Personal finance analyst Sarah Coles of Hargreaves Lansdown explains how you can prepare for the worst and reduce the financial strain on your loved ones
Putting your affairs in order
When you learn that a loved one is ill, and that their time with you is limited, a million thoughts flood your mind.
You worry about the big things, like what’s going to happen to them, and how you will ever live without them, but then in the small hours of the morning, you worry about the stupid little things too, like who is going to look after their dog, or where they’ve put their will.
There’s little you can do to prepare your family and friends for the big worries if you fall ill, but you can spend time putting your affairs in order to make it easier for those you leave behind, help put their minds at rest, and ensure they don’t have to worry about how to pay the bills.
If you're worried about one of your loved ones, please read our separate guide on what to do when a family member passes away.
Make a will
It’s easy to see why people put off thinking about their own death, but dying without a will can cause serious financial problems for those you leave behind.
If you die without one (which is known as dying intestate) your estate is divided according to specific rules, rather than how you might want.
If you are not married, the rules can be particularly harsh, because your partner will inherit nothing: the estate will pass to children, parents and siblings – in that order.
Even if you’re married, your spouse doesn’t inherit everything, because if you have children, they will be entitled to some of your estate too.
Making a will also enables you to pay less inheritance tax, by leaving your estate tax-efficiently.
If, for example, you have survived your spouse and you have children, if you leave your property to your children, you will get an extra nil rate band (£125,000 in 2018/19 or £250,000 if your spouse didn’t use their allowance).
You might also have specific wishes you want to be carried out regarding your funeral, so it’s worth leaving written instructions and keeping them with your will. Of course, once you have done this, it’s also important to tell your loved ones where to find them.
Make a lasting power of attorney
This is a legal arrangement that lets you nominate someone to make decisions for you if you eventually are unable to make them yourself.
There are two types: one means they can make medical and welfare choices for you and the other will let them handle your property and finances.
A financial LPA means someone you trust can step in if you are unable to stay on top of money matters, including help on decisions of how to pay for your care.
A welfare LPA, meanwhile, allows someone to make decisions about your medical care, such as refusing or accepting treatment.
If you are ill, consider advance decisions
You may have appointed an LPA to cover health decisions, but if you want your own wishes to be taken into account, you can complete an Advance Care Plan or an Advance Decision to Refuse Treatment. These are also known as living wills.
It’s important to tell your family about this plan – as well as health and social care professionals – to make sure your wishes are taken into account.
If you have children under the age of 18, you should name a guardian in your will who will care for them in the event that both parents die. You should speak to any potential guardians in advance to be certain they are happy with the responsibility.
You also need to think about trusts. You can leave assets in trust for children under 18, so they can be managed until they are old enough to inherit. This can be particularly useful in blended families to protect the inheritance of children from a former relationship.
In some cases, people will want to make arrangements for the care of their pets after they pass away. It’s worth talking to anyone you expect to take the responsibility on, or contact a charity, such as The Cinnamon Trust, if there is nobody to care for them.
Talk to your family
Families can be funny when it comes to money, so it’s important to be clear with everyone while you are alive, to avoid disagreements and blame after you pass away.
Talk to those who are affected by your decisions, whether that’s how you have left your money or who you have appointed as an executor or guardian for your children.
If you have specifically left someone out of your will, you need to be clear as to why, to avoid them trying to make a claim from the estate at a later date.
Leave an assets register
One of the most difficult jobs, when someone dies, is getting to grips with their finances.
It’s much easier if you can leave a list detailing your assets - including all your accounts, investments, pensions, health insurance, life insurance, debts, mortgage and any insurance that covers the mortgage. Keep this safely with your will.
Get your paperwork together
Collate paperwork like birth and marriage certificates, divorce decrees and name changes by deed poll.
If you complete a tax return, your executor will also need to provide the information required to complete a return for the final year.
Consider day to day money
While your estate goes through probate, your accounts will be frozen, which may cause issues for your spouse if you handled most of the household finances.
It’s worth ensuring that your spouse has a reasonable sum of cash in their own name, so they have access to any cash they might need during the process.
This will include things with financial value, such as music you have bought online, as well as things with sentimental value – such as photographs, and things that you may want to continue after your death - like social media accounts.
Make sure you leave enough details to enable your family to access these things after you have gone.
Sarah Coles is a personal finance analyst at Hargreaves Lansdown. The views expressed in this article do not necessarily represent those of loveMONEY.
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature