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Complete Guide to Estate Planning

Planning your estate is easier than you may think. Learn the essentials to estate planning and create personalized estate and health care documents to ensure you and your loved ones are protected.

Essential estate planning documents

Our most commonly used estate planning documents trusted by users around the world every single day.

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Step 1

Power of Attorney

A Power of Attorney allows an individual to grant powers to another person to act on his or her behalf.

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Step 2

Last Will & Testament

A Last Will and Testament is an important legal document that allows an individual to appoint an executor and specify how they would like their assets...

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Step 3

Advance Decision

An Advance Decision, also known as Living Will or Health Care Directive, expresses an individual's health care and medical treatment wishes in the eve...

Last updated May 10, 2023

One of the greatest motivators for getting out of bed every morning is building a life for yourself and your loved ones. You do what you can to ensure you all have food, shelter, security, and maybe some fun here and there. With that sense of responsibility comes the nerve-racking question: "What happens to my loved ones and everything I've worked for when I'm gone?"

Creating an estate plan will help you answer that question and give yourself peace of mind.

This guide will take you through a step-by-step process for planning your estate. From appointing an executor to understanding the U.K.'s estate tax laws, we explain all the documents you'll need and why they're vital for building an effective estate plan.

What is estate planning?

Estate planning is the process of determining the management of your assets and affairs for when you can no longer do it for yourself. Think of it as an instructional guide for the people carrying out your wishes.

When many people think of estates, they tend to imagine wealthy people passing down expensive family heirlooms, vacation properties, and art collections. However, that isn't the reality.

It doesn't matter how much or little a person has in their possession. Everyone has an estate. When you pass away or become incapacitated, there are always plenty of personal matters needing addressing.

Your estate consists of everything you own and owe, from real estate properties and personal belongings to money and debts. Your plan should include any relevant information relating to your assets and debts, health care, and the custody of minor children. It should also outline your wishes for after you pass away, such as funeral arrangements, charitable donations, and the bequeathal of gifts to friends and family.

An estate plan should include essential documents like a Last Will and Testament, Power of Attorney, and Advance Decision.

Why is estate planning important?

Having an estate plan is important because it lets you maintain control of your assets, communicate your wishes, and take a heavy burden off your loved ones.

If your family members find themselves dealing with your estate, it likely means something has happened to you, and they're going through a difficult time. The less they need to worry about legal matters and hope to do justice to your wishes, the better. Having an estate plan speeds the process up and takes the guesswork out of it.

For example, you might have a personal belonging that you know a specific person would greatly cherish when you’re gone. Including instructions in your estate for distributing your assets can avoid the default intestacy rules that might result in that person not receiving the item. 

By taking the initiative to plan an estate early, you can:

  • Prepare in advance for emergencies
  • Leave heirlooms and gifts to family members
  • Ensure your loved ones receive your savings
  • Make your medical wishes known
  • Ensure your children receive proper care

Step 1: Set goals for your estate plan

Planning an estate isn't a simple task. There are a lot of elements to consider, and you shouldn't approach planning like it's a standardised process. Each person's plan is uniquely based on their goals and circumstances.

When thinking about what you want your estate plan to accomplish, try making your targets specific, realistic, and achievable. It's also a good idea to consider expenses and estate tax laws. Some common estate planning goals include:

  • Appointing guardians for any minor children
  • Choosing your beneficiaries
  • Dictating the future management of a business
  • Making charitable donations
  • Outlining funeral arrangements, senior care, or health care preferences
  • Providing your family members with financial support
  • Specifying your preferences in the case of a medical emergency or incapacitation

Also, consider which individuals you want in specific roles (e.g., person given Power of Attorney, executor of your Will, or guardians) and how they're likely to handle the responsibility.

Step 2: Documenting your assets, inventory and debt

Making an inventory of your assets and debts is crucial in estate planning. Creating a thorough list of everything you own and owe allows you to see what you need to consider. Before you can decide what you want to leave to people, you need to know what you actually have in your possession to leave.

Make a list of your debts and other expenses

You'll pay any debts you still owe through your estate when you pass away. Make a transparent list of everything you owe because the executor of your Last Will can't distribute your estate until your debts are covered. Creating this list reduces the chance of any unexpected complications. It also ensures everyone receives what you hope to leave them.

Debt can include:

  • Credit card balances
  • Home equity lines of credit
  • Mortgages
  • Student loans
  • Vehicle loans

However, it's essential to remember that the estate might also need to cover funeral costs and other payments to protect estate assets.

If you're unsure about what you owe, contact the financial institutions that handle your account balances, deeds, and life insurance policies. For example, banks, building societies, insurance companies, or shareholding organisations.

Make a list of your assets

After you know how much debt you have, make a list of your tangible and intangible assets. Your assets are possessions you own that have financial value. 

Tangible assets are material belongings, such as:

  • Collectables (e.g., art, coins, stamps, trading cards, and antiques)
  • Houses and other real estate
  • Land
  • Personal and sentimental valuables (e.g., books, jewellery, tools, and household furnishings)
  • Vehicles (e.g., boats, cars, and motorcycles)

Intangible assets are non-material possessions that you can't touch or hold, such as:

  • Bonds, mutual funds, and stocks
  • Businesses owned
  • Current and saving accounts
  • Life insurance
  • Retirement plans

If there are specific assets you want to give to a beneficiary, make a note of them, so, if possible, it isn't sold to cover outstanding debts.

Calculating your assets’ value and residuary estate

You can calculate the value of your assets by subtracting your total debt from the full value of your assets. The remaining value is what you have left for bequeathals to friends, family, and charities. 

For tax purposes, it's important to make a note of any significant gifts you give away. Gifts you give in the seven years before your passing may be included in your estate's value, and your estate's total value is used for calculating inheritance tax.

Gifts with reservation of benefit are included in inheritance tax as well. These are gifts you continue to benefit from after giving away. A common example of this is when parents gift their home to their children but continue to live in it.

Your residuary estate is what's left of your estate after your executor has paid your debts, inheritance taxes, funeral expenses, and distributed your gifts. Unclaimed gifts, like ones bequeathed to a person who passed away before you, are also part of your residuary estate. Most people will leave what's left of their estate to a spouse or children.

Step 3: Know the inheritance tax laws

Depending on your estate's size, inheritance tax laws could affect how much you have left to leave beneficiaries. That's why knowing whether these laws apply to you is crucial.

Part of the executor's role in a Last Will is paying any inheritance tax on the estate. The tax applies to the sum value of the estate's assets after paying off debts and liabilities.

However, there are certain thresholds you need to exceed in order to be subject to the tax. The estate's value must be more than £325,000 to be subject to inheritance tax. If it does exceed that threshold, only the amount above £325,000 is taxed. Your tax-free threshold can increase to £500,000 if you give away your home to your children or grandchildren.

You can also avoid the tax on the exceeding amount if you leave that portion to a:

  • Spouse
  • Civil partner
  • Charity
  • Community amateur sports club

The standard inheritance tax rate is 40%, but it's reduced to 36% if you leave 10% of your estate's net value to charity. 

Gifts you've given in the seven years before your death are also taxed, but the rate gradually decreases each year depending on how long ago it was given. The people who receive a gift within seven years of your passing will also have to pay an inheritance tax if you gave away more than £325,000 in gifts in those seven years.

For more information on your personal inheritance tax responsibilities, you can phone’s inheritance tax and probate helpline.

Step 4: Create your Last Will

Your Last Will and Testament is the document that allows you to communicate what you want to happen with your money, possessions, and property when you pass away.

You can use a Last Will to:

  • Name an executor
  • Leave gifts to beneficiaries
  • Make donations to charities
  • Appoint guardians for your minor children
  • Specify the age at which minor beneficiaries receive their inheritance
  • Name a caretaker for pets you leave behind
  • Specify what happens if beneficiaries pass away before you

You're able to write your own Last Will. However, two people need to formally witness and sign it to be legally valid.

It's also recommended you use a codicil to update your Will every five years or after significant changes to your life, like:

A Living Trust may better suit your needs if you have high-valued property or a significant amount of assets. They’re also often used by blended families to help ensure children from previous relationships are looked after.

Appointing an executor

Appointing an executor is one of the most important decisions you’ll make when planning your estate. The executor is the person who carries out the instructions in your Will and takes care of any tasks related to it.

An executor is responsible for:

The person you name as executor should be someone who is capable of following instructions, handling paperwork and legal matters, and making logical decisions (e.g., when to sell your property, so beneficiaries inheriting the proceedings make the most amount of money).

More importantly, they should be someone you trust. Most people choose their spouse, a friend, or a family member. You can also choose a professional executor, but they can be quite expensive.

What are probate and confirmation?

Applying for probate in England, Wales, and Northern Ireland gives your executor the legal right to manage your finances, property, and possessions when you pass away. 

In Scotland, the executor applies for confirmation, and this gives them the authority to administer your assets. From a legal perspective, the executor steps into your shoes to handle your affairs.

Another difference between probate and confirmation is that when the executor applies for probate, they need to report the estate's total value. With confirmation, the executor needs to provide a list of all the estate's assets.

Step 5: Create a Power of Attorney

The purpose of an estate plan extends beyond what happens to your possessions when you pass away. Including a Power of Attorney (POA) ensures someone you trust is in a position to act in your best interests when you’re unable to do so for yourself.

You use a Power of Attorney to appoint one or more people (called attorneys) to make crucial decisions on your behalf regarding your finances, property, medical care, and personal health. Some common scenarios where using an attorney is appropriate include when you:

  • Are mentally incapacitated and can’t make decisions for yourself 
  • Are out of the country for an extended period
  • Need someone to operate your business in your absence 
  • Want to set specific guidelines for handling your finances if you’re incapacitated

You can give your attorney the authority to oversee your banking, real estate, financial accounts, and many other matters you specify. The attorney's power comes to an end when you pass away.

Although the role of an attorney is similar across all four U.K. countries, the specifics of each can vary.

Power of Attorney in England and Wales

In England and Wales, the person appointing someone to make decisions on their behalf is called a Donor.

The attorney needs to be at least 18 years old and have the capacity to make decisions on their own. However, they don’t need to live in the U.K. or be a British citizen.

There are two types of Power of Attorneys in England and Wales: Ordinary and Lasting.

An Ordinary Power of Attorney is only valid until you are mentally incapacitated, according to the Mental Capacity Act 2005. If you become unable to make decisions for yourself, the authority of the document gives the attorney ends.

Unlike an Ordinary POA, a Lasting Power of Attorney’s authority is still valid when you’re incapacitated. You can specify whether its purpose is for handling your property and financial affairs or your health and welfare. However, it can also cover both options.

If you don’t appoint an attorney while you’re capable, the Court of Protection will appoint a Deputy to manage your affairs.

Power of Attorney in Scotland

If you’re creating a Power of Attorney in Scotland so someone can handle your affairs on your behalf, you’re called a Granter. The minimum age for an attorney is 16 years old.

There are varying ways you can set up a Power of Attorney in Scotland. You need to decide whether it is Ordinary or Continuing. Ordinary works the same way as it does in England and Wales; the attorney's authority only lasts until you're incapacitated. A Continuing Power of Attorney gives your attorney authority even after you're incapacitated.

Once that's decided, you need to specify whether it's a Financial POA, Welfare POA, or both. A Financial POA is for your finances and property, while a Welfare POA allows the attorney to make decisions about where you live, your medical treatments, and personal care.

The Adults with Incapacity (Scotland) Act 2000 specifies that a person has lost mental capacity if they can’t communicate, make, or understand decisions. It also states that your attorney needs to take your past and present feelings and wishes into account whenever possible.

The Court of Protection will appoint a Guardian to manage your affairs if you haven't created a Power of Attorney while capable of doing so for yourself.

Power of Attorney in Northern Ireland

The Enduring Power of Attorney Order 1987 and Powers of Attorney Act 1971 govern POA laws in Northern Ireland. Like England and Wales, the person appointing someone to make decisions on their behalf is called a Donor in Northern Ireland. The attorney needs to be 18 years old or over.

It also has an Ordinary Power of Attorney in Northern Ireland lasts until the Donor is incapacitated. However, Northern Ireland's other option is an Enduring Power of Attorney.

The Enduring POA gives your attorney the authority to continue managing your affairs after you're incapacitated. It covers matters relating to your finances and property.

Northern Ireland doesn't have an equivalent to Scotland's Welfare POA. Medical treatment and personal care are handled by your next of kin. You’ll need to make an Advance Decision for personal welfare matters.

If you become incapacitated before you create a Power of Attorney document, the court will appoint a Controller to handle your finances and property.

Step 6: Create your Advance Decision

You can use an Advance Decision (also called a Medical Power of Attorney or Advance Care Directive) to outline your healthcare and medical treatment preferences if you're ever incapacitated and can't communicate your wishes.

It's particularly important when travelling, reaching old age, or having chronic health concerns. Not only does it give you peace of mind because you'll know you will maintain control over your medical care, but it also saves your loved ones from making difficult decisions on your behalf during an emotionally stressful time.

When creating your Advance Decision, think about scenarios where you want to refuse life-sustaining treatments like life support, cardiopulmonary resuscitation (CPR), or a feeding tube. For example, you might prefer to refuse treatment if you’re terminally ill, persistently unconscious, or severely mentally impaired.

Your Advance Decision is also how you can give directions for donating organs, permit the use of certain drugs, and specify which people you want with you in your final moments.

If you want a Do Not Resuscitate Order in your Advance Decision, it's a good idea to discuss it with your doctor, so you fully understand the advantages or consequences of your decisions.

Your doctor and emergency contacts should have a copy of your Advance Decision. Also, make sure the person you give Power of Attorney authority to and your family are aware of your wishes. 

Step 7: Create your End-of-Life Plan

Now that you've left instructions for managing your assets and medical care, you can begin to think about your End-of-Life Plan. It isn't easy to address for some people, but making plans for what happens to your body after you pass away and making funeral arrangements is a necessary discomfort.

Take into consideration that asking your loved ones to make spontaneous decisions regarding your remains when the loss is fresh would be significantly harder on them than it would be for you to do it yourself.

Your End-of-Life Plan should cover:

  • Funeral or memorial service arrangements
  • Payment of funeral arrangements
  • Whether you want to publish a death notice or obituary
  • Who’s your executor (usually the same person you appoint for your Last Will and Testament)
  • Your wishes for your remains (e.g., burial, cremation, entombment, or donation to science)

You can also share final thoughts and messages in your End-of-Life Plan. Write direct messages to specific people or a general message to all your family and friends if you feel it’s appropriate for you.

Step 8: Create any other necessary documents

At this point, your estate plan should have the majority of your concerns covered. However, every person's situation is unique, and you might need some additional documents to ensure your plan meets all your needs.

Consider including a Child Medical Consent, a Gift Deed, and Just-in-Case Instructuctions in your estate plan as well.

A Child Medical Consent is excellent for parents who leave their children in the care of a babysitter, grandparent, or other temporary guardians. The document gives the caregiver the authority to quickly consent to medical treatment for your child if you aren't there to do it for yourself.

A Child Medical Consent document should include:

  • A description of the authorised medical treatments
  • A description of the child's health information and any medications they take
  • Health insurance information
  • The children’s names and birthdays
  • The parent(s) or guardian(s) name, address, and contact information
  • The temporary caregiver’s name and address
  • Family doctor’s name
  • Emergency contacts
  • A statement that there are no court orders that would prevent the parent(s) or guardian(s) from legally making such an authorization
  • Signatures of the parent(s) or guardian(s) in the presence of two witnesses and a notary public

Gift Deed

You can give gifts to people or organisations using a Gift Deed form. Although this might sound similar to leaving gifts to beneficiaries in your Last Will, the difference is that a Gift Deed transfers ownership of an item while you’re still alive. 

Money, real estate, household and personal goods, and stocks listed on the London Stock Exchange are all considered gifts. However, it's essential to keep in mind that your gifts might be added to the value of your estate and taxed if the combined value exceeds a certain threshold.

You have an allowance that lets you give up to £3,000 worth of gifts in a tax year without them becoming part of your estate's value. There's also a small gift allowance that permits you to give away as many gifts as you want with a value of £250 or less. The small gift allowance is only valid if you haven't used another allowance on the same person.

Just-in-Case Instructions

Just-In-Case Instructions are a single document that you use to consolidate your personal, legal, and financial information. The instructions are then available to someone taking care of various tasks on your behalf to reference quickly.

The attorney and executor you name in your Power of Attorney and Last Will are likely two people who will find them helpful in their roles.

Just-in-Case Instructions should include valuable information, such as:

  • Financial information: Banking, investments, debts, billing, and tax information
  • Health care: Family doctor’s contact information, insurance coverage, and medications
  • Location of essential documents: Birth certificates, passports, national insurance number, Last Will and Testament, End-of-Life Plan, and Power of Attorney
  • Personal details: Family and employer’s contact information and any relevant family medical information
  • Pet care: Dietary restrictions, medications, and schedules
  • Property: Current residence (e.g., address, location of keys, alarm system codes), vehicle details, and real estate details
  • Storage and access: Access to personal safes, safe deposit boxes, self-storage units, and electronic devices

Step 9: Gather essential physical and digital paperwork

It's important to gather any documents that relate to your estate plan. Doing so makes carrying out your wishes more convenient and time-efficient for the people acting on your behalf.

Some essential paperwork you might want alongside your primary documents include:

  • Adoption and birth certificates for children
  • Business and investment share certificates
  • Marriage, divorce, and separation documents
  • Property deeds and titles

These documents can help prove ownership of property or changes to relationships if there’s ever a dispute about the facts.

Step 10: Store your estate plans and inform your representatives

Provide the people representing you in your estate plan with copies of any documents related to their role in your estate plan and also to your loved ones.

For example, give the whole estate plan to your attorney, the Last Will to your executor, and the Advance Decision and End-of-Life plan to your doctor and family members.

You should also store all your documents in a safe place, such as:

  • A fireproof or waterproof safe (as long as someone you trust has quick access to it)
  • An online storage service
  • A trustee company
  • Safety deposit box at your bank
  • Your lawyer’s office

You might also want to include a list of passwords for your digital accounts like bank accounts, online business or real estate portfolios, and social media accounts.

Updating your estate plan

Depending on how early you create your estate plan, there's a strong possibility that you'll need to update it from time to time, especially after significant life events. You need your plan to always reflect your current circumstances. Otherwise, its effectiveness is limited.

You should always update your estate plan after:

Make sure you always inform your attorney and representatives when you update your estate plan.