There are said to be two certainties in life –
death and taxes. Whilst we will readily discuss our tax affairs,
death is an uncomfortable conversation for many to have and is too
often one that is avoided. However, avoiding such discussion can
add to the emotional and practical difficulties that family and
loved ones can face when you pass away. By ensuring that the
following steps are considered appropriately you can ensure that
your wishes for your passing are granted; our team of experts will
be there every step of the way to guide you through these difficult
conversations.
In this blog, we outline key points to consider when thinking
about organising your personal affairs in preparation for when you
pass away, should you have any questions or wish to discuss your
specific circumstances please reach out to our team of experts who
will be happy to help.
Why is end of life financial planning so important?
Planning can ease the administrative burden for your loved ones
after you die but also the emotional one. Making as many advance
decisions as possible removes the burden of having to make these,
often quite quickly, on your behalf after you pass.
Additionally, by creating legal documents and having
conversations with key professionals ahead of time you can increase
the likelihood that your wishes will be respected during crucial
moments and that the people that mean the most to you are being
taken care of.
How can you ease the burden for family and loved ones?
A difficult conversation to have with others, and perhaps even
think about, but it is vital that you talk to your family and
friends about your wishes.
If you are unsure how to approach the conversation or what to
say, you could perhaps start by involving the other person in the
conversation and asking a question such as ‘have you thought
about what you would like to happen at your funeral?’ to broach
the topic.
You could speak with them about whether you have any funeral
preferences, for example, if you would prefer to be buried or
cremated, where you would want your ashes to be scattered, what
music you would like played or whether you want funeral donations
to a particular charity.
It will be of great comfort to those having to make those
decisions knowing they can fulfil your wishes. Equally, it is best
to have these conversations early before it is too late or there
comes a time when you are unable to.
- Creating a document with important
information
Nowadays, many important documents are stored online, of which
only you can access. This can create difficulties. You could print
out a hard copy of important documents, or you may wish to create a
digital or physical file outlining where your important documents
are stored. Useful information includes – who you have
accounts, investments and policies with, which utility companies
you use, what assets you own, whether you have any debts, who your
accountants and solicitors are etc.
Our paperless age has made it increasingly difficult to gather
information quickly, especially if nobody else has access to your
emails or banking details. It is also important to provide secure
information on usernames and passwords (perhaps in sealed envelopes
stored separately in a safe or lodged with a Will).
If you chose to create a physical file with all your information
stored, you will be able to keep original documents such as your
latest Will, birth and marriage certificates within the folder
too.
- Contact your pension provider / life insurance
company
Most pensions and many life insurance policies are held in a
trust which means that they may pass outside of your estate, making
your pension pot a tax-efficient way to pass
on your wealth to certain beneficiaries.
If your pension passes outside of your Will, it is important
that you tell your pension provider who you would like to benefit
from any proceeds after your death. When you first join a pension
scheme, you will usually be asked to complete an expression of
wishes form. However reports indicate 75% of people have not told
their pension company who they would like to nominate to receive
the proceeds when they die. This can create delay and could results
in unintended people benefiting from your wealth.
It is also essential to keep these nominations updated
regularly, particularly after significant life events such as
having a new child, marrying or following a relationship breakdown.
It is also essential that if you have had multiple pension schemes
throughout your career, you have informed each provider of your
wishes. If you would prefer, it is possible to nominate different
beneficiaries for each scheme. This could include an ex-spouse or
partner instead of your current partner.
Continued financial planning for dependants
To ensure that once you pass those closest to you are supported,
we must stress the importance of ensuring that your financial
affairs are reviewed and structured as necessary with this in
mind.
Funeral expenses, outstanding debts, and loss of income can
quickly accumulate, making an already difficult situation even more
challenging to navigate. It is important to take into account the
needs of your dependents and any outstanding debt so that you can
understand how much protection your spouse or family would have.
Looking into your assets may also inform decisions as to whether
you have the correct life insurance policy to align with your
finances.
- Ensure you have a Will and that it is
up-to-date
More than half of UK adults do not have a Will. Without a Will, your
estate passes in accordance with the statutory intestacy rules.
These are particularly unsuitable for blended families, unmarried
couples or where you are estranged from certain members of your
family.
- Think about your tax situation wisely
Whilst the tax rules are complex, at a basic level, if you have
an estate valued at more than £325,000, anything you pass to
non-exempt beneficiaries above this amount results in an
Inheritance Tax (IHT) charge of 40%. This threshold has been frozen
until April 2028.
However, with careful planning, large amounts can pass to
friends and loved ones free of tax. For example, assets left to a
spouse or a charity are free of IHT, the formation of a trust may reduce a tax bill,
and no IHT is due on any gifts you make during your lifetime, as
long as you live for 7 years after gifting them. Lifetime gifting
is an excellent strategy to pass wealth and reduce your IHT
bill.
- Is there a checklist for what must be considered in my
end of life planning?
This is something we at Price Bailey are often asked, and the
answer is no. Everyone has differing circumstances and therefore
different decisions to make. Nevertheless, everyone should
consider:
Finances
- Keeping a list of assets and savings, Inheritance tax (IHT)
planning, passwords and accessing accounts, list of gifts
made.
Legally
- POA, wills, property deeds.
Other considerations
- Practical preference such as plans for funeral can be expressed
in a will or letters, if you have any outstanding bills.
In summary, end of life planning results in the following:
- Your wishes are more likely to be followed,
- the administration of your estate is likely to be quicker and
cheaper, - your intended beneficiaries are more likely to benefit,
and - the amount of tax payable on your estate is likely to be
lower.
Equally, for more detail surrounding end of life financial
planning, watch our six part video series featuring Donna Mahoney,
which goes into further detail on specific topics related to the
above discussion.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#Life #Financial #Planning #Making #Affairs #Order #Wills #Intestacy #Estate #Planning
