5 important estate planning tips to follow in 2025
Many people procrastinate on forming an estate plan, also known as an inheritance plan – but it’s essential to pay attention to it. Read 5 important tips here
As 2025 inches closer, you might be reviewing your future plans and ensuring you’re on track to achieve them.
Whether a career move, relocation, or even retirement is on the cards for you next year, there’s one aspect of your financial plan that could likely do with some attention: your “estate plan”, otherwise known as an inheritance or legacy plan.
While you might put these plans on the back burner, perhaps because you feel you don’t need them yet or you don’t wish to dwell on the prospect of passing away, creating an estate plan is essential. Without one, your family could be left with an enormous administrative and financial burden after you die – and their inheritance could be subject to the laws of intestacy rather than being distributed according to your wishes.
Don’t procrastinate on securing your family’s financial future. Here are five important estate planning tips to follow in 2025.
1. Revisit your legacy plans in light of recent Inheritance Tax changes
As you might have read about in our Budget update, the chancellor has announced changes to the Inheritance Tax (IHT) regime that could affect your family in future.
Along with freezing the nil-rate bands (under which estates pay no IHT) until 2030, Rachel Reeves said that pensions will also be included as part of a person’s estate for IHT purposes from 6 April 2027.
With regards to the nil-rate bands: these thresholds were previously frozen by the Conservatives until 2028, but this freeze has been extended to 2030 by Labour. Simply put, if you were to pass away within this time, your estate could have risen in value but the nil-rate bands won’t have increased in line with it. This means your loved ones could pay more IHT, as a greater portion of your assets may be dragged into the taxable bracket.
What’s more, pensions don’t currently form part of a person’s estate for IHT purposes, but this is set to change in 2027. While this won’t affect you next year, it could be worth revisiting your legacy plan to ensure you’re factoring your pensions into the equation.
Reviewing your estate plan in light of recent tax regime alterations could mean you’re still on track to leave a sizeable legacy.
2. Treat your will as a “live document”
If you don’t already have a will, it’s crucial to create one in 2025. Passing away without a will means your estate may not be distributed exactly how you’d want, and could lead to costly disputes among family members too.
However, if you do have a will, it’s equally important to revisit it in 2025. Treating your will as a “live document” rather than a finished article could mean it remains accurate, in terms of the assets you own and the beneficiaries you name in the will.
For example, if you recently welcomed a child or grandchild into your family, they might not yet be named in your will. Leaving your will untouched means that upon your death, they might be excluded from receiving funds, even if this isn’t your intention.
Similarly, if you’re getting divorced, revisiting your will and making the appropriate changes is sensible.
3. Register or update your Lasting Power of Attorney
A Lasting Power of Attorney (LPA) is a legal document that enables a person, or people, to act on your behalf. There are two types of LPA: health and wellbeing, and property and financial affairs.
A health and wellbeing LPA lets your “attorney” – the nominated person – to act in your best interests if you lose mental capacity due to an illness or injury, such as dementia or a road traffic accident. They might decide what kind of care you receive, and whether you receive this at home or in a nursing facility.
A financial and property affairs LPA doesn’t just come into play once a person loses capacity, it can be actioned at any time. For example, if you leave the country for an extended period and want your UK finances taken care of, your attorney could step in. Or, if you do lose capacity, your attorney may be called upon to manage your wealth – including buying and selling property, making mortgage repayments, or accessing your insurance.
Crucially, a next of kin doesn’t have the same powers as an attorney in the event of a person losing capacity, so even if you’re married, registering an LPA could be a very sensible idea.
If you were to lose mental capacity without an LPA in place, a member of your family would have to apply to the Court of Protection to become a “deputy” – essentially gaining the same powers as an attorney. But this might not be the person you’d initially have chosen, and the application can take months to be approved.
So, nominating an attorney using an LPA could give you the peace of mind that if you are unable to make informed decisions yourself, your estate will still be managed in a way that reflects your wishes.
And, if you do pass away following a life-altering injury or illness, your attorney will have managed your wealth in your best interests, helping to ensure that your estate is in a fit state to be distributed according to your intentions.
4. Review your gifting strategies
We’ve written several detailed insights about the vast array of gifting options that could help you leave a living legacy.
Distributing your estate to your beneficiaries over the course of your life, rather than bequeathing it all in your will, could help your family seek important life opportunities in the here and now. Plus, gifting could reduce your family’s IHT bill – with fewer assets to your name at the time you pass away, your estate could be subject to less tax.
Read our blog covering five ways to help your kids financially during the cost of living crisis, and find out two often-overlooked positives of leaving a living legacy, plus more insights on our news page.
5. Speak to your Kellands financial planner about your estate plan
Between navigating the ever-changing IHT landscape, considering your family’s wellbeing, and updating essential documents like a will and LPA, forming an estate plan can be time-consuming.
So, if you feel you simply don’t have the time or knowledge to solidify your plans, you could consider speaking to your Kellands financial planner for guidance.
Our experts can help you figure out:
• How much you can afford to give away as part of your living legacy
• Whether your estate may fall into the IHT net, and if so, by how much
• How much each of your beneficiaries may be set to receive after you pass away
• If financial protection, including life insurance, could improve your estate plan and bolster your family’s financial security.
To learn more about these tips from a qualified professional, email us at hale@kelland.co.uk, or call 0161 929 8838.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, tax planning, Lasting Powers of Attorney, or will writing.