Rose | Edited by Martin
Updated December 2016
Death can cause financial tragedies as well as grief. Yet planning for the end isn't about being morbid. It's about making crucial financial preparations to lessen the impact when it happens.
Our checklist includes tips on wills, inheritance tax, funerals and setting up a power of attorney, plus how to do the 'unpleasant issues' chat.
Have the 'unpleasant issues' chat
Some things aren't best avoided. Hopefully you've still got decades of fit body and mind ahead, but there's a chance you might not.
The mental incapacity or death of a loved one's hard enough to deal with, but often the financial complications can add a huge unnecessary blow to the pain of it all.
Whether it's you who wants to avoid the subject, or your loved ones who'd rather not face it, it's certainly not something you should put off.
Difficult as it is, it's better to deal with it head on than face the consequences of having not considered it.
One solution is to simply have a day when you discuss with your partner and/or dependants what you want, and how things should be organised. Doing it in one go makes it easier – it shouldn't be morbid – and it's best to be open and practical.
A financial factsheet. Are you the only person who knows the details of your bank accounts, pension, gas and electricity provider or more? When someone passes away, often merely the process of finding out these facts can be painful. Putting all the crucial info somewhere secure so it can be taken over by someone else can be very helpful.
If not, some of your hard-earned savings may be lost. The safest thing to do is simply to list the providers with a rough indication of the product, but don't list your passwords. Age UK's free LifeBook is a handy resource to help keep track of this important info, and can be sent in booklet form or via email.
- Inheritance tax planning. This needs doing early. If your estate's likely to have inheritance tax issues (assets, including property, of over £325,000 or £650,000 for couples), the sooner you tackle it, the better. Many ways to mitigate it involve giving assets away at least seven years before someone dies. See Inheritance Tax Planning.
In case your faculties fade. It's a thorny issue, but if you had difficulties that meant you couldn't make decisions for yourself any more, who would you want to take over your finances? It's far easier to arrange the potential for a power of attorney while you're still fully aware and able to take the decisions yourself – even doing this 20 years in advance isn't a problem.
Please share your tips on how to broach this discussion and what to talk about in the unpleasant issues chat forum discussion.
Sort your will
Don't leave a financial nightmare for those you love – ensure you've an up-to-date will. Making a will is the most important preparation any of us can make, even if you're perfectly healthy.
There are several key reasons for this:
- It's particularly important once married or with assets. These include property, large sums of money or shares. With a will in place, it'll be clear who looks after your estate and, crucially, where any significant assets go.
- It can help avoid painful family conflict. It also saves your relatives from having to make difficult financial decisions without guidance.
- It can ensure your partner's provided for. Remember, if you aren't married or in a civil partnership, your partner won't automatically inherit anything automatically.
- Wills can be cheap or free to make. Solicitor-drafted wills can be cheap or even free to make or amend. There's more on all the options in Free & Cheap Wills.
Arrange who would look after your dependants
If you've got kids under 18 or anyone else who depends on you, make sure you discuss with your family who'd look after them after you've gone. It's tough to talk about, but don't put it off. Making plans and provisions now will help to ensure they're safe and cared for if the worst happens, especially if you're currently the only living parent.
When you discuss it, first make sure those you've asked are prepared to do it, as it's a big commitment. You can then name them in your will as legal guardians (see Free and Cheap Wills). However, if further down the line they become unable to look after them, or if they refused, a court would appoint a suitable guardian instead.
If you're a carer, the NHS website also has info on where to get extra help and advice.
Plan early to save on inheritance tax
When you die, the Government assesses the worth of your estate (everything you own) from cash and investments to property and business. If you don't do any planning for this, many can expect 40% of this to go in tax.
There are lots of ways to deal with this, including giving gifts at least seven years before you die, leaving cash to charity and more.
Yet the key here is planning early. See the Inheritance Tax Planning guide for tips.
It may be complex, but tackle this now with your relatives – there are plenty of legal ways to reduce the bill.
Teach others to wear the financial trousers
The fact you're reading this means it's likely you make a good share of your household's financial decisions. Yet if you died, would your loved ones know which date the rent's due, when your car insurance runs out and where the stopcock is?
Our MSE poll showed that out of those in a relationship, an average 49% of users said they usually control all the family finance in their household.
So as well as making a financial factsheet, take time to ensure your partner, kids, parents or flatmates have the practical skills they need to look after the household.
Whether you usually keep the car maintained, sort the savings or pay the milkman, make sure those who rely on you know how to do it for themselves too.
For more on this read Martin's 'Are you secretly hurting your spouse by looking after the family finances?', editorial comment.
Plan your funeral
When a loved one dies, having to make funeral decisions with no guidance – which music, did they want flowers, where to scatter ashes – can be harrowing at an already painful time. Yet making a few quick decisions on your own funeral now can be a real help to your relatives after your death, and it needn't be drawn out.
Things to discuss include how much you can afford to spend, whether you'd rather be buried, cremated, or even have a 'green' funeral, as well as any music, flowers, religious rites and readings.
Discussing this in haste at death's door adds extra distress, so make your wishes known while you're well if you can.
- Note down your wishes for the ceremony. Age UK's free LifeBook has a section that lets you note down details of your funeral wishes to help others, and can be sent to you in booklet form or via email.
- It can be MoneySaving. While you may love the idea of a no-expense-spared film-star funeral, going for simple, cheaper options (eg, cremation rather than burial, flower-free ceremony, asking friends and family to be pall bearers etc) will help keep costs down.
- Ask for flowers to be donated. If you do have bunches of flowers at your funeral, you may want to ask for them to be donated afterwards to a nearby organisation, such as a local hospice, for others to enjoy.
- Don't go it alone. Planning your own funeral can be a lot to bear, so ask for help. Friends and relatives can give vital support, and if you'd like a religious ceremony, your local chaplain, rabbi, imam or priest will be able to give guidance on any rites needed. If you want to arrange a non-religious, or civil, ceremony a funeral celebrant is an option.
Plan ahead in case you lose your faculties
Thinking and talking about what would happen if our faculties deserted us is uncomfortable. Yet you need to consider how much worse the situation would be if you became incapacitated through a stroke, accident, dementia (eg, Alzheimer's) without sorting it first.
A Lasting Power of Attorney (LPA) is a legal document where someone (while they still have mental capacity) nominates a trusted friend or relative to look after their affairs if they lose mental capacity.
It's best to do this whilst you're in good health, as the financial and legal complications can be huge if you want to do this after your health has deteriorated. See the Power of Attorney guide for full help.
Remember you can't take cash with you
Far too many people scrimp and sacrifice towards the end of their lives, trying to retain some money for their children's inheritance. Yet don't make yourself suffer because of it – after all, you can't take assets with you when you're gone.
Thinking through how to balance this early is certainly worthwhile; ensure you've enough to be comfortable.
Remember: you too have a right to live as well as you can, while you can.
Get inspiration from Chris' bucket list
Hopefully you've a long life ahead of you, but even if not, remember to live every day to the full.
In 2011, Martin was contacted by members of the MSE forum about Chris Hyde – a 45-year-old man dying from brain cancer – and his inspirational bucket list.
Far from being morbid, Chris' list was about all the important things he was doing and seeing in the time he had left, from driving in an Aston Martin to buying his wife a gold chain so she could wear his wedding ring next to her heart.
So get round to doing things and seeing places you've always wanted, and letting your loved ones know how you feel. Financial preparation's important, but once it's done, get busy living. For more inspiration, read Martin's blog: Inspired by an amazing man.
Beware listing your passwords
It may seem like a good idea to write down the passwords to your online accounts for after you've gone. But it's worth considering that even if your next of kin has your login details, it's likely they'd be in breach of the website's terms by using them, which could get them into trouble legally.
For others to legitimately use your online accounts after your death, they'd need to to notify the website via the proper channels, and get permission to gain access.
It's still worth listing the names of any online storage accounts (eg, if your photos are stored on a website, for example) and any other sites you've membership with on your financial factsheet to help your next of kin know who to contact after you're gone.
The safest thing to do is simply to list any providers with a rough indication of the product, with no password info. Though it may take time for your relatives to gain access this way using your death certificate, they'll at least know which organisations to contact.
Consider saving a life after you've gone
Registering as an organ donor can be a huge help to someone in need after your death. However, it's a personal decision, so it's worth thinking about this early.
On average, three people that need a transplant die every day due to the shortage of registered organ donors – by registering you could save or improve as many as nine lives.
If you decide to, it's quick and easy to register on the NHS Organ Donation website, via the NHS Donor Line on 0300 123 23 23 or by texting SAVE to 62323. MoneySavers have also suggested donating your body for medical research, see the HTA website for details.
Weigh up whether an over-50s' plan is really worth it
Over-50s' plans promise to pay a fixed lump sum on death, with no need for a medical, which you could then use to cover your funeral costs.
While these sound like an easy way to protect your loved ones, there's a crucial term in the small print:
"Premiums are payable for life and you could pay more in than is paid out on death."
Because the amount it pays out is fixed, if you live a long time you may end up paying more for the plan than you'd ever receive.
So if you've got a plan already, don't just cancel. First, do some sums to see how good or bad these plans work out for you. For full details see our Over 50s' Life Insurance guide.
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To refuse treatment, make a 'living will'
'Living will' is a term often used to refer to an advance decision (or an advance statement, see below). Under the Mental Capacity Act 2005, an advance decision is a legal statement that lets you say if you don't want certain types of medical treatment in certain situations, if you lose capacity in the future.
For example, you may not want to be resuscitated if you become too ill to make the decision later on, or refuse to receive a blood transfusion if it's against your religion.
Advance decisions are free to make, and you don't need to go via a solicitor. You do need to be over 18, and have mental capacity when you make it, for it to be valid.
You can amend it at any time
It only comes into play if you lack capacity to make or communicate the decision in future, eg, if you had a stroke, accident or late-stage dementia. If you change your mind about the statement at any point after making an advance decision, it becomes invalid. You can cancel or amend an advance decision at any time, verbally or in writing.
How to do it
To make an advance decision, make a written statement of any treatments you'd like to refuse and in which circumstances, giving as much detail as possible. If you want to refuse certain treatments even if your life is at risk, make this clear.
Someone else can write it if you're unable to. Sign it if you can (again, someone else can do this while you're present if you can't), and date it. A witness should sign and date it too.
Store it safely, and ensure your relatives, close friends and doctor know about it. If it refuses life-sustaining treatment, your advance decision must be in writing, be signed with a witness and must include a statement that the advance decision is to apply to the specific treatment 'even if life is at risk as a result'.
This only applies in England and Wales, so isn't legally binding in Scotland or Northern Ireland, though should still be taken into account by medical professionals. See the Age UK website for full info. Don't confuse an advance decision with a Lasting Power of Attorney – see above for more info.
Note down how you'd like to be cared for
While advance decisions are legally binding and are only about treatments you want to refuse, if you want to ensure others know about how you want to be treated towards the end of life, you can make an 'advance statement'.
This document lets you state anything you think others should know to best care for you in future if you lose capacity to communicate them.
Store it safely
An advance statement could include dietary preferences, religious beliefs, who you'd like to look after pets if you're ill, or where you'd like to be cared for. They aren't legally binding, but should be taken into account by those looking after you.
To make an advance statement, write down your wishes, sign it and keep it somewhere safe. Again, ensure your loved ones know where it's kept, and you can also ask your doctor to keep a copy in your medical notes. See the NHS website for more info.
Ensure pets are provided for
You can leave pets to others in your will (check they're happy to look after them first), but if you don't have a loved one who would be able to take them in, the RSPCA offers a free Home for Life service.
Sign up to it and it'll try to find a new home for your pets if you pass away. You'll need to amend your will, but there's no obligation to leave the RSPCA a donation to take part in the scheme.
It's also told us that it'd always take in animals left to it under the Home for Life service. Share feedback in the Home for your pets discussion.
Don't leave life insurance until it's too late
If you're older and reading this, life insurance is likely to be very expensive – plus your kids may be past the age of relying on you anyway. If you're younger, life insurance is well worth considering if you've got kids.
Level term life assurance is one of the cheapest ways to protect your family's income if you die, because it will pay a fixed amount to your dependants. The two key words are:
- Term: This means you only get a payout if you die within a fixed term, eg, 18 years.
- Level: This means the payout you get is always at a set amount. So level term assurance guarantees a lump sum payout upon death within a fixed time, for example, £150,000 if you die within the next 18 years.
Standard life insurance policies become more expensive the older you are, especially when you're over 60. They'll also take your medical history into account, so they can become prohibitive (though non-smokers in their 50s may still find them a good deal).
Of course, this is the one policy you hope won't pay out, but it's well worth looking into. See the Life Insurance guide for full info and best buys.
Do debts die with you?
It's often said that "when you die, your debts die with you". But it's a little more complicated than that. When you die, anything you owe has to be paid first, before any assets can go to your beneficiaries.
So if you owe more than your assets are worth, your debts do die with you. Your beneficiaries will get nothing, but they won't be asked to pay the rest of the debt.
But if your inheritors are jointly responsible for the debts, your debts don't die with you as they'll have to make up the shortfall. If you're concerned about the impact this may have, contact Citizens Advice or consult a lawyer.
Tell your next of kin where your will's kept
Don't forget to let a close relative or friend know where your will's kept, so that they'll be able to find it without any additional hassle at a difficult time.
Once you've created a will, it's usually stored with a solicitor and you get a copy. Most charge a small fee for this.
If you'd rather store it yourself, you could keep it at home but this isn't really recommended. The Probate Service can also keep it for you for a fee of £20, and it's free to withdraw it. The HM Courts & Tribunal Service explains how to deposit a will and there's more information on Gov.uk.
Think carefully about releasing the equity in your home
Equity release is commonly marketed as a way to spend a home's value while still living in it, either by taking a loan or selling part. Do this and if you've dependants, less money will be left for after you've gone. But if you don't have any dependants, it isn't an issue.
While rates don't sound much higher than ordinary mortgages, they often cost much more. No repayments are made until you die, so the interest compounds rapidly.
For example: Borrow £20,000 aged 65 at 5.5% on a £120,000 home and live 25 years, and when you die £76,000 needs repaying. Though house price rises can offset this.
We're no fans of these deals, but for some there's no alternative. Make sure you read these key points first...
It's less of an issue if you've no dependants. If you've no one to leave the property to, you lose nowt as the debt's repaid from your estate when you die.
It can affect your benefits. Having cash rather than a property can hit those eligible for benefits such as pension credit.
Explore downsizing instead. For many, a cheaper way to release equity is to downsize – sell and move to a smaller home. So explore this, but do it sooner – anecdotally, while many still feel up to moving in their sixties, as they get older the disinclination to move sets in so it's much tougher.
You typically have to be at least 55 to do this. Plus, the younger you are, the less you can usually borrow.
Ensure the company's a member of the Equity Release Council (formerly SHIP). This trade body's members all guarantee your estate will never owe more than your home is worth.
Wait as long as you can. As a rule of thumb, at a rate of 5.5%, the amount you owe doubles every 13 years. Therefore the longer you wait, and the less you borrow, the lower the impact on your estate.
Don't think "I may as well do it in one go". For example, if you think you may need £40,000 from your house to cover 10 years, see if it's possible to get £20,000 now and the rest in five years. It'll usually work out much cheaper, plus you may need more cash later for long-term care.
Speak to an independent mortgage broker. If you're seriously considering this, speak to an independent mortgage broker or financial adviser with an equity release speciality to find the best deal. See the Mortgage Broker finding guide.
Get extra help and support
If you're planning for the end of life, don't shoulder the worry alone – help is available and you make sure you seek it out.
The following places are a good place to start:
- It's a daunting task, so ask your family and friends for extra support if you need it.
- If you already have a solicitor, they should be able to help with big financial decisions. Otherwise, get help from a friend or relative in the know, or contact Citizens Advice.
- If you're struggling to cope, don't suffer in silence. There are several useful organisations that can help, including charities Samaritans and Age UK.
- Local religious leaders can also help plan ceremonies, last rites or prayers, and give spiritual support. They will have helped many through this process before, so should be able to give you the benefit of their experience.
Add your tips on the forum
The Deaths, Funerals and Probate forum board is a useful resource for sharing your thoughts and discussing all aspects of planning for the end.
Plus if you've any tips to pass on to help others, please do share them in the Planning for Death forum discussion.