As morbid as it seems, death is an inevitable occurrence which requires serious financial preparation just as is required for various other milestones in life. By preparing, you are able to lessen the impact of your death when the time comes by minimising financial trauma for loved ones who are left behind. A study by the British Medical Journal interviewed 20 elderly people and found that 19 of them had funeral plans, and 13 had made a will – but you don’t need to wait until old age to put plans into place. The following tips for UK citizens outline the type of considerations you should be making when planning for the end. (Though steps for all people should be similar.)
Arrange a Will
Writing a will is perhaps the most important preparation that you can make and is something to consider doing even when in full heath. By organising your will well in advance, you are able to spare your family further distress in the immediate aftermath of your death while eradicating the possibility of any conflict between relatives that may arise when having to divide assets. Further to this, by taking care of your own will you can ensure that you are able to provide for those who are close to you but are perhaps not be bound by blood or marriage.
As well as organizing your will, it is also essential to collate important financial information and keep it somewhere safe so that it can be recovered securely by family when you are gone, as well as passing on passwords for all important online accounts.
Plan Your Funeral
More and more people these days are eager to define their legacy through their funeral. It may be important for some to have certain aspects of their funeral tailored to represent their beliefs and therefore it is best for these decisions to be made beforehand by the individuals themselves.
In addition to this, much like sorting your will, organising the details of your own funeral in advance will save your family from making harrowing decisions at an already difficult time. Funeral planning tends to go hand-in-hand with creating a will, with certain funeral plans combining both of these elements to ease the process.
You Can’t Take it with You
Frugality can become more entrenched with age and can be a cause of previous life experiences that have resulted in a deep-rooted saving mentality or simply hesitance to spend a hard-earned pension. However, it is important to acknowledge that you have a right to live as well as you can at every age and with pensioners enjoying better health than any generation before them, it is important to make the most of your riches while you are still well enough to enjoy them.
Further to this, having accounted for 47% of all UK consumer spending in 2015, pensioner spending massively bolsters UK economic growth and plays an integral role in keeping the British economy moving.
Financial Legalities to Consider
If you are still reluctant to spend however think you are unlikely to use everything in the bank during your remaining lifetime, it is key to plan how to distribute this wealth in advance in order to save on inheritance tax. Today, the inheritance tax threshold sits at £325,000 per person, with anything over this limit subject to a 40% tax bill.
There are, however, ways to reduce your inheritance tax bill legally with the most obvious requiring you to reduce your estate value to below the £325,000 threshold. This is why many people choose to downsize in later life and is extremely advisable if you are in a position to do so.
In addition to this, it is recommended to transfer all of your non-pension assets to fund your pension as they will no longer be included in your final estate valuation, ultimately avoiding inheritance tax. Pension pots can then be passed on tax-free to loved ones after a saver dies.
It is important for each individual to take care of their own financial decisions as far as possible however it may be worth imposing a Power of Attorney in order to prepare for a situation in later life in which you may experience loss of mental capacity. Such a position should be delegated to a trusted friend or family member who is knowing of your desires and wishes and has your very best interests at heart.