Deciding on the distribution of your possessions posthumously
Making an inventory of your assets and debts is a fundamental step in estate planning. By creating a comprehensive list of everything you own and owe, you gain clarity on your estate’s contents. This knowledge is essential before deciding on the distribution of your possessions posthumously.
Understanding your liabilities
Compiling a detailed list of your debts and other financial obligations is crucial. Upon your demise, these liabilities will be settled from your estate. A clear record of your debts ensures that the executor of your Last Will can efficiently manage your estate, avoiding any unforeseen complications and guaranteeing that your intended beneficiaries receive their due inheritances.
Debts may encompass:
• Credit card balances
• Home equity lines of credit
• Mortgages
• Student loans
• Vehicle loans
Additionally, it’s vital to account for any funeral expenses and other payments necessary to safeguard estate assets. If you are uncertain about your financial obligations, it is advised to contact relevant financial institutions for accurate information.
Cataloguing your assets
Once your liabilities are accounted for, the next step involves listing both your tangible and intangible assets. These assets represent valuable possessions under your name. Tangible assets include physical items such as collectables, property, personal valuables and vehicles.
On the other hand, intangible assets comprise financial investments like stocks and shares, bonds, business ownership, bank accounts, life insurance and retirement plans. It’s beneficial to specify any particular assets you wish to bequeath directly to avoid them being liquidated for debt settlement.
Valuation and property calculation
The valuation of your assets minus your total debt gives you the net value available for bequests to loved ones and charitable organisations. Documenting any significant gifts made within seven years of your passing is crucial for tax considerations, as these could influence your estate’s value for the application of Inheritance Tax. Gifts with reserved benefits, where you continue to enjoy the gifted asset, also impact Inheritance Tax calculations.
Your residuary estate, the portion remaining after settling debts, taxes and distributing specified gifts, often forms the legacy left to your closest relatives. Managing this aspect carefully is important to ensure your final wishes are honoured.