High-Net-Worth Estate Planning: Common Mistakes to Avoid


Estate Planning for High Net Worth Individuals

You’ve worked hard to build your wealth and have an impressive collection of assets, but have you thought about what might happen after your death? Are your loved ones protected or could you be subject to hefty tax bills and unexpected financial burdens? A little bit of organisation now could save a lot of hassle down the line, so it’s important to take estate planning seriously.

Here Nick Hughes, a specialist in estate planning for high net worth individuals domiciled in the UK and overseas, has offered up some common mistakes to avoid when considering your wealth management approach.

Mistake 1: Failing to Update Your Estate Plan

It’s quite possible that your net worth will fluctuate during your lifetime, particularly if you buy new properties and businesses or inherit valuable items. For this reason, it’s really important to update your estate plan to reflect any changes. Remember, Inheritance Tax (IHT) is applied to estates worth £325,000 and over. So if your wealth tips over into this band, you need to plan for increased tax liabilities. Kent tax advisors can help you with this and find ways to lower the amount of tax due, such as gifting assets to relatives while you still can.

To avoid other issues such as a decrease in wealth protection or unnecessary family conflict from outdated estate plans, it’s a good idea to review your plan at least every few years or after a significant change to your circumstances. Estate plans are living documents which means you can update them as many times as is necessary.

Top tip: Make sure your estate is valued correctly to avoid any surprise taxation. You should total up the value of your property, savings, investments and any valuable possessions before subtracting debts and reasonable funeral expenses to get an accurate calculation.

Mistake 2: Unclear Division of Assets

The death of a loved one can be made even more traumatic by poor estate planning. To avoid unnecessary upset, it’s really important to divide your assets clearly and precisely, leaving no grey or murky areas that might cause conflict or debate. Be sure to put all your wishes in writing and communicate clearly with your beneficiaries.

If you’re not sure where to start with the whole process, it might be worth seeking professional advice about setting up trusts. A trust is a legal arrangement where you give cash, property or investments to someone else so they can look after them for the benefit of a third person. For example, you might decide to set up a trust fund for your children. This can be clearly documented in your estate plan and could help you to avoid probate with respect to the trust assets.

Mistake 3: Not Setting Up an Advanced Care Directive

Without sounding too depressing, good health isn’t guaranteed. Something could happen to you mentally or physically that could result in your estate falling into disarray. For this reason, it’s a good idea to set up an advanced care directive which details who you want to act on your behalf if you’re unable to make life decisions. Documents can include:

  • Power of Attorney
  • Healthcare Surrogate or ‘Proxy’
  • Living Will

Securing your estate now and providing a backup plan for any potential incidents will help you to manage your wealth even in the most difficult of circumstances. If you’re the executor of a Will looking for help with the distribution of wealth and the calculation of IHT liabilities, contact a Kent accountant for probate services today.

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