The vital role of Wills in estate planning

Legacy planning holds different meanings for different individuals. For some, it is about ensuring their loved ones are financially secure; for others, it involves safeguarding cherished possessions or supporting charitable causes. Central to this process is drafting a Will, a pivotal legal document that allows you to dictate the distribution of your money, property and possessions after your death.

This document clearly states your wishes, ensuring your assets are allocated precisely as you intend. Without a Will, you lose this control and are considered to have died ‘intestate’. Consequently, intestacy laws come into play, determining how your legacy is distributed. These rules are far from straightforward and vary significantly based on factors such as your location, relationship status and family structure.

The complexity of intestacy laws can lead to unintended consequences, such as estranged relatives inheriting your estate or loved ones being left without adequate support. The absence of a Will complicates the distribution process and can create emotional and financial strain for your family. By having a valid Will, you provide peace of mind, knowing that your wishes will be respected and potential disputes or challenges will be minimised.

Lasting Power of Attorney explained
Equally important in legacy planning is the concept of a Lasting Power of Attorney (LPA). This legal document permits you, the ‘donor’, to appoint one or more individuals, known as ‘attorneys’, to make decisions on your behalf or assist you in doing so. There are two primary types of LPA: Health and Welfare, and Property and Financial Affairs.

Importance of Health and Welfare LPA
The Health and Welfare LPA ensures that your chosen attorneys can make decisions regarding your medical care and life-sustaining treatment when you are incapacitated. This document becomes effective only when you lose mental capacity, allowing your attorneys to act in accordance with your expressed wishes.

Property and Financial Affairs LPA
On the other hand, the Property and Financial Affairs LPA allows your attorneys to manage your financial matters, including paying bills, managing your bank accounts and handling property transactions. This type of LPA can be activated as soon as it is registered, provided you grant permission or upon losing your mental capacity.

Avoiding potential financial pitfalls
From a financial planning perspective, neglecting to establish an LPA can lead to significant issues. Without an LPA, your loved ones may need to apply to the Court of Protection for the right to act on your behalf, a time-consuming and costly process. This can be particularly problematic if the finances are solely in the name of the incapacitated individual, leaving their spouse or partner without legal access to necessary funds.

Registering your LPA
Once drafted, LPAs must be registered with the Office of the Public Guardian (OPG). This registration is crucial for the documents to become legally effective and ensures that your chosen attorneys can act on your behalf when necessary.

Holistic financial planning
We can help you identify these potential pitfalls and plan accordingly. By incorporating LPAs into your financial strategy, you can avoid the complications that arise from an unexpected loss of capacity, ensuring that your financial matters are handled smoothly and in line with your wishes.

THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL, OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE FINANCIAL CONDUCT AUTHORITY DOESN’T REGULATE TRUST PLANNING AND MOST FORMS OF INHERITANCE TAX (IHT) PLANNING. SOME IHT PLANNING SOLUTIONS PUT YOUR MONEY AT RISK, AND YOU MAY GET BACK LESS THAN YOU INVESTED. IHT THRESHOLDS DEPEND ON INDIVIDUAL CIRCUMSTANCES AND THE LAW. TAX AND IHT RULES MAY CHANGE IN THE FUTURE.