One of the key elements of a good financial plan is that your loved ones will be looked after if the worst happens.
No one likes to think about being in an accident, suffering a serious illness or, worse, passing away. However, all these events will have a significant impact on you and those around you. So, it’s vital to plan ahead.
As well as ensuring you have the right protection, it’s crucial to have your paperwork in order. So, read on for three types of document that you should have in place right now that will ensure your family’s lives are easier after an unexpected event.
1. A Lasting Power of Attorney
If you’re unable to make decisions for yourself, don’t assume that your loved ones will be able to make them for you.
If you’re in an accident, you’re ill in hospital, or you lose mental capacity, it’s vital that you have a Lasting Power of Attorney (LPA) in place so a trusted person can look after your affairs for you.
Despite this, research from insurer Canada Life reveals four out of five adults (78%) in the UK have not registered an LPA, including 77% of over-55s.
An LPA lets you appoint trusted people to manage your affairs if you lose capacity. There are two types:
- Property and financial LPA – this lets a trusted person manage your bank account, receive benefit payments, and sell your home
- Health and welfare LPA – here, a trusted attorney can make decisions about your day-to-day care, medical treatment, and where you live.
Without an LPA in place, your loved ones may find it difficult to manage your household finances.
You may recall the story of TV presenter, Kate Garraway, who was unable to manage many of her household finances when her husband, Derek Draper, spent months in hospital because of Covid-19. The journalist has spoken passionately since about how important it is for individuals to put an LPA in place.
It’s important to remember that, if you lose mental capacity, it’s too late to write an LPA. So, it’s a job you should do straight away – however old you are.
2. An expression of wish form
When you die, your pension typically doesn’t form part of your estate. This means, you can’t usually specify what you’d like to happen to it in your will.
Instead, for each pension you have, you should complete an “expression of wish” form – sometimes called a “pension will”. This is a simple document that lets you nominate which person (or people) you’d like to receive your pension when you pass away.
On your death, the expression of wish helps the provider to distribute the pension quickly and efficiently, taking into account the views on the form.
Worryingly, a report in Money Age reveals that more than 7 in 10 (72%) UK adults have never completed an expression of wish form. This means that, on death, the benefits from a pension could be paid in a way that does not align with the wishes of the deceased.
It’s a simple but important step you should take. Contact your pension providers and make sure you have completed a pension will – and remember to update it as your circumstances change.
3. A will
A will is a simple way to ensure your assets are distributed in accordance with your wishes when you die.
Despite this, further research from Canada Life has revealed that more than half of UK adults, equivalent to 29.6 million people, have not made a will.
Without a will, your estate will be distributed in accordance with the rules of intestacy. This could be a particular problem if you have a partner and you’re not married, or you have stepchildren you’d like to benefit from your estate.
A will can also help you to avoid costly and distressing legal wrangles after your death. It can even help to mitigate an Inheritance Tax bill on your death as, for example, leaving your home to a child or grandchild could enable them to take advantage of the “residence nil-rate band”.
If you don’t have a will, make an effort to do it now. And, if you do, make sure you regularly review it to ensure it remains up to date.
Get in touch
These three simple documents are inexpensive and can prove invaluable when the worst happens. To find out more, please get in touch. Contact us by email at email@example.com or call us on 01189 876655.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.