There are said to be two certainties in life – death and taxes. Whilst we will readily discuss our tax affairs, death is an uncomfortable conversation for many to have and is too often one that is avoided. However, avoiding such discussion can add to the emotional and practical difficulties that family and loved ones can face when you pass away. By ensuring that the following steps are considered appropriately you can ensure that your wishes for your passing are granted; our team of experts will be there every step of the way to guide you through these difficult conversations.

In this blog, we outline key points to consider when thinking about organising your personal affairs in preparation for when you pass away, should you have any questions or wish to discuss your specific circumstances please reach out to our team of experts who will be happy to help.

Why is end of life financial planning so important?

Planning can ease the administrative burden for your loved ones after you die but also the emotional one.  Making as many advance decisions as possible removes the burden of having to make these, often quite quickly, on your behalf after you pass.

Additionally, by creating legal documents and having conversations with key professionals ahead of time you can increase the likelihood that your wishes will be respected during crucial moments and that the people that mean the most to you are being taken care of.

How can you ease the burden for family and loved ones?

• Discussing death early

A difficult conversation to have with others, and perhaps even think about, but it is vital that you talk to your family and friends about your wishes.

If you are unsure how to approach the conversation or what to say, you could perhaps start by involving the other person in the conversation and asking a question such as ‘have you thought about what you would like to happen at your funeral?’ to broach the topic.

You could speak with them about whether you have any funeral preferences, for example, if you would prefer to be buried or cremated, where you would want your ashes to be scattered, what music you would like played or whether you want funeral donations to a particular charity.

It will be of great comfort to those having to make those decisions knowing they can fulfil your wishes. Equally, it is best to have these conversations early before it is too late or there comes a time when you are unable to.

• Creating a document with important information

Nowadays, many important documents are stored online, of which only you can access. This can create difficulties. You could print out a hard copy of important documents, or you may wish to create a digital or physical file outlining where your important documents are stored.  Useful information includes – who you have accounts, investments and policies with, which utility companies you use, what assets you own, whether you have any debts, who your accountants and solicitors are etc.

Our paperless age has made it increasingly difficult to gather information quickly, especially if nobody else has access to your emails or banking details.  It is also important to provide secure information on usernames and passwords (perhaps in sealed envelopes stored separately in a safe or lodged with a Will).

If you chose to create a physical file with all your information stored, you will be able to keep original documents such as your latest Will, birth and marriage certificates within the folder too.

• Contact your pension provider / life insurance company

Most pensions and many life insurance policies are held in a trust which means that they may pass outside of your estate, making your pension pot a tax-efficient way to pass on your wealth to certain beneficiaries.

If your pension passes outside of your Will, it is important that you tell your pension provider who you would like to benefit from any proceeds after your death. When you first join a pension scheme, you will usually be asked to complete an expression of wishes form. However reports indicate 75% of people have not told their pension company who they would like to nominate to receive the proceeds when they die.  This can create delay and could results in unintended people benefiting from your wealth.

It is also essential to keep these nominations updated regularly, particularly after significant life events such as having a new child, marrying or following a relationship breakdown. It is also essential that if you have had multiple pension schemes throughout your career, you have informed each provider of your wishes.  If you would prefer, it is possible to nominate different beneficiaries for each scheme. This could include an ex-spouse or partner instead of your current partner.

Continued financial planning for dependants 

To ensure that once you pass those closest to you are supported, we must stress the importance of ensuring that your financial affairs are reviewed and structured as necessary with this in mind.

Funeral expenses, outstanding debts, and loss of income can quickly accumulate, making an already difficult situation even more challenging to navigate. It is important to take into account the needs of your dependents and any outstanding debt so that you can understand how much protection your spouse or family would have. Looking into your assets may also inform decisions as to whether you have the correct life insurance policy to align with your finances.

• Ensure you have a Will and that it is up-to-date

More than half of UK adults do not have a Will. Without a Will, your estate passes in accordance with the statutory intestacy rules.  These are particularly unsuitable for blended families, unmarried couples or where you are estranged from certain members of your family.

• Think about your tax situation wisely

Whilst the tax rules are complex, at a basic level, if you have an estate valued at more than £325,000, anything you pass to non-exempt beneficiaries above this amount results in an Inheritance Tax (IHT) charge of 40%. This threshold has been frozen until April 2028.

However, with careful planning, large amounts can pass to friends and loved ones free of tax. For example, assets left to a spouse or a charity are free of IHT, the formation of a trust may reduce a tax bill, and no IHT is due on any gifts you make during your lifetime, as long as you live for 7 years after gifting them. Lifetime gifting is an excellent strategy to pass wealth and reduce your IHT bill.

• Is there a checklist for what must be considered in my end of life planning?

This is something we at Price Bailey are often asked, and the answer is no. Everyone has differing circumstances and therefore different decisions to make. Nevertheless, everyone should consider:

Finances

• Keeping a list of assets and savings, Inheritance tax (IHT) planning, passwords and accessing accounts, list of gifts made.

Legally

• POA, wills, property deeds.

Other considerations

• Practical preference such as plans for funeral can be expressed in a will or letters, if you have any outstanding bills.

In summary, end of life planning results in the following:

• Your wishes are more likely to be followed,
• the administration of your estate is likely to be quicker and cheaper,
• your intended beneficiaries are more likely to benefit, and
• the amount of tax payable on your estate is likely to be lower.

This article was written by Donna Mahoney, a Senior Manager in our Tax team. If you wish to discuss Inheritance Tax strategies or prepare a Will, please contact Donna who will be happy to assist.

Equally, for more detail surrounding end of life financial planning, watch our six part video series featuring Donna Mahoney, which goes into further detail on specific topics related to the above discussion.