Last week Martin Lewis dedicated his Money Show Live to what he calls ‘unpleasant issues’ – mainly death and incapacity. I don’t know why I do it to myself, but I always read through the social media comments after his shows, and it never fails to depress me!
Despite his best efforts, many people still need help with financial planning issues.
It was an excellent time to update and repost my tips on being financially organised. These will not only help you during your lifetime but might make matters easier for your nearest and dearest at the most challenging times.
1 – Make a Will
The modern family unit can often look very different from what we might have experienced or remembered growing up. Step-families, unmarried couples and divorcees are all commonplace.
There is also an increasing number of people choosing to remain single.
However, intestacy rules – the rules that dictate what happens to your wealth/possessions if you die without a valid Will – are still primarily based on the traditional family unit.
There are many reasons why you might want your assets to pass to someone other than your technical ‘next of kin’, but without a Will, this may not happen.
We always recommend using an advocate. The potential financial and emotional cost of getting your Will wrong is too great not to use a suitably qualified expert.
2 – Make a Power of Attorney
An advocate can assist in drafting Enduring Powers of Attorney, often while preparing a Will. Completing these together can keep costs down.
If you become unable to look after your financial affairs and lose mental capacity, a power of attorney can be invaluable.
Permitting a loved one to act on your behalf can save many admin battles at a challenging time.
3 – Beneficiary nominations
Pensions and life bonds are often structured in a way that means they do not operate under your Will.
It’s essential to make sure that you keep your “beneficiary nomination” up to date. If you move house, change contact details, or your beneficiaries do so; you should tell your product providers.
4 – Assets held in joint names
For couples, holding assets jointly (as joint tenants) may be beneficial.
In this case, on the first death, ownership passes to the surviving spouse, usually on receipt of a certified copy of a death certificate.
It’s wise to seek professional advice here, especially for more significant assets, to establish the best way of holding them for your circumstances.
This approach also applies to other non-financial accounts such as utilities etc. – having bills in joint names can save much hassle down the line.
5 – Probate
Holding assets jointly means probate is not usually required on the first death.
Probate is usually required for assets held in sole names where that person dies. Probate is the bank or investment provider’s proof that the person claiming the investment is legally entitled to it.
Probate is generally required from the courts of the jurisdiction where the asset is based.
When using UK, Channel Islands or Dublin-based providers, consider this. Ask your product providers their position on this if they are based outside the Isle of Man.
6 – Record keeping
One of the biggest challenges faced by those dealing with an estate is knowing exactly what assets to deal with.
We often meet people who have forgotten about small investments/accounts that they may have taken out 20, 30 years ago.
With that in mind, you can imagine the difficulties a spouse or child of the deceased may have.
Keeping a record of your assets can assist greatly. Our Financial Passport template is a valuable tool.
There is also space to record any financial gifts made during life which may be helpful if UK Inheritance Tax or care fees funding becomes relevant.
7 – Talk more
There are many more interesting topics to discuss with your loved ones, but avoiding these critical conversations will not save anyone from facing the administrative nightmare that could follow.
Losing a loved one is probably the most difficult thing we will ever deal with, and at this time, the focus should be solely on self-care and family, not paperwork and admin.
Having these conversations now, however unpleasant, could be beneficial in the future.