5 steps you can take during your lifetime to help your family before you pass away
23/08/2023As you get older, you may be increasingly concerned about your family’s financial future. You may well have asked yourself: “Would my spouse or children and grandchildren be stable and secure if I were to pass away?”
Indeed, one of the biggest concerns we hear from our clients at Douglas White Financial Planning (DWFP) is whether their families will be financially secure after they’re gone.
Fortunately, you can start taking steps now that could help to safeguard your loved ones’ futures.
In particular, if you are reaching old age or even have a terminal condition and know the end is coming, going through this process now may be even more important.
So, read on to discover five steps you can take during your lifetime that can benefit your family in future.
1. Talk openly to your family
In the UK, we often find it difficult to talk honestly and openly about death. Even though everyone will face it at some point, research from Goldsmith’s College shows that 83% of people think that Brits are uncomfortable talking about death and dying.
So, the very first thing to remember is to talk openly with your family. No matter what steps you take to organise your wealth or ensure your loved ones’ financial stability in future, initiate conversations with them and explain exactly what you’re planning.
In doing so, you can ensure that everyone is on the same page and understands what’s going to happen to your wealth when you pass away.
Having these conversations can be surprisingly enjoyable. You can confidently talk about your family’s plans for the future, and everyone will often feel better knowing what will happen when the time comes. This can be both incredibly cathartic and immensely reassuring.
If you think you’ll find this difficult or daunting, it can be helpful to involve your DWFP financial planner.
We can help you to articulate what you want to achieve with your wealth and assist you in explaining everything to your family, and help answer any questions they may have.
2. Create a comprehensive will and ensure your solicitors have it to hand
Your will is the cornerstone of your estate plan. This legally binding document is your opportunity to outline what you would like to happen to your wealth, including who inherits what from you and who will be the executor – the person or people who administer the estate – when you pass away.
It’s vital to create a comprehensive will with your wishes detailed clearly. This can help to avoid disputes over your wealth, which can be particularly important if you have remarried or have children from a previous relationship.
Crucially, make sure that your solicitors hold your will and you keep it updated so it reflects your wishes, especially if family circumstances change over time.
You may have seen the news that Aretha Franklin’s estate was ultimately decided by a note found under her sofa, which a jury ruled to be a legal will, Sky News reported. This created significant conflict between her children over who was entitled to what.
You can avoid all doubt like this on your death by creating a will and making sure your solicitors have it when you pass away.
3. Make your wealth as easy to manage as possible
Throughout your lifetime, you may have accumulated wealth in a number of different ways. This might leave you with multiple bank accounts, as well as other investments and pensions.
To help your executors, make this wealth as easy to manage as you can.
Provide a list of all your different accounts and anywhere else you hold money so that it can be calculated and divided fairly between your loved ones.
If you have multiple savings accounts, you could consider consolidating these into fewer accounts. That way, there might be fewer financial institutions for your executors to notify and deal with.
It’s worth keeping in mind the Financial Services Compensation Scheme (FSCS) limits if you choose to do this.
The FSCS will protect your money in your account up to a limit of £85,000 if your bank or provider is unable to pay out to you – for example, if they are insolvent.
Crucially, this protection applies to each financial institution you hold money with. As a result, it can be sensible to only hold up to this £85,000 limit in each account you have, so that you gain maximum protection from the FSCS.
It’s also worth noting that this limit will apply to providers that operate under the same banking licence. This may mean that you might have two accounts with separate banks or building societies, but only benefit from one use of the £85,000 protection.
You can use the MoneySavingExpert tool to check whether your provider is linked to another one, ensuring that you are making the most of the FSCS.
4. Have a Lasting Power of Attorney in place in case you lose capacity
A Lasting Power of Attorney (LPA) involves you appointing one or multiple individuals (known as an “attorney”) to make decisions for you should you ever lose capacity.
There are two types of LPA: one allows for control of your finances, and another relates to your personal health and wellbeing.
Putting an LPA in place can be valuable because it means you’ll have someone to make decisions in your best interest if you’re unable to do so for yourself. It’s essentially an insurance against losing capacity, giving your family an option to proceed with what needs doing should they ever need it.
It’s important to remember that you can only put an LPA in place while you still have your mental faculties.
As such, it’s crucial to organise an LPA sooner rather than later, especially if you’ve been diagnosed with a condition that might affect your cognitive function, such as dementia.
If you think there’s a chance that you may lose the ability to make decisions in future, don’t delay.
Without an LPA, your family will need to apply to the Court of Protection. This can be a difficult and time-consuming process for your loved ones.
Having an LPA can remove the possibility of this stress entirely.
5. Put measures in place to make probate straightforward
Probate can be a lengthy process. According to Unbiased, on average it takes a year from the date of death for assets to be distributed. For simpler cases, this may be sooner, but it’s still often as long as six months.
As a result, anything you can do to make probate more straightforward could be of enormous value to your family.
For example, it can be prudent to put a life insurance policy in trust, particularly from an Inheritance Tax (IHT) perspective. This way, as the payout essentially already belongs to your beneficiaries, they’ll be able to access the money straight away.
As a result, they’ll be able to pay for important costs of death. This can be especially useful if you’re leaving behind a large IHT bill.
If you’re going to do this, it’s often sensible to do so sooner rather than later. While this may be fine in many circumstances, if at the point of assigning the policy to trust you are in serious ill health, this may be deemed a gift from your estate. In turn, this could have a negative impact on your IHT position.
There are also various types of trust available, with different features and benefits. This means it’s important to choose the right type of trust that’s most suitable in your personal circumstances.
Make sure you take professional advice before putting a policy in trust to ensure you are doing so without creating a negative impact, and that you have chosen the most appropriate type of trust.
Speak to us
If you’d like help taking steps to protect your family for the future, we can help at DWFP.
Email info@douglaswhiteltd.com or call 0151 345 6828 to speak to us today.
Please note:
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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