The American President Benjamin Franklin said that the only two certainties in life are death and taxes. The issue is that many people believe that there are no options for them to manage those certainties, or that estate planning is only necessary in the realm of the multi-millionaire or 'high net worth' individual. The reality is quite the opposite. The fact is that everyone can enjoy the benefits of estate planning in one way or another.
What is estate planning?
Simply put, estate planning is the process of taking steps to manage the certainties that President Franklin mentioned. That includes:
- the preparation of a will to set out what happens to your property when you pass away;
- the creation of a power of attorney for someone to manage your affairs if you find yourself unable to do so;
- the establishment of a structure to manage assets / pass something on to future generations; or
- all of the above.
What are the benefits of estate planning?
There are many things to be gained from estate planning, but in our opinion, there are three main benefits to estate planning:
Reason one: The opportunity to take stock
One benefit of estate planning is that it affords you the opportunity take a step back and think about what your priorities are in life, and what you want to happen when you are no longer here. Understandably people tend not to want to think about such things. After all, life is for living! That said, the important point is that many people tend not to 'take stock' until something happens to force them to do so. All too often there are instances where people have missed out on the opportunity to take stock: they die without a will; or they lose mental capacity to care for themselves. Estate planning is the ideal means to ensure that that does not happen to you.
Reason two: Taking control
Another key benefit of estate planning is the opportunity to decide exactly how you want to deal with President Franklin's certainties. There are laws in place for what is to happen when someone dies or loses mental capacity. Estate planning, however, provides you with the opportunity to influence how those rules will impact you:
- Succession laws govern who will inherit your property when you pass away. The important point is that those laws only come into play if you do not make a will. By making a will you decide what happens to your estate by setting out your wishes in a will.
- There are occasions where someone can lose the ability to look after or make decisions for themselves. In that situation there is a process by which people can approach the Scottish courts to manage your affairs on your behalf. There is however one snag – you will have no say in that process. That is why it is so important for everyone to put a power of attorney in place: you decide who makes decisions on your behalf if you were unable to do so on your own.
- The law makes various structures available for you to manage your affairs in life, and for others to manage things on your behalf on your death. However, those structures don't simply come into being on their own; they have to be created. In other words, you need to decide on what structures you want to you, how you want to use them, and take the steps to create them.
Reason three: Bespoke arrangements
No two people are the same, and that is also true for their affairs. As you would expect it follows that everyone will need to have different estate planning arrangements in place to fit their circumstances. While everyone should take similar steps e.g., have a will, set up a power of attorney etc, your documents will be prepared according to your own unique circumstances:
- You may have particular wishes for who is to inherit your estate when you pass away. Equally you may have accumulated different assets over the course of your life and have clear plans on what is to happen to them when you die. Estate planning gives you the opportunity to think through these details, with the benefit of professional advice, and to document your wishes in a will which is unique to you.
- You may have a clear idea of who you would like to make decisions on your behalf if you were unable to care for yourself, and what kind of decisions they are able to make. However, these wishes will not be given effect to unless they are documented in a power of attorney. As with wills, powers of attorney are highly personal documents that need to be drafted to fit your circumstances.
- Your circumstances may change as time goes by e.g., you may start your own business, have a family or even win the lottery (it does happen!). A change in circumstances, however small, is a very good reason to look at your estate planning arrangements and decide on whether they suit your plans.
The fundamental point to remember about estate planning is that it is for everyone. There is no "one size fits all" approach. Regardless as to the simplicity or complexity of your affairs, with input from professional advisors that understand your intentions, everyone can access the benefits of estate planning.