Estate planning mistakes

Many mistakes people make when estate planning come from them trying to do it themselves rather than seeking professional advice. One mistake that people make it trying to transfer their assets or make gifts to their loved ones without fully considering the implications. If you want your wealth to remain within your family, consider that it could be diluted by your current or future son or daughter in laws next partner.

The most two common mistakes I see is married couples assuming all assets go to each other and non-married couples not considering what will happen without a will, which can be a major issue for women without any personal assets. The majority of people like to hope for the best and, only when they have to deal with a family's estate when someone has passed away, do they realise the complexity of it all. One milestone when people do recognise they need a will is when they have children, but this is generally at a time when finances are straightforward. Often over time the will becomes old and out of date. Again only years later when they are dealing with another family member or they come across an issue, will they act. If they haven't, they have missed an opportunity. This is going to be even more important post-April 2027, when pensions become part of the estate.

One of the biggest estate planning mistakes is failing to put the right legal foundations in place. Many people still do not have a Lasting Power of Attorney, which can leave loved ones unable to manage affairs if capacity is lost.

Another common issue is not having an up-to-date will. As family circumstances, assets and wishes change, wills should evolve too, otherwise important decisions are left to chance.

The biggest mistake, however, is treating estate planning as a single issue, whether that is gifting assets or using insurance to fund an inheritance tax bill. Effective planning should be holistic, balancing lifetime objectives, family wishes, tax efficiency and succession planning.

For larger estates, the best outcomes are often achieved through collaboration between a financial planner, & private client solicitor or accountant. Early planning and professional advice are key.

Everyone knows they need a will and LPA’s but they keep putting them off until it’s too late. Trying to cut corners and preparing a will without seeking advice or transferring property whilst the testator is still alive without considering the 7-year rule or Gifts with reservation of benefits can really cause a lot of unintended consequences. Not updating wills after life events such as divorce or remarriage often sees inheritance going to people it’s no longer intended for.

Please use Steve Greenall at Greenall Estate Planning for this article

The biggest mistake is thinking estate planning is only for the very wealthy or very old. It is not. It is about control, protection and making sure the people you love are not left with a legal and financial mess.

In practice, I see people delay writing a will, forget to update it after marriage, divorce, children or buying property, and assume assets will automatically go where they want. Pension nominations are often outdated or missing, which is a huge blind spot. Power of attorney is another area people ignore. Everyone thinks about death, but very few plan for incapacity, even though that can cause immediate problems with bills, property and family decisions.

In my experience, only around 10-15% of people have all their ducks in a row. Most have fragments: maybe an old will, no LPA, pension nominations they cannot remember, and no joined-up plan.

People avoid it because it feels uncomfortable and complicated. But estate planning is not morbid; it is an act of care.

One major error that people make with estate planning is only doing it once and then leaving it stored away for years to come. A lot will happen over time as lives change, including new family members being born and rule changes, so, while this may be uncomfortable, it needs to be done more regularly to ensure your wishes are followed. Research reveals that 11 per cent of UK adults with a will admitted that it no longer reflected their current wishes, and the average time since last updating their will was six years.

A key mistake is waiting too long to gift, which can leave a financial burden on loved ones. If death occurs before seven years pass, then the beneficiaries will be left with a tax bill under current inheritance tax rules, although taper relief can reduce the tax rate after a certain period of time. Impending changes that bring pensions into IHT in 2027 make this worse and mean that millions of families will need to evaluate and change their planning strategy.

Not knowing the rules is the first one. There are so many misconceptions flying about and it's not the easiest tax to understand. A really common mistake is thinking that you can place your house in your kids names, and trick the system. It doesn't work and it can be really time consuming and expensive to unpick.