Taking the first step into your career is an exciting time. Like any other big life event, this is a good opportunity to consider your personal affairs and an opportunity to get everything in order for the future.
This may encompass any number of considerations depending on your personal circumstances, living arrangements, assets, family and relationship status. However, there are some key legal documents that transcend all circumstances to add value and benefit to all.
Why make a will?
Getting a will in place is arguably one of the most important things you can do for your future. While not the most exciting of topics, it is crucial to ensure that your estate passes on to those you wish to receive it when you are no longer here. The will is your opportunity to set in motion how you want that to work, who you want to benefit and who you trust to ensure that your instructions are carried out properly.
As you embark on the world of work and begin to pay into your pension, the structure of your will and who it benefits requires even more careful consideration
In 2024, the Chancellor announced that pensions would now feature in inheritance tax calculations. As you embark on the world of work and begin to pay into your pension, the structure of your will and who it benefits requires even more careful consideration.
An estimated 50 to 60 percent of adults in the UK do not have a will. Without a will, your estate will pass under the default intestacy rules, which may not leave your assets as you intend.
Who do you want to benefit?
Based on legislation from 1925, which was only modestly updated in 2014, the intestacy rules have not been readily updated to reflect the modern family structure. They provide a list of relatives who can benefit from your estate in an order of priority. This starts with any spouse and children, ahead of passing down a line of more distant relatives if required.
The rules do not, however, provide for stepchildren, foster children or cohabiting partners. They prioritise the spouse, who will receive the first £322,000 of the estate, all personal effects and 50 percent of any remaining estate (if the deceased has surviving lineal descendants). Any children of the deceased receive the remaining 50 percent equally between them. While the spouse may be the priority for many, it can create difficulties for individuals who have married for a second time and who have children from a previous relationship. There is little balance between those interested parties then in value terms.
There are many benefits to making a will beyond the distribution of wealth. It is therefore not simply for those who own their own property, or who have large investment portfolios. A will allows you to specify guardians for any minor children you may have. It allows you to structure inheritance into trusts for vulnerable beneficiaries and to balance interests between partners and children from other relationships. It also allows you to leave your funeral preferences, as well as specific token gifts and gifts to charity.
Making a will is therefore not simply something to consider as you approach retirement. It is an important consideration for any individual to ensure that their affairs are as straightforward as possible for their loved ones after they have gone.
Lasting powers of attorney
Lasting powers of attorneys (LPAs) last for the duration of your life and allow you to select individuals you would trust to make decisions for you in the event that you lose the mental capacity to do so in the future
In contrast to wills, a lasting power of attorney (LPA) allows you to provide for the management of your estate while you are alive, but in circumstances where you become less capable of managing decisions for yourself.
LPAs last for the duration of your life and allow you to select individuals you would trust to make decisions for you in the event that you lose the mental capacity to do so in the future, whether temporarily or otherwise. There are two types, allowing you to customise your wishes between those you trust to make medical and welfare decisions, and those you trust to manage your financial affairs.
While this is a difficult topic to think about, it is just as important as making a will as it dictates who can access your accounts, pay your bills and ensure you have everything you need if you were to become unwell.
As with wills, these are not documents to be considered towards the end of your career as you never know when you may require them. Rather, consider them a bit like an insurance policy: an accident or unexpected illness could impact your mental capacity at any time, so this is not just restricted to older people or those post-retirement.
What next?
Being prepared never fails to prove invaluable when the unexpected happens, so don’t put off until tomorrow something which you could tick off your list today.
