The death trap: How refusing to discuss the inevitable can affect your finances

2nd August 2018

We know that it’s not a nice topic to talk about, but, unfortunately, refusing to talk about death could be standing in the way of thorough financial planning.

Research has shown that 94% of over-50s have not talked to their financial planner about what will happen to their belongings when they die. 30% of those say that feeling uncomfortable about the subject is the primary reason for avoiding it (Source: wishLockr via FT Adviser).

It’s not a nice thing to think about, but ultimately, arranging what happens to your estate when you die forms an important part of your financial plan.

What happens if you don’t make arrangements?

If you don’t have a will in place you will die ‘intestate’ and your estate, including belongings, assets and property will be distributed according to the laws of intestacy. These are a prescriptive set of rules which are unlikely to match your wishes and may leave your family facing a lengthy and stressful process at an already difficult time.

It is not just your belongings or property at risk when you die. Any dependents, such as children or vulnerable adults could be at risk if you have not nominated someone to care for them when you are no longer around.

What should you do next?

Although it might be hard, preparing your estate for a time when you are no longer around can’t be put off. Unfortunately, predicting the future is a skill most of us don’t have, and life likes to be a bit unpredictable. Therefore, having a plan in place, just in case anything happens to you, is the most sensible thing to do.

There are four key things to do:

  1. Talk to your family: There are two reasons to talk to your loved ones about what will happen when you die. Firstly, it could help you to make decisions about what you want to happen to your belongings when you die. Second, you will need to inform those closest to you of your wishes, especially those who will be appointed Lasting Power of Attorney or executor of your will.
  2. Write a will: Your will details what happens to your estate, dependents and body after you have passed away. It is an important document which you will need to revise regularly (ideally annually) to ensure that it reflects your situation and has not been invalidated since the last update.
  3. Appoint Lasting Power of Attorney (LPA): Lasting Power of Attorney means that someone you nominate has the authority to make decisions about your healthcare or finances on your behalf if you are unable to do so due to mental or physical incapacity.

Find out more about how to appoint LPA here.

  1. Talk to a financial planner or adviser: Engaging with a professional will help you to make sure that your decisions are financially sound and reflect your best interests. A financial planner or adviser will help to put your wishes into context and make sure that your plans are laid out in a way that both makes sense and is viable.

The order in which you do these is up to you. You may wish to get all the conversations out of the way before putting anything in writing, or you might prefer to have your decisions set in stone before informing your family of them. Either way, we recommend talking to us before making any concrete decisions, as we may be able to help you to streamline your plans further and offer suggestions that you had not previously thought of or heard about.

The benefits of planning ahead

We understand that it might be a hard process, but some people find that they feel reassured following a ‘final finance’ conversation. Knowing that there are plans in place should the unexpected happen can bring comfort and peace of mind.

Planning ahead means that you will know:

  • How your assets and money will be passed on to loved ones
  • Who will look after your dependents
  • What will happen to your body and how your life will be celebrated

An added benefit of planning your final finances is retaining some control over the Inheritance Tax (IHT) your loved ones will have to pay on your estate. In the 2018/19 tax year, estates worth more than £325,000 or £450,000 including the Residential Nil Rate Band (£650,000 and £900,000 for widows using their late partner’s allowance), will be subject to IHT.

However, if you think that your assets, property and money will breach this threshold, you can use your will to offset the value and reduce the amount of tax your beneficiaries will pay.

IHT is a complex subject and we recommend talking to us about your personal situation for a more in-depth explanation of how it might affect your loved ones when you pass away.

In fact, if you are ready to have the conversation, we’re here to help you make plans for your estate when you die and ensure that you leave a legacy for those you care about.