Understanding the value of your assets and how they may fluctuate over time is essential when deciding how to distribute them. This blog aims to provide insight into the value of your assets and assist with estate planning in Birmingham. In our previous post, we explained why estate planning should be an integral part of your financial and life plan. In this post, we’ll delve deeper into why comprehending the scope of your estate is significant.

Your estate encompasses all your possessions, which can include tangible items or intangible assets such as investments or savings. Therefore, it’s common to overlook some items when deciding what to leave for your loved ones. Assessing your estate now will provide clarity on how you want to allocate specific assets upon your passing and ensure that appropriate measures are in place to execute your desires.

Furthermore, comprehending the value of your entire estate and individual assets will also help you determine whether you need to consider aspects such as Inheritance Tax (IHT) when devising a long-term plan.

So, where should you start when planning your estate planning in Birmingham?

Bringing your assets together to calculate the value of your estate

An effective approach to begin is by compiling a list of your assets and their corresponding values, beginning with the highest valued item. Your most significant assets might include:

  • Property
  • Pensions
  • Investments
  • Savings

It’s important to account for personal belongings, such as jewelry, artwork, or a vehicle, and you may find it beneficial to seek professional valuation in some cases. Afterward, it’s necessary to factor in liabilities, such as mortgages, loans, or debts, which should be subtracted from the total asset value.

Don’t forget that some gifts may be considered part of your estate for IHT purposes for up to seven years. If you’ve given significant gifts to loved ones, such as a lump sum for a property deposit or shares, in the last seven years, you should include them too.

Some gifts are considered outside of your estate immediately when calculating IHT. If IHT is something you need to consider, making use of these could reduce a potential tax bill.

IHT exempt gifts include the annual exemption, which is £3,000 for the 2023/24 tax year, up to £250 to each person, and gifts made from your income. Please get in touch with us if you’d like to discuss how gifting could reduce an IHT bill.

Assessing the value of your estate presently can be beneficial, but it’s equally vital to consider how it may evolve over time.

Why you should forecast how your estate will change during your lifetime

During your lifetime, the value of your estate will change. This could be due to decisions you make or outside factors.

For instance, you can expect your pension to decrease in value as you start using it to generate retirement income. In contrast, the value of your home may increase over time, given the expected long-term rise in property prices.

To ensure that your estate plan remains relevant to the current value of your assets, it’s crucial to consider potential changes that may occur. Making estate planning part of your overall financial plan means you could consider how values may change. For example, what returns do you expect your investment portfolio to deliver each year, and how would this affect your estate in 10 or 20 years?

When you consider how your estate may change, it could alter your plans. The value of assets increasing could mean you decide to make additional gifts during your lifetime. Or perhaps one asset rising in value means that your children wouldn’t receive an equal share of your estate unless you updated your will.

Regularly reviewing your estate plan is crucial as it provides an opportunity to ensure that it still aligns with your preferences and evolving circumstances.

We can help you understand how your long-term plans and the decisions you make could affect the value of your estate over the short, medium, and long term to create an effective plan that suits you.

Read the blog next month to learn about how you can pass on assets to loved ones

Once you understand your estate, you can start thinking about who you’d like to benefit from it. There are several ways you can pass assets on, from gifting during your lifetime to leaving an inheritance in a will. Read next month’s estate planning blog to learn more about your options and key considerations.

If you have any questions about your estate planning in Birmingham or would like to arrange a meeting, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning or tax planning.

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