Estate Planning: Five Avoidable Mistakes That Can Derail Your Legacy

Mistake 1: Not having a valid will

Dying without a will leaves your estate in the hands of the law rather than your own wishes. Without clear instructions, government intestacy rules decide who inherits your assets, which may not align with what you would have wanted. This can create confusion, delays and even disputes among family members at an already emotional time.

A properly drafted will ensures your loved ones are provided for according to your intentions, and can also help reduce unnecessary legal and administrative costs after your death. However young/healthy you are, make sure that you have a will in place as none of us know what the future has in store.

Mistake 2: Kicking the estate planning can down the road

Many people kick the can down the road when it comes to estate planning, convincing themselves that their financial situation is too transient or likely to change in the next ten years. This mindset often leads to unnecessary delays, leaving families unprotected should something unexpected occur.

In reality, most estate planning documents are intentionally broad and future-proof – they don’t require detailed lists of every asset or exact figures. The notion that you should wait until your finances are settled simply isn’t valid. It’s far better to get the core documents in place now and update them later if needed, rather than risk leaving everything to chance.

Mistake 3: Failing to put LPAs in place

Not having Lasting Powers of Attorney (LPAs) in place can create serious problems if you lose mental capacity. Without these legal documents, no one – not even your spouse or children – can automatically deal with your assets, manage your financial affairs, or make healthcare decisions on your behalf.

While joint assets can usually be managed by one party, few couples hold all assets jointly. Pensions, investments and savings are often in one person’s name. Without LPAs, your loved ones may be unable to access funds, pay bills or make important care decisions for you, leading to significant stress and financial difficulty. Putting LPAs in place ensures the people you trust can step in smoothly if you’re unable to act for yourself.

Mistake 4: Not protecting a legacy in case of divorce

Many parents want their estate to benefit their children but overlook what could happen if a child later divorces. If assets pass directly into a child’s personal name, those assets could be treated as part of their marital estate and potentially lost in a divorce settlement.

To avoid this risk, it’s wise to include a trust within your will. A trust allows you to provide financial support and access to your assets for your children while keeping legal ownership separate. This means that if your child divorces, the trust can help protect those assets from being divided, ensuring your estate remains within the family and is used as you intended.

Mistake 5: Not making provision for IHT liability

Failing to make provision for inheritance tax (IHT) can leave your beneficiaries facing a significant financial burden after your death. While your estate may be well planned, if there isn’t enough liquidity to pay the IHT bill, your family could struggle to access assets until the tax is settled.

A practical solution is to have life cover in place specifically to cover any potential IHT liability. It’s often advisable that this policy is written in trust, so the proceeds fall outside your estate and aren’t themselves subject to IHT – otherwise you risk compounding the problem. This approach ensures funds are available immediately after death, allowing beneficiaries to settle any tax liabilities quickly and efficiently without needing to sell assets or use personal savings.

If you’re making any of the above mistakes, now is the time to take action to rectify them. If you’re an expatriate, your first port of call should be a professional with a good knowledge of cross-border issues, as it’s crucial to understand how the law in the different jurisdictions where you hold assets may affect your will, tax liabilities and asset distribution.

One of our knowledgeable advisers can help you review your existing arrangements, identify potential risks and recommend practical solutions – from setting up trusts and reviewing life cover to putting LPAs in place.