Getting started with estate planning in the UK



If there’s one thing we can all benefit from, it’s estate planning. Estate planning in the UK is, thankfully, simpler than it may seem at first. Here’s how it works.

What is estate planning?

Your estate is everything you own. It includes personal property, joint assets and business assets.

Estate planning lets you do two things:

  1. You can decide who gets what when you die.
  2. You can manage your assets properly while you’re still alive. 

In other words, there’s more to estate planning than just drafting a will. There’s a whole host of tools you can use to plan your estate effectively. For example, you can:

  • Set up a trust
  • Appoint someone to manage your estate when you die
  • Name someone to handle your affairs if you can’t manage them anymore 

So, estate planning puts you firmly in control of your own affairs, and helps you shape your family’s future. What if you don’t have large assets? Is estate planning worth it? Absolutely – read on to find out why.    

Benefits of estate planning in the UK

Estate planning doesn’t just give your loved ones clarity and certainty when you die. It also helps you:

  • Reduce your estate’s tax bill 
  • Protect your existing assets
  • Decide how best to grow your wealth and invest in your family’s future 

Ultimately, a good estate plan gives you peace of mind and ensures that your loved ones get all the money they’re entitled to. 

Estate planning: UK legal terms

To make estate planning a little easier, here’s a quick summary of the most common terms you’ll encounter. This isn’t a full list, but these are the most important terms you should know about before you plan your own estate. 

Beneficiaries

The people who benefit from a will or trust.

Capital gains tax

You pay capital gains tax (CGT) if an asset increases in value between the time you bought it and when you dispose of it.

Say you buy a house. It increases in value before you die and you leave it to someone in your will. Tax must be paid on the “capital gain” – the increase in the value. 

Executor

Also known as the personal representative, this is the person who administers your estate when you die. 

Inheritance tax

Inheritance tax (IHT) is a one-off tax. It’s paid on a portion of your estate above a certain value. 

You don’t usually pay IHT on estates valued under £325,000.

Intestate estate

An estate where there’s no will in place. Intestate estates are divided according to special rules.

Legacy

The gift you leave someone in your will. 

Nil-rate band

This is the portion of your estate that’s exempt from IHT. You pay IHT on anything above the nil-rate band.   

Power of attorney

The power for someone to make decisions for you if you lack the mental capacity to make decisions yourself. 

Probate

The process for how the court examines a will and determines if it’s valid or not. If it’s valid, the court grants probate and distributes the assets accordingly. Otherwise, the executor divides the estate according to intestate law.

Trust

A legal arrangement where one or more people administer assets on behalf of someone else. 

Trustees

People who administer a trust.

Will

A legal document or “testament” setting out what should happen to your assets when you die. 

Get started with estate planning in the UK

So, now you’re ready to plan your estate. How do you get started? Just follow these few simple steps. 

  • List all of your assets. This includes all of your investments, savings, insurance policies, and personal possessions.
  • Make sure your dependants and/or partner have enough money if you die. Consider taking out life insurance to protect them.
  • Appoint an executor to manage your estate (after consulting them first, of course).  
  • Name your power of attorney who can handle your financial and medical affairs. Only choose someone you trust, and get their consent. 
  • If you have children, name someone to look after them if you die. Make sure the prospective guardian consents – not everyone wants the responsibility. 
  • Write your will. Name who gets which assets, and state what should happen to the remainder of your estate. 

If you only have a small estate, you might not need expert tax advice. However, it’s a good idea to hire a lawyer to help with estate planning in the UK. They can draft your will and give you bespoke legal advice. 

Takeaway

Estate planning is the most effective way to manage your assets and look after your family when you die. It’s not just for big estates, either – it’s for everyone.

You can do your own estate planning. UK laws recognise wills drafted without legal representation. However it’s best to ask a wills and trusts lawyer for expert advice. They can help you minimise your tax liabilities and wind up your affairs properly. 

Still have questions?

If you didn’t find everything you were looking for on this page, we have other ways to help:

Was this article helpful?
YesNo

Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.