5 steps to prepare financially before your death

Your first, and most important step, is to make a will. A will is a legally-binding document that explains who should inherit your assets after you die, but it can also detail your other preferences and wishes. These might include naming a legal guardian for your children, leaving instructions for your funeral, or arranging trusts to provide for your family in the years to come. It’s also where you can name the person you would like administer your estate and carry out your last wishes (known as an ‘executor’).

When it comes to writing your will, the best place to start is to think about who should receive the assets that make up your estate (these people are known as your ‘beneficiaries’). Then you can make a list of all your assets and how much you believe they are worth. You can specify which person, organisation or charity should receive which asset (which is known as ‘specific legacies’ or ‘bequests’). Assets can include large items such as the family home, or small items of jewellery or keepsakes.

As a will is a legally-binding document, it’s important to get professional advice to make sure the will is valid and enforceable by a court. You should also let your family know where your will is kept, so they can find it easily after your death.

For more information see our ‘Why making a will matters to your family‘ article.

If your estate – which can include your home and other properties, as well as any savings, investments and life insurance policies – is valued at more than £325,000, your beneficiaries will be expected to pay IHT at 40% on everything above that threshold.

However, there are several ways in which you could reduce the amount your beneficiaries are likely to pay, and ensure a greater share of your estate is passed to them.

See our ‘9 steps that could reduce the IHT bill for your family’ article for more information.

A Lasting Power of Attorney (LPA) gives you the power to appoint someone you trust to make decisions on your behalf, should you one day become unable to make those decisions yourself.

There are two types of LPA:

• A Property & Affairs LPA lets a trusted person make decisions about your property and your finances
• A Health & Welfare LPA lets them make decisions about your healthcare and any medical treatment you may need

You can appoint anyone to be your ‘attorney’, as long as they are 18 or older. However, for a Property & Affairs LPA, they cannot have been declared bankrupt or have been the subject of a debt relief order. You can choose to arrange one or both LPAs, and you can nominate the same person or choose to have a different person in charge of each.

Whoever you choose, they must be someone that you trust to make responsible decisions that are in your best interests. But just because you have arranged an LPA, it won’t mean you instantly lose control of the decisions that affect you. You can arrange an LPA to be very specific about when the person acting on your behalf can assume control over your decisions.

It’s worth noting that all LPAs have to be registered at the Office of the Public Guardian – the government body that oversees LPAs – before they can come into effect.

As with writing a will, people often find that setting up an LPA is a tremendous weight off their shoulders, because they’ve taken action now, rather than leaving it too late to have their say. It’s a good idea to create an LPA at the same time as writing your will, and it’s worth talking openly with the person you are planning to nominate as your attorney, so they know in advance what your wishes are and what you expect of them.

See our ‘Why everyone should set up a Power of Attorney‘ article.

After you’ve made a will, devised an IHT plan, and arranged an LPA, it should become a little bit easier to talk about your death with your family, and at least reassure them that your financial affairs will be in order beforehand.

At this point, it’s useful to give your nominated executors the information they’ll need to be able to access your legal documentation easily. At the same time, you can create a key information pack that covers all the relevant areas, such as:

• The whereabouts of your will
• Contact details for your solicitor, accountant and financial adviser
• Bank accounts held in your name
• Key details about your pension or pensions
• Details about your investments, and the investment providers they are held with
• Details of any shares you own that qualify for relief from inheritance tax
• Any funeral arrangements you have made, or want made on your behalf

It’s never easy to talk to loved ones about your own death, but taking all of the necessary steps to prepare your finances in advance should make the conversation as stress-free as possible. And the positive steps you take now will certainly leave your family and friends much better placed to face the future – which is what leaving a legacy is all about.

An Amber River financial planner can work with your family solicitor to create a comprehensive estate plan that encompasses all facets of your wealth, properties, and business interests, ensuring no crucial details are overlooked.