Nobody likes to think about life coming to an end. But organising your affairs can only be of benefit to you and your family. Here’s what to consider.
There comes a time in each of our lives when we begin to think about putting our affairs in order. More often than not, this is when we are approaching retirement, or experiencing ill health.
Unappealing as the prospect may be, it’s never too early to start the process. And once it’s done, you will need to keep everything under review.
So, what do you need to consider, and how (and when) should you go about it?
Make a will: providing for your family
The most important thing to do is to make an up-to-date will; everything else will flow from this. The process of making a will should start with:
- listing all of your financial assets and their value, including your home and other property, savings and investments
- deciding who you wish to inherit your assets when you die
This may be straightforward for a married couple with adult children from that relationship and modest assets, but it’s unlikely to be as simple where young children and/or stepchildren are involved, or if you have a business or more valuable assets.
Your solicitor will be able to advise you about the options available to provide for your family, including trusts for the benefit of minor children, or to protect your children’s inheritance, in case your partner remarries or disinherits them after your death.
Business succession planning: consult and discuss
If you have a business, there may be difficult decisions to make about succession on your retirement or earlier death. So rather than waiting until you are on the point of retiring, you should start discussions with your family, solicitor, accountant and business advisers at an early stage.
It may be that, in order to ensure that the business can continue after your death or retirement, you can’t benefit all of your children equally by your will, particularly if not all of your children are working within the business. Involving them in the planning process can help to avoid future disputes.
Inheritance tax planning: PETs
Your asset list will enable your solicitor to calculate whether there is likely to be an inheritance tax (IHT) liability when you and/or your partner die, and they will be able to advise on whether there are opportunities to reduce the IHT liability.
IHT planning generally involves making lifetime gifts called potentially exempt transfers (PETs), which will only become exempt from IHT if the donor survives for a period of seven years after making the gift (though in certain circumstances, gifts made within 14 years of death can still attract IHT). This is therefore not something to be undertaken at an advanced age, or after the onset of ill health.
Retirement planning: plan in advance
Whether or not you run your own business, you should start planning in advance for your retirement to ensure that you have sufficient income. This goes hand in hand with IHT planning and will involve your solicitor, financial adviser and pension administrator, particularly in view of the recent changes to pension legislation that has increased the options available on retirement and for dealing with your pension fund on death.
Care fees planning: consider wills trusts
Many people, particularly those of more modest means, are concerned to ensure that their assets are not exhausted by paying for their care in old age. Through the use of will trusts, you may protect a share in your home, or other assets, from being used to fund your partner’s care after their death. Again, however, such planning needs to be carried out while both you and your partner are still living and mentally capable of making a will.
Funeral planning: talk about your wishes
As part of retirement or care fees planning, you may also consider taking out a prepaid funeral plan.
It is always a good idea to discuss your funeral wishes with your family, as it will help them in the difficult time after your death to know that they are carrying out your wishes.
Lasting power of attorney: who will take care of your affairs if you can’t?
At the same time as making your will, you should consider making a lasting power of attorney (LPA). While a will deals with arrangements following your death, an LPA appoints someone (your attorney) to manage your affairs during your lifetime if you become unable to do so yourself. There are two separate forms of LPA: the property and financial LPA and the health and welfare LPA.
The importance of having a property and affairs LPA can’t be over-emphasised. For example, if you suddenly become ill, or suffer an accident, your attorney can deal with all of your personal finances and keep your home running – and if you run a business, your attorney can make business decisions, pay employees’ salaries and generally keep your business going until you recover. If you have not made an LPA, an application may have to be made to the Court of Protection for appointment of a deputy to deal with your affairs while you are out of action, which could take months and cost many hundreds, or even thousands, of pounds.
Under a health and welfare LPA, your attorney will be able to make decisions about where you live and the type of personal and medical care you receive, including end-of-life care if you wish, once you are no longer able to make those decisions for yourself. This can be particularly useful if you do not have close family, or where family members may disagree about what is in your best interests.
Advance decision: end-of-life care in your hands
Instead of delegating end-of-life care decisions to your attorney, you may prefer to make an advance decision, stating your own wishes regarding end-of-life care in certain events, such as terminal illness or permanent coma. An advance decision will be legally binding on medical practitioners, as long as it fulfils certain legal requirements.
Once you have all of your arrangements in place, you should review them regularly. Over time, your circumstances may change, and there may also be changes to legislation that open up additional opportunities, or necessitate changes to your plans.
About the author
Karen Bacon is head of the wills, probate and tax team at Steeles Law.