The Truth About Legacy Planning: Make A Lasting Impact

Written by Fraser Stewart
Reading time 6 minutes
The Truth About Legacy Planning: Make A Lasting Impact image

Death, an inevitable part of life, is still considered taboo in the UK. Many avoid thinking about it, let alone discussing and planning for it. This reluctance, while understandable, can inadvertently result in considerable stress, confusion, and financial burden for those left behind. But it doesn’t have to be this way. Enter legacy planning. Legacy planning is an in-depth and thoughtful approach to estate planning, ensuring your financial wealth and your values, life lessons, and dreams are passed on to future generations.

Legacy planning provides peace of mind knowing you’ve done what you can to make the transition smoother for your loved ones. Moreover, it offers an opportunity to leave a lasting impact that extends far beyond your lifespan. This guide seeks to demystify legacy planning, offering valuable insights and guidance on navigating this critical process in the UK.

The Silent Crisis: The Stigma Against Talking About Death

In the UK, death remains one of the last taboos. A recent survey by Lyfeguard, a renowned life management and FinTech platform, paints a stark picture of the implications of this. The stigma surrounding discussions about death has resulted in a silent crisis: Brits neglecting crucial end-of-life planning.

The numbers are shocking: 61% of Brits do not have a will in place, a legal document that outlines the distribution of your assets after death. Among younger age groups, this figure increases dramatically – 78% of 16-24-year-olds and 73% of 25-34-year-olds have not made a will. Even among the older age bracket (45-54), two-thirds lack this essential document. The primary reason? They “haven’t gotten around to it.”

The avoidance of talking about death isn’t limited to wills. It extends to financial planning for funerals, with significant consequences. Despite 44% of respondents have had to manage a loved one’s funeral and end-of-life process – an experience labelled stressful by 49% and a financial burden by 19% – 42% of consumers have not saved money specifically for their funeral.

Moreover, 42% of Brits wouldn’t know where to find important information if a family member passed away. Over half claimed they would need to seek professional help to manage their loved one’s estate. These statistics underscore the urgency for broader conversations about death, end-of-life decisions, and legacy planning.

Understanding Legacy Planning 

Legacy planning is an integral part of preparing for your future and the future of those you care about. It extends beyond the creation of a will or an estate plan. Platforms like Lyfeguard aim to lift the stigma and promote open dialogues about end-of-life matters by facilitating conversations around death and encouraging proactive planning.

Wills and Trusts

A will is a fundamental legal document that stipulates how your assets should be distributed upon your death. Without a will, your estate will be distributed according to the rules of intestacy, potentially leading to disputes among surviving relatives and your wishes not being fulfilled.

For married couples, mirror wills can be considered, which reflect similar wishes. If you're unmarried but have a partner, having a will is even more critical to ensure they are provided for, as they don't have the same legal protections as spouses.

On the other hand, trusts are more sophisticated legal arrangements where you transfer assets to a trusted third party (the 'trustee') who then manages these assets on behalf of your beneficiaries. Trusts provide a higher level of control over the distribution of your estate, stipulating when, how, and under what circumstances your assets should be passed on. Different types of trusts, such as discretionary trusts, interest in possession trusts, and bare trusts, offer various levels of control and tax efficiency.

It's worth noting that trusts can be established during your lifetime or created by your will. They can serve specific purposes, like protecting the interests of a disabled family member or ensuring a minor inherits at an appropriate age. However, the rules around trusts are complex and can carry significant tax implications, so professional advice is crucial.

Power of Attorney

A Power of Attorney (POA) is a legal document where you appoint one or more individuals to act on your behalf if you cannot make decisions for yourself due to physical or mental incapacity. The UK has two main types of Lasting Power of Attorney (LPA): Property and Financial Affairs LPA and Health and Welfare LPA.

The Property and Financial Affairs LPA allows your attorney to make decisions about your finances, such as managing bank accounts, paying bills, or selling your property.

On the other hand, a Health and Welfare LPA allows your attorney to make decisions about your medical care, living arrangements, and life-sustaining treatment. It's only used when you're unable to make these decisions yourself.

Setting up a POA can be emotionally challenging, as it forces you to think about scenarios where you may not be capable of making decisions. However, knowing that someone you trust can legally step in and act in your best interests when necessary provides peace of mind.

Healthcare Directives

Healthcare directives, also known as 'advance decisions' or 'living wills,' allow you to set out your preferences for medical treatment should you become too ill to communicate or make decisions. These decisions can range from the type of treatment you wish to receive to specifying interventions you want to avoid.

In the UK, a legally binding Advance Decision to Refuse Treatment (ADRT) can specify treatments you wish to refuse under certain circumstances, including life-sustaining treatment. It's essential to discuss your wishes with your doctor and ensure that your ADRT is accessible in an emergency.

An Advance Statement isn't legally binding but provides a broader picture of your preferences, such as your likes and dislikes, spiritual or religious beliefs, and where you would like to be cared for

Philanthropy

Philanthropy can be an essential aspect of your legacy planning if there are causes or charities you feel passionately about. By leaving a portion of your estate to a charity in your will, known as a 'bequest,' you can continue supporting these organisations after your death. Many charities in the UK offer free will-writing services, hoping you'll consider them in your legacy planning.

Beyond cash donations, there are other ways to contribute to charities, such as gifting shares, property, or leaving a percentage of your estate (also known as a 'residuary gift'). These can have tax benefits as gifts to charities are generally exempt from Inheritance Tax and could reduce the overall tax rate on the rest of your estate.

Family Education

Family education is a crucial but often overlooked aspect of legacy planning. Educating younger generations about wealth management, the value of money, and family values and traditions is vital for preserving your legacy.

You can involve your family members in the legacy planning process, explaining your decisions and their reasons, and encourage open discussions about inheritance, philanthropy, and responsibilities that come with wealth. This education can be informal family meetings or more formal education through wealth management advisors.

There is a saying: "shirtsleeves to shirtsleeves in three generations", which illustrates the potential for wealth to be lost through poor management and lack of understanding. Effective family education can go a long way towards preventing this, preserving your wealth and legacy for generations to come.

The Importance of Open Conversations and Planning 

The lack of open conversations about death has led to a significant gap in end-of-life planning in the UK. The fact that over 1 in 5 people have fallen out with a family member over the death of a mutual loved one speaks to the emotional turmoil that can arise when proper planning isn’t in place.

This silence around death extends to practical considerations as well. Shockingly, 42% of respondents wouldn’t know where to find a deceased family member’s vital information, and over half claimed they would need to seek professional help to manage their estate.

Furthermore, when asked why they hadn’t made a will, 46% of respondents claimed they simply hadn’t gotten around to it. Another 20% believed the process of creating a will was too expensive. These misconceptions highlight the need for greater education and support around end-of-life planning.

How to Start Legacy Planning 

Start by addressing the most crucial element: the will. In the UK, a professionally drafted will ensure that your estate is distributed according to your wishes and can help prevent family disputes after your death. You can use a solicitor, a reputable will-writing service, or an online platform like Farewill.

Once your will is in place, consider establishing a Power of Attorney, writing an advance decision, and setting up trusts if applicable. If you have a complex estate or substantial assets, seeking advice from financial advisors, solicitors, or legacy planning experts can be highly beneficial.

If philanthropy is a part of your values, consider leaving a legacy to a charity. Several UK-based charities offer free will-writing services in the hope that you’ll consider them in your will. This can be a fulfilling way to support causes you care about and leave a lasting impact.

Educating your family about your end-of-life wishes and involving them in planning can be beneficial. It not only ensures they understand your wishes, but it also prepares them for wealth management and preservation.

Remember, legacy planning is an ongoing process. As your circumstances change, so should your plan. Regular reviews with professionals can ensure your plan remains current and fits your needs.

Conclusion

While the statistics paint a bleak picture, there’s an opportunity here. By promoting open discussions about death and end-of-life planning, we can lift the stigma surrounding these topics and ensure that Brits are better prepared for the future. As we navigate these conversations, services offered by companies like Lyfeguard and its partners are invaluable resources in the journey towards better legacy planning.



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