This does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Dental and Medical Financial Services Limited is an appointed representative of Best Practice IFA Group Limited, which is authorised and regulated by the Financial Conduct Authority.
You will spend your entire career building your wealth, not just for your own benefit, but for your family and loved ones too. So, it’s important that you prepare for the inevitable of you not being around one day. Estate planning will ensure that your wealth is distributed according to your wishes, as well as help to minimise the tax burden your beneficiaries might be subject to after receiving their inheritance. Here’s how doctors and other medical professionals can get started with estate planning so you can take care of your loved ones after you pass.
It’s understandable that you might not want to think about what will happen after you die, but preparing for the future is critical, especially if you have wealth you plan to pass on to loved ones. A will and assigning power of attorney are the foundations of estate planning.
The importance of estate planning
If you don’t have a will at the time of your passing, then your estate will be distributed according to the rules of intestacy, no matter your wishes. Drafting a will makes the whole process easier for your loved ones to deal with your affairs when the last thing they want to be thinking about is money.
You can, of course, write it yourself but as there are many legal ramifications – as well as tax implications – that should be taken into consideration, we strongly recommend working with a professional to ensure that everything is thought of. Not just a solicitor, but a financial adviser so that your estate plan works seamlessly with your overall financial plan.
It’s important to regularly review your will at points where your life circumstances change. Getting married or divorced, expanding your family, or moving house are all examples of times when you should revisit your estate plan.
Lasting Power of Attorney
A Lasting Power of Attorney is a legal document that assigns someone you trust to make health, wellbeing, and financial decisions, or to help you make these decisions, on your behalf. This means that you and whoever you choose can discuss your options in advance so you can have peace of mind knowing that if you are ever unable to handle your affairs yourself, you will be in safe hands.
Minimising Inheritance Tax
Inheritance Tax (IHT) is tax paid on property, money, and possessions of someone who has passed away. If you have not prepared a plan to deal with IHT, then your loved ones will be stuck with the bill after your death. With careful planning, you can reduce or avoid IHT altogether.
If your estate is below the nil rate band, or if everything you leave to your spouse is above the threshold, then you shouldn’t have to worry about IHT. For the current 2023/24 tax year, the nil rate band is £325,000, with 40% tax payable on the value of your estate above that level. You can reduce the rate of IHT by leaving 10% of your estate to a registered charity, reducing the tax payable to 36%.
The residence nil-rate band can also help. This allowance applies when you pass a main residence to a direct descendant and adds an additional £175,000 per person to the tax-free allowance.
Creating a will, assigning lasting power of attorney, and planning for IHT are only the tip of the iceberg in terms of estate planning. Gifts, trusts, pensions, and business relief should also be taken into consideration. As you can see, it’s a lot to juggle. But you don’t have to do it alone – working with an independent financial adviser, who specialises in working with medical professionals, can help you balance your current lifestyle with your desire to leave a legacy.
Get in touch with the experts at Dental & Medical Financial Services to get started on building a plan to take care of your loved ones for life.