What is estate planning?
Estate planning helps to organise your finances and personal wishes for the future. It helps set out how you’d like your wealth to be distributed when you die and how you’d like to be taken care of if you can no longer make financial and medical decisions for yourself.
Estate planning helps you prepare for key events at all stages of life, such as buying a home, starting a family, building a business, retiring or considering long-term care.
In this article we look at the key elements of estate planning in the UK and how it can help you make your wishes clear to your family and manage inheritance tax.
What is estate planning?
Estate planning involves making arrangements for how your assets, finances and personal wishes will be managed during your lifetime and after your death.
Your estate is made up of all the assets you own. It includes:
- your home and car
- your savings and investments
- your personal belongings, such as jewellery and art
- collections, such as your vinyl or Star Wars memorabilia
- a life insurance payout (if it isn’t written into trust)
Remember though that if you own assets jointly with other people, to only include the proportion that belongs to you.
You can also put plans in place if you become unable to manage your own financial or health and welfare affairs if you lose mental capacity. This can help reduce the risk of disputes around who can deal with your estate and medical care on your behalf.
Why is estate planning important for individuals and families?
There are four main benefits to estate planning.
- Make sure your wishes are carried out
By making a will, you can make it clear in advance who receives what when you die. Without a will, your estate may be distributed differently to how you want it to be. - Support your loved ones
Having a clear understanding about the size of your estate can help you work out how to financially support your loved ones now and when you die. - Minimising taxes and legal complications
Planning ahead can help ensure your estate is distributed in line with your wishes and may help manage any inheritance tax liability. Recording your wishes in legal documents such as a will or power of attorney can also provide greater clarity for loved ones and help reduce the risk of disagreements. - Peace of mind
It’s reassuring to know you’ve planned ahead and made things easier for your loved ones to deal with as you age or after your death.
What does an estate planning process typically include?
The estate planning process involves looking at all aspects of your finances. You’ll need to make a comprehensive list of everything you own. And then decide who you want to leave it to.
As part of the process, you’ll usually need to draw up various legal documents, such as a will or powers of attorney. These documents set out who gets what and how you want to be treated if you can no longer manage your finances or your health yourself.
For estate planning advice, it’s a good idea to speak to a professional, such as a solicitor, financial adviser or will writer. They’ll make sure everything is recorded correctly.
Estate planning is an ongoing process that should evolve as your circumstances change. Regular reviews are particularly important if you divorce or remarry, have a blended family, or expect your estate to be subject to inheritance tax in the future.
What is the role of a will in estate planning?
Making a will is one of the most important components of estate planning. A will is a legal document that sets out how you want your estate to be divided up after you die.
If you don’t leave a will when you die, your assets will be subject to intestacy rules. These rules specify that legal spouses and civil partners inherit first, then children and their descendants will inherit if there's no legal spouse.
With a will you can decide which people or organisations will receive your assets. You can set out how much money they receive, who inherits your jewellery or which charities will benefit for example. These people or organisations are called beneficiaries. You can also stipulate what happens to your assets if any of your beneficiaries die before you do or if additional children or grandchildren come along after you’ve made the will.
Why are powers of attorney and healthcare directives important in estate planning?
An attorney is a person or group of people you trust to make decisions for you if you lack mental capacity. They would take on the responsibility of looking after your finances and your health if you can no longer make decisions for yourself.
A power of attorney is a legal document that formally sets out who your attorneys are, how they can act on your behalf and whether they can act alone, or must agree about your finances or medical care jointly.
You can set up separate powers of attorney. One to manage your finances and one to manage your health and welfare. Different attorneys can be appointed for each one if you like. It’s the attorney’s responsibility to look after your estate or your health with your best interests at heart.
Within your health and welfare power of attorney you can also decide if you want your attorney to be responsible for making decisions about life-sustaining treatment. Without a power of attorney, decisions about your health will be made by medical professionals, not your family.
Who needs estate planning?
You don't have to be rich to benefit from estate planning. Anyone who has savings, owns property, has a pension or even a life insurance policy can plan who they want to receive their estate when they die.
It’s particularly important if you have children and you want to make sure they’re taken care of if anything happens to you. In your will you can not only leave your wealth to your children but specify who looks after them if they’re not yet adults.
Estate planning can also secure your partner’s financial future if you’re not married or in a civil partnership. When you die without a will, your money won't automatically go to your partner as they’re not your legal spouse. You need to make them a beneficiary in your will if you want them to inherit your assets.
How can estate planning help protect your family and assets?
Having a plan for your future can help provide financial security, manage an inheritance tax bill and reduce uncertainty for your loved ones after you die, or if you lose capacity.
Financial security
Setting up a will allows you to outline exactly who should benefit from your estate, helping to ensure your assets are distributed according to your wishes and providing clarity for your loved ones.
Inheritance tax
Inheritance tax is generally charged at up to 40% on the value of an estate above the applicable tax-free allowance. The amount payable depends on individual circumstances and any available exemptions or reliefs. If you think your assets add up to more than the allowances, estate planning can help reduce your inheritance tax bill. Leaving the family home to your children or grandchildren, making a will, putting assets into trust or taking out a life insurance policy are all strategies to help with managing inheritance tax.
Calculate your inheritance tax bill
Reduced uncertainty
Losing capacity can happen at any age through illness or accident. If it does happen and your loved ones need to take on the responsibility of caring for you, they need to know how you’d like to be looked after. A power of attorney lets you choose who makes these decisions and what happens when your health deteriorates.
How do trusts fit into estate planning?
A trust is a way to take your assets out of your estate, so you won’t need to pay inheritance tax on them. Anything can be put into trust, including property, possessions and cash.
A legal agreement is set up so that the trustees – the people who run the trust – become the legal owners of the assets. This means they no longer belong to you.
As part of the trust, you can request that certain people benefit from the assets, such as your family. The trustees typically follow your request when you die.
A common estate planning strategy is to place a whole of life insurance policy in trust. The policy can then provide a cash lump sum on death, which your beneficiaries may use to help pay any inheritance tax due on your estate.
What happens if you do not have a plan in place?
If you don't have a plan in place for what happens to your estate when you die, you could find that the State determines the distribution of your estate. This is called being ‘intestate’. It means that you died without making a will.
Intestacy rules specify that legal spouses and civil partners inherit first. Then children and their descendants will inherit if there's no legal spouse. This may mean that your wealth doesn’t end up with those you would have chosen to receive it.
An example of this is unmarried partners. If you die without making a will, your unmarried partner is not entitled to automatically inherit your wealth. Your estate will go first to any legal spouse or civil partner (even if you’re separated).
You could also find your estate is landed with an inheritance tax bill if you don’t take steps to plan ahead. Estate planning can help minimise the amount of inheritance tax you may need to pay.
When should you start estate planning?
There’s no ‘right time’ to start estate planning. People often consider it when they buy a home, start a family or want to make sure a special possession is gifted to the right person when they die.
In the UK you can make a will from the age of 18 (12 in Scotland), so age isn’t a barrier when estate planning. And a power of attorney can be set up from 18 as well.
Unless you have complicated finances, estate planning needn’t be expensive, and there are options for will writing and power of attorney to suit a range of budgets. Some charities will even help you write a will for free if you leave some money to them. Also, many life insurance companies don't charge extra for setting up a life insurance plan in trust.
How do you get started with estate planning?
A few simple steps can help you get started
1. List your assets
- Savings and investments
- Property
- Personal possessions
- Car and other vehicles
- Pensions and life insurance
- Business interests
2. Choose your beneficiaries
- Family members
- Friends
- Charities
3. Choose your executors
- These people make sure your wishes are carried out
- Choose guardians for any children under 18
4. Draft a will
- Decide who you want to inherit
- Make allowances for future children or grandchildren
- Get the will signed and witnessed
5. Establish your powers of attorney
- Decide who your attorneys will be
- Make your wishes known to them
- Register your power of attorney with the Office of the Public Guardian
6. Monitor your assets
- Inheritance tax due on assets over £325,000
7. Review regularly
- At each life event
- Following separation or divorce
- Setting up a business
Key takeaways
- Estate planning helps to organise your finances and personal wishes for the future. It lets your loved ones know how you’d like your wealth to be distributed when you die and how you’d like to be taken care of if you can no longer make financial and medical decisions for yourself.
- It involves looking at all aspects of your finances. You’ll need to make a comprehensive list of everything you own. And then decide who you want to leave it to.
- You’ll usually need to draw up various legal documents, such as a will or powers of attorney. These documents set out who gets what and how you want to be treated if you lack mental capacity.
- If you don't have a plan in place for what happens to your estate when you die, you could find that the State determines who gets what. This is called being ‘intestate’. It may mean that your wealth doesn’t end up with those you would have chosen to receive it.
Vitality life insurance
Want to know more about life insurance or thinking about taking out a policy? Here are some of the benefits of taking out life insurance with Vitality:
- A brand you can trust - In 2024, we paid out 98.9% of all Life Cover claims.*
- Get a lower monthly premium upfront when you add Optimiser to your plan. Keep your premiums low when you stay active.
- Access to Vitality partner discounts and rewards.
- Get free no-obligation advice. Our advisers offer expert advice to help you make the right decisions.
You're not alone in choosing Vitality. Over 2 million lives in the UK are now covered by our insurance, and we’re here to support you too.
Ready to take the next step? Getting a quote is simple and takes just a few minutes.
*VitalityLife Claims and Shared Value Report 2025
