Conversations about estate planning can be challenging and uncomfortable. It can be upsetting to talk to your parents about their eventual passing, and what they plan to do with their wealth. Equally, you might hesitate to have these conversations with your children.
This means that many families are in the dark about one another’s estate plans.
For example, according to FTAdviser, 36% of UK adults don’t know what their parents’ inheritance plans are. This could lead to many challenges for your family.
Read on to learn why estate planning conversations are so important.
Everybody can make their wishes clear and set expectations
Disputes about estate planning can cause distress for your loved ones. Unfortunately, Today’s Wills and Probate reports that applications to block the probate process increased by 56% between 2019 and 2024.
This rise in estate planning disputes could be caused by several factors, including:
- The rising value of estates as house prices increase
- An aging population and concerns about mental capacity
- More people over the age of 60 remarrying
- The rise of DIY wills.
Whatever the reasons, having open conversations with your family could prevent disputes about inheritance in the future.
By talking about your plans, you can make your wishes known to the whole family. You can also set expectations about who will inherit what when you pass away.
This means that there are no surprises, and everyone is clear about how your estate will be divided. If anyone is upset about your plans, you can discuss and resolve disputes in a healthy way while you’re alive.
You can discuss whether passing wealth to loved ones while alive may be more beneficial
When creating an estate plan, you might focus on how you will divide your assets when you’re gone. However, certain family members might benefit from the wealth more if you pass it to them now.
If you had children at 30 and live to 90, your children would be 60 when you pass away. At this stage of life, they will likely be on the property ladder and may have married and raised children already.
Conversely, adult children in their 20s and 30s may still be trying to meet these life milestones. They’re also more likely to have young families and face the additional costs that come with them. What’s more, their earning potential may be lower if they’re at the start of their career.
As such, it may be more useful for them if you gift wealth now, rather than leaving it to them after you pass away.
By discussing your personal financial goals with your family, you can plan how to pass wealth between generations effectively, so everybody can achieve their aims.
It’s important to discuss a potential Inheritance Tax liability
When passing wealth to your beneficiaries, they might have to pay Inheritance Tax (IHT) on a portion of your estate.
Fortunately, careful planning could help reduce the amount your family is liable to pay. This is much easier to achieve if you discuss ahead of time how much wealth you’re likely to pass on and what the IHT liability could be.
You can then work with a financial planner to find the most tax-efficient ways to transfer wealth to your loved ones. This might include gifting wealth while alive, as well as using all the available reliefs and exemptions.
Understanding what you will inherit helps you plan more effectively
A lump sum from an inheritance could help you progress towards your financial goals. However, you typically receive these funds after losing a loved one. While you are grieving, it could be difficult to make measured decisions about how to use a financial windfall.
This might lead to decisions that don’t align with your financial plan, and you could miss opportunities to grow your wealth.
Planning ahead could mean you make more effective use of your inheritance. However, you can only do this if you know how much you’re likely to receive.
Having open conversations with your family about expected inheritance can help everyone plan accordingly.
Get in touch
A financial planner can facilitate important estate planning conversations and support your family with any challenges.
Please get in touch to find out how our team of VouchedFor Top Rated planners could help today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning or tax planning.