Where there's a will there's a way

NONE of us like to think of not being here, but surely none of us would like to make things tougher for the loved ones we leave behind.

Yet writing a will and planning what you want to happen to your estate can seem an intolerable burden, not least because the issues seem complex.

Compiled with the assistance of Julie Hutchison, head of estate planning at Standard Life, here are ten straight- forward steps to help you sort out your estate.

Good estate planning starts with having a will that is both legitimate and up to date. As The Scotsman has previously reported, research by Standard Life shows that 50 per cent of people don't have a will at all, which means that half the population are risking the rules on intestacy. If you die without making a will, the automatic rules of inheritance kick in and your hard-earned assets could then go off in directions you might not have wanted.

After your will, a power of attorney is the next most important document to have. A growing number of people, almost 130,000 in Scotland since 2001, have taken advantage of these powers, which are registered with the Public Guardian in Falkirk. They allow your finances and welfare to be taken care of easily in the event of you losing the capacity to think or act for yourself. Granting a family member, relative or friend power of attorney will save your family time, money and worry.

Everyone can gift £3,000 free of Inheritance Tax (IHT) each year, which increases to £6,000 if you have not used last year's amount. Making a gift of capital can seem a big commitment, but making smaller and more regular gifts of surplus income is easier to manage. Remember to keep records of these gifts and of your income and expenditure in the year of the gift. A good starting point is Her Majesty's Revenue and Customs' (HMRC) own form D3A, which you can access from www.hmrc.gov.uk

Try to make the most of the retrospective effect of the new IHT rules for the nil-rate band – the part of your estate which is not taxed at 40 per cent when you die. The law changed on 9 October last year, with an unexpected benefit for Scotland's widows and widowers who might now find that more of their estate is IHT-free. Take independent legal advice on your position and be prepared for a lot of HMRC paperwork if you plan to claim any transferred nil-rate band from your late spouse or civil partner.

Think about setting up a trust for your life policy. If you have a life assurance policy designed to pay out a lump sum when you die, that could end up being taxed at 40 per cent, leaving less to support your family. If you gift the policy to a trust, not only could the 40 per cent IHT bill be saved, but the beneficiaries will have quicker access in the event of your death.

If you have a family business, take advice on how best to structure your arrangements with succession planning. A special 100 per cent IHT relief called business property relief can apply in many cases, but care is needed to avoid falling outside the criteria.

Many employees have death in service benefits, and you should regularly check the arrangements, updating your letter of wishes to give guidance on who should receive the lump sum in the event of your death.

Check the arrangements for your death benefits associated with your pension. Much like your death in service benefits from your employer, there could well be an out-of-date form lurking around. Or, if your pension is older, you might be able to gift the death benefits to a trust which could save IHT. The position varies here depending on the type of pension contract.

Finally, if you own agricultural land, please take advice on how agricultural property relief for IHT might apply to you. It is available at two rates: 50 per cent and 100 per cent.

AN EXPERT HEAD OF ESTATE

In this series of articles on inheritance tax, The Scotsman has greatly relied on the commentary of one of the country's emerging young experts on the issue.

Julie Hutchison became Standard Life's first head of estate planning earlier this year, having joined the company in 2004. Hutchison is a lawyer who graduated from Edinburgh University where she remains a tutor for the law degree's tax course.

In 2005, she was appointed as Standard Life's first national development specialist in estate planning.

She represented Standard Life on the Association of British Insurers' products tax panel and was kept very busy in 2006 with representations on the Finance Bill – she was quoted in the Parliament – on life policy trust issues in the aftermath of the Budget which radically changed the inheritance tax rules. She has also written several newspaper articles on estate planning matters.

Hutchison was instrumental in developing Standard Life's suite of estate planning trusts, which now stands at 10 new trusts in the last four years. She also played a leading role in the company's ground-breaking research into the parlous state of the British public's estate planning, which showed that half the population did not have a will.