It is one of life’s inevitabilities. But death has always been an uncomfortable subject for most people.
That is the case even though there is a general recognition that it’s something we should all prepare for, especially while we’re still physically and mentally able to. With some good preparation, financial and other personal affairs can be organised in such a way that our loved ones not only stand to benefit in the right ways, but that the practicalities are made far easier to deal with.
Imagine if you were to die tomorrow; would your partner know where to find details of your insurance policies? Would he or she be able to access your online accounts and cancel your direct debits? Might they face a barrage of claims from people you owe money to?
These are not pleasant thoughts. But the good news is that you have time now to do something about the loose ends, the piles of paperwork you haven’t filed away, the legal arrangements that will safeguard the financial futures of those you care about.
But if you were to start your preparation today, where should you begin? Also, where should you stop? The range of things that could (and should) be done is huge. My advice is to focus on these things first:
Making a Will is the obvious first step to take if you want to make sure your family and friends benefit from the assets you have built up over your lifetime. Conversely, you may decide to leave some or all of your estate to a charity or to someone outside your close circle. A Will allows you to do those things.
If you die without having made a Will, the laws of intestacy apply. These can lead to outcomes you might not have chosen. Unmarried partners are particularly vulnerable because the intestacy rules do not recognise their perceived rights to a share of the family home or to other parts of the estate owned by the deceased. This means that the surviving partner, even if they had lived with the deceased as ‘common law’ husband, wife or civil partner, is not entitled to inherit under the intestacy rules.
Children may also be left in a weak position. If there is a surviving partner who was married or in a civil partnership with the deceased, children will only inherit if the estate is worth more than £250,000. In some situations, those who stand to benefit from the estate will agree to change the apportionments so that those left out may inherit something. However, that is not a foolproof option. Nor should you count on the goodwill of those standing to benefit under the intestacy rules.
Setting out your wishes in writing removes much of the uncertainty and potential angst caused by relying on the law to determine who should get what. If there’s one thing you decide to do this week, make a Will. If you already have a Will, revisit it and make sure it’s still relevant. Has there been a family rift or death that should be reflected? Has there been a significant change in income or assets? Have new children or grandchildren come along?
Lasting Power of Attorney (LPA)
An LPA is a legal document that appoints someone to make decisions about your health and welfare and property and finances on your behalf. It only comes into play if you lose the ability to make those decisions for yourself, perhaps because of an accident or mental illness.
LPAs can only be made while a person still has mental capacity, and they are not just for older people. In fact, we encourage all clients (of all ages and stages in life) who come to us to consider making one of these. If nothing else, it provides peace of mind – an insurance policy – that their future will be in safe hands should they become unable to take care of some of the important things in life.
There are all sorts of ways in which estates can be structured so that beneficiaries stand to get maximum benefit from them.
Inheritance tax has long come between people and the full value of their inherited property, possessions and other assets. With some careful planning, and through mechanisms including trusts, gifts, and the use of tax-free allowances, your estate can be in the best possible shape to be passed onto loved ones.
Debts do not die with their owner. While a surviving spouse will usually have an idea of the amount of money owed (and will in many cases jointly own that debt), it is not unusual for there to be a surprise or two resulting from a played down credit card liability or overdraft.
One of the big problems is that debts have to be paid before beneficiaries. In some situations, this leads to loved ones missing out completely because there is not enough left in the estate for them.
While it may be unrealistic to clear all debts, it is worth looking for ways of consolidating or otherwise arranging debts to improve the position of your beneficiaries.
Your personal documents
Tell your partner, or someone else close to you, where to find important documents like your Will, your LPA, investment certificates, insurance policies.
Don’t forget about your digital assets. These are things you store online, from your emails to your photos, your Facebook posts, to your Amazon subscription. Where your digital assets hold particular sentimental value – family pictures, for example – you may want to think about downloading and storing them safely. Others may have more tangible value, and should be taken into account as part of your estate.
At the very least, start making a list of your online accounts so that others will be able to see the extent of your digital assets.
If there is one thing our clients have in common, it’s a shared sense of relief that comes from making plans. The first thing many tell is that they have been putting this off; some because they had felt uninformed, others because they had preferred not to address their minds to it. Start the conversation. It’s the first step towards shoring up your family’s future.