Understanding Estate Planning
Dec 2, 2025
Estate planning is the process of deciding what should happen to everything you own when you pass away - ensuring your assets are passed on according to your wishes, with minimal stress for your loved ones and in the most tax-efficient way possible.
Your estate includes all the assets you hold, such as:
Cash and savings
Properties
Investments
Personal Possessions
Insurance policies
But estate planning goes beyond just dividing assets after death — it can also address how your affairs are handled if you're ever unable to make decisions for yourself.
Without a plan, families can face confusion, delays, and even legal disputes during an already emotional time. That’s why putting a clear, legally sound estate plan in place is one of the most important things you can do — not just for yourself, but for those you care most about.
There’s no set age to begin estate planning, but many experts recommend starting in early adulthood and reviewing your plan periodically as your life and finances evolve.
Why Estate Planning Matters
Estate planning gives you control - not just over who receives what, but also over how and when your estate is distributed. While it can seem complicated, the benefits far outweigh the effort involved.
Key Benefits of Estate Planning:
Clarifies the total value of your estate
Ensures your assets go to the right people or causes
Helps reduce the Inheritance Tax burden on your heirs
Allows for faster, smoother transfer of ownership
Reduces legal ambiguity, preventing disputes or court intervention
How to Create an Effective Estate Plan
A thorough estate plan involves several key components. Below are the most essential steps to consider when preparing your own:
1. Write a Will
A will - also known as a last will and testament - is a legal document where you outline how your estate should be distributed after your death. You’ll name beneficiaries, specify who should receive what, and appoint an executor to carry out your instructions.
Without a valid will, your estate is distributed based on intestacy laws. This could mean your estate goes to people you hadn’t intended - for example, an estranged spouse or distant relatives - and not necessarily to those you care about most.
Making a will ensures your intentions are honoured and that your loved ones avoid unnecessary legal complications.
2. Set Up a Lasting Power of Attorney (LPA)
An LPA allows you to appoint someone you trust to manage your affairs if you're no longer able to do so yourself, due to illness or incapacity.
There are two types of LPA, but for estate planning purposes, the Property and Financial Affairs LPA is most relevant. This gives your appointed attorney the authority to handle your finances, property, and assets either immediately (with your permission) or in the future if you lose capacity.
While it doesn’t apply after death, having an LPA in place protects you and your estate while you're still alive but unable to manage things yourself.
3. Reduce Your Inheritance Tax Liability
Inheritance Tax (IHT) is currently charged at 40% on estates exceeding £325,000, with an additional allowance if you own a property passed to direct descendants. Transfers between spouses or civil partners are exempt.
If your estate is likely to exceed the threshold, you can explore various strategies to legally reduce the IHT your beneficiaries might face - such as gifting, charitable donations, or setting up trusts.
4. Consider Creating a Trust
Why Everyone Should Have an Estate Plan
Having a well-prepared estate plan gives you peace of mind — knowing your wishes will be carried out, your loved ones will be cared for, and the legal and financial aspects of your estate are in order.
Benefits of an Estate Plan:
You stay in control — not the courts
Reduces or eliminates unnecessary taxes
Appoints a trusted executor to manage your estate
Gives you a say in who handles your finances if you're unable
Ultimately, estate planning is about safeguarding your legacy and protecting your family’s future — no matter how large or modest your estate may be.
Written by Sam Barrie, Obsidian Financial Planning (RNF: BSG300134621, representing Synergy Financial Advisers) – this article is written to provide generic information only and does not constitute Financial Advice, which is only provided in an official report based on your individual circumstances.
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