I started my career in financial planning with Imperial Life Assurance Company of Canada, based at their Cardiff branch. Many of the things I was taught have stood me in good stead over the years.
One of the things I was taught early on was that when I went home at night I had to leave my desk in such a state that if I never returned to the office for whatever reason, a colleague could pick up the client work, and indeed everything else, from where I left off.
We should have the same attitude towards our own financial affairs. Who would be responsible for picking up our finances where we left off if we made a sudden exit from this world? Who would pick them up if we lost the capacity to deal with our finances through a serious accident or illness? What I am suggesting is that we leave them a simple document which I prefer to call ‘My Important Stuff‘.
It doesn’t matter what you call this document. You could head it ‘In case of my death’. The important thing is that it will be readily understood by the person who is to find it. If you have a spouse or family member you trust implicitly then give them a copy making sure they secure it somewhere. Otherwise print off a copy and leave it where it will readily be found by a friend or family member in the event of your death or disablement but not by a burglar. Now I know this may sound morbid but get it done and you can then get on with living a full life.
My important stuff
The purpose of the My important Stuff document is to make things that bit easier for those left behind if you have to exit this life, unexpectedly or otherwise. This will make the transition less of a burden for your family and that is surely worth planning for. It would also be of vital importance if, through an accident or serious illness you lost the capacity to deal with you finances.
Here are the steps to help you achieve this objective. Do bear in mind that death and serious illness doesn’t just happen to older people. Here is a proforma of My Important Stuff should you wish to use it.
Get you will out and read it
Does your will still achieve your wishes? If not, get it changed at once, either by getting a new will drawn up or by adding a codicil if the changes required are small. Everyone already has a will. It is either one you have arranged yourself or one the Government has set up for you because you will have died intestate (i.e. without a valid will). Now the ‘Government’ is unlikely to know you very well and they certainly don’t know your wishes in the event of your death. In view of this I strongly recommend that you talk to a solicitor to set up your own will. A will does two main things:
- Provides a set of instructions to your executors as to how to distribute your assets on your death.
- Appoints guardians if you have children under the age of 18.
An important item to add to My Important Stuff is therefore the location of your will. If your will is with a solicitor or will writing company then make sure that you keep a copy at home and say where it is kept.
Who are your executors?
In your will it has a list of your executors, that is those who will execute your wishes on your behalf. Many people name their spouse or their partner as an executor but that can give them additional stress at a time when they are grieving and feeling somewhat lost without you. If you have adult children they could make better executors.
Are your executors still alive and in good health? If not, now is the time to replace one or more of them.
Add the names and contact numbers of your executors to My Important Stuff so that there is no doubt who should be dealing with your financial affairs on your death.
Produce a balance sheet of your assets and liabilities
This can be a simple sheet with two columns. On the left is a list of every major item of financial worth that you own and on the right is a list of all of your debts including credit card balances. This should be updated at least annually.
Set up files of all of your investments, pensions and insurance policies
It is a fairly simple matter to set up a few two-ring binders containing current details of all of your investments, pensions and insurance policies. You could label these ‘My Investments’, ‘My Pensions’ and ‘My Insurance Policies’ so they stand out from other files that you may keep. Another file could contain all of your other important papers such as your will.
Whilst a lot of this information will also be on your computer it just makes life easier for someone else to see what’s what in tidy, up to date, paper files. As a tip to keeping things tidy you generally only need to keep the last annual statement for any investment or pension plan. You should keep dividend notices and annual tax statements but you don’t need twenty years’ history of annual statements.
Tidy up your investments
I was once an executor, along with his solicitor, for an elderly gentleman friend. He wasn’t a client and I had no information about his estate. In fact he didn’t even ask me if I was willing to be his executor. I only found out after his death. It took very many months to find and then to collect up to date information on all of his investments, some of which were overseas. All the time the solicitor’s costs were mounting.
If you have not already done so you might want to consider moving the majority of your investments to an online investment platform. There is a good choice of these depending on whether you use a financial adviser or look after your investments yourself. A good platform can consolidate all of your Stocks & Shares ISA investments, as well as any personal pension pots, and all of your ‘unwrapped’ investments such as shares, unit trusts and OEICs.
The platform will then provide at least annual statements in a tidy consolidated format. It will also be a simple matter to produce a value of all of your investments on the platform at the date of your death. The platform will be able to provide the necessary tax documents both for calculating your income tax to the date of death and the tax on income and capital gains to be paid by those who inherit your estate in due course.
Use joint accounts where possible
Use joint accounts where appropriate. Investments such as ISAs and VCTs have to be held in a single name as do pension plans. However, many cash accounts, shares, unit trusts, OEICs and other forms of investment not held in a tax efficient wrapper can be held in joint names. This will allow these accounts to continue to be accessed by your spouse or partner in the event of your death rather than having to wait for probate.
Can you tidy up your pensions?
If you are a member of one or more occupational pension schemes which are of the ‘defined benefit’ variety then there is little to do except put a note of these on My Important Stuff. If you have one or more personal pension plans these work on a ‘defined contribution’ basis and are simply a pot of money. You can again hold these on an investment platform which will make life easier when you come to draw amounts from them. The important thing is to make sure that you have nominated the beneficiary or beneficiaries that you want to inherit these in the event of your death.
Do you use a particular financial adviser, solicitor or accountant?
If so add their contact details to My Important Stuff. Financial advisers don’t typically charge for helping a deceased client’s spouse or children understand the investments or pensions that are being passed to them. Pension benefit options can be quite complicated as can the benefit, for example, of holding onto inherited VCTs rather then selling them.
Have you appointed a lasting power of attorney?
You may reach a point in life where you are really not able to handle your financial affairs. This could happen at any time through an accident or serious illness and is not just a problem for older people. You should consider setting up a Property and Financial Affairs Lasting Power of Attorney (LPA). An LPA can be arranged through your solicitor but it is also quite easy to arrange online. Setting up an LPA means that if you cannot deal with things yourself, someone else that you trust can take over.
Apart from setting up a Property and Financial Affairs LPA you can also arrange a Health and Welfare LPA. This involves choosing someone to make decisions for you on everything except finances. This is somewhat similar in purpose to Advance Decisions which are also referred to as ‘Living Wills’.
You should add a note of where your LPA can be found to My Important Stuff together with a note of who the attorneys are and their contact details.
Are you aware of your inheritance tax situation?
Is your estate going to be worth less than £325,000 as a single person; £650,000 as a married couple; or £1m as a married couple with a house and children? If so, there is unlikely to be any inheritance tax on your estate.
Your estate will include gifts of more than £250 that you have made to family members and others (not charities) during the last 7 years, although where those gifts were within £3,000 in any one year or were out of your income and did not affect your standard of loving they can be ignored.
You should keep a list of all gifts of more than £250, showing who the gift was made to, the amount of the gift and the date given. This will make things much easier for your executors who will be faced with a substantial Inland Revenue form to complete to decide if your estate is liable for inheritance tax.
Your marriage, divorce and birth certificates
While these are difficult to replace while you are alive they are much more difficult to replace once you have died. Make sure that you have these and note on My Important Stuff where they can be found.
You will need to leave your passwords for your phone, computer, email, and social media accounts. The simplest way to do this is to use an online password manager system so that you only need to leave a note of your master password on My Important Stuff. Naturally you need to be very careful who is going to see this.
Your special possessions
Do you have any special items that are particularly valuable either financially or emotionally? It makes sense to list these in My Important Stuff together with an idea of their value or who you would particularly like to have them on your death.
Instructions for your funeral
You should make sure that those close to you know your preference for cremation, burial or a green funeral etc. Do you want any particular hymns or songs sung or played at your funeral?
Have you thought of leaving letters to your loved ones? If that is helpful then by all means do so. Alternatively you might simply prefer to make sure that your friends and family know how much you appreciate them while you are still around.
Donating your organs
If you live in England you are now an organ donor unless you opt out. The opt out system works on the understanding that all adults agree to become organ donors when they die, unless they have made it known that they do not wish to donate. You can still choose not to be an organ donor when you die by registering your decision and telling your family.
Links to further information
- Organ Donation
- Proforma – My Important Stuff
- If you need personal financial advice on Your Important Stuff then I am happy to introduce you to Flying Colours Life who have access to independent financial advisers throughout the UK
This information does not constitute personal advice and should not be treated as a substitute for specific advice based on your circumstances.
Information given relating to tax legislation is based on my understanding of legislation and practice currently in force. Whilst I believe my interpretation of current law and practice to be correct in these areas, I cannot be responsible for the effects of any future legislation or any change in interpretation or treatment. In particular you are warned that levels of tax and tax reliefs are subject to alteration and, in any case, the value of such reliefs and benefits may depend on an individual’s circumstances.
If you are in any doubt as to whether any course of action is suitable for you, then you should discuss the matter with a suitably qualified independent financial adviser or other specialist.