While it’s fair to say that inheritance tax receipts to the UK Treasury have largely plateaued since 2017, Brits continue to pay considerable amounts on their estates.
Through 2020/21, such tax receipts in the UK amounted to approximately £5.32 billion in total, compared with £5.36 billion during the previous financial year.
Of course, effective and organised estate planning can help to reduce your total tax burden and make it easier to manage your accumulated assets. But when exactly should you start estate planning as an individual?
The Common Reasons to Consider Estate Planning
Let’s start with the basics; as there are numerous events that may force you to consider estate planning as a major priority. These include:
- Marriage and Remarriage: The majority of wills dictate that spouses should become the main beneficiary in the event of their partner’s death. So, you may need to alter an existing financial plan when you marry, whether this is for the first time or in the event of a divoroce.
- The Birth of a Baby: Similarly, children also serve as the main beneficiaries of a will in many instances. So, when your family sees a new addition in the form of a baby, it’s wise to factor this into your will redistribute your future assets as part of ongoing estate planning.
- Buying a Home: There are many different ways to finance the purchase of a home and secure a mortgage, from joint applications to joint ownership of a property. You may subsequently have to structure your will based on the ownership structure of your property, to ensure fairness and transparency in the future.
- You Receive a Sudden Increase in Wealth: Financial circumstances can change wildly in a relatively short period of time, with the world’s financial markets testament to this. Make no mistake; a sudden increase in your wealth will require you to amend your will, so that you can recognise the full value of your estate and ensure that this is distributed in accordance with your wishes.
- You Have a New Job: On a similar note, you may also want to revisit your estate planning when you secure a new job. This is particularly relevant if this precipitates a significant change in your earnings, which will directly impact your estate and long-term financial planning.
The Last Word
With these points in mind, you can identify the key events that should encourage you to either start estate planning or make amendments to your existing will.
In general terms, however, it’s important to be proactive and recognise changes in your financial circumstances, while also making amendments to reflect changes in your personal life and relationships.
It’s also important to start planning your estate just as soon as you come into some form of tangible wealth, in the form of a house or large pension plan.