectives and any investment policy statement (IPS).

Trustees have a duty to manage trust assets prudently, and periodic reviews are an important part of fulfilling that responsibility.

The Financial Conduct Authority does not regulate tax planning or trusts.

Lasting Powers of Attorney: The overlooked essential

Another common misconception I often hear from clients is, “I don’t need a power of attorney. My family/wife/children can just make decisions for me.” Or, “I’m not that old am I?”

Unfortunately, that’s not how it works. Without a valid Lasting Power of Attorney (LPA) in place, your loved ones have no automatic right to manage your affairs if you lose mental capacity. Instead, they must apply to the Court of Protection which can be a costly and time consuming process.[5]

The two types of LPAs:

• Property and financial affairs LPA
  Allows your chosen attorney(s) to manage your bank accounts, pay bills, sell property, and handle investments.
• Health and welfare LPA
  Covers decisions about medical treatment, care arrangements, and even life-sustaining treatment.

Both types are important, yet many people only consider the financial one – if they consider any at all.

Why people avoid setting them up:

• “I’m too young for that.”
  Mental incapacity can happen at any age due to accident or illness.
• “I don’t want to give up control.”
  LPAs only take effect when necessary. You remain in control while you have capacity.
• “It’s too complicated or expensive.”
  In reality, LPAs are straightforward to set up and far cheaper than a Court of Protection application.

In practice, I’ve seen elderly clients begin to lose capacity and still resist putting LPAs in place. This can create significant challenges for family members who are left trying to manage affairs without legal authority.

The pitfalls of not having LPAs

Without LPAs:

• Your family may be unable to access your finances to pay for your care.
• Medical decisions could be made by doctors or social workers, not those who know you best.
• Delays in decision-making can lead to distress, financial loss and even legal disputes.

It’s also important to review your LPAs regularly. Your chosen attorney may have moved away, lost capacity themselves, or even passed away. Ensuring your appointments still reflect your wishes and current circumstances is just as important as having them in place to begin with.

Planning isn’t just for the elderly

Estate planning isn’t just about what happens when you die, it’s about protecting your loved ones and your wishes while you’re alive.

Whether it’s ensuring your children are cared for, your partner is financially secure, or your medical preferences are respected, the right documents make all the difference.

A quick checklist to get started:

• Write or update your will
• Put in place both types of LPA
• Review and update death benefit nominations
• Revisit your plans after major life events

Taking these steps now can save your loved ones a great deal of stress, cost, and uncertainty in the future.