Many clients who have their later life planning under control say it was easier than they thought and they felt better once they had dealt with it.
Conversations with clients about later life and dying can be difficult or uncomfortable and yet this is an essential element of financial planning. When our clients purchase a house, they consider all factors – the best interest rate for the mortgage, life insurance to protect their family and home insurance to take care of the house. So why does later life planning often stop after discussing retirement and pensions? There is so much more to talk about!
Many people have never discussed inheritance with their families, often believing it is not a priority due to their age. However, at time of writing the Inheritance Tax collected by HM Treasury in 2017 was over £5 billion and a lot of this could have been mitigated by better financial planning.
Here are eight points to consider when thinking about later life planning:
Importance of an Up-To-Date Will
Making a will is the starting point to planning for the future, especially if you have children under the age of 18. It is also the perfect time to discuss your wishes with family and friends. Research has shown just four in ten over-55s have an up-to-date and valid will.
Lasting Powers Of Attorney (LPAs)
LPAs are an important part of later life planning. These documents will ensure your wishes continue to be implemented if you were to lose physical or mental capacity. They allow you to choose who you would like to make decisions about your finances and welfare if you become unable to make them yourself.
Talk about Later Life Care
Social care is a worry for most. In turn, it is a hot topic in the press, which has increased awareness of the problems surrounding social care. Many people are concerned about paying for the care they may require in future and the type of care they would like to receive. It is therefore important for you to discuss this with your family and plan for this earlier than previous generations.
Digital Assets
While the law is slowly evolving on this subject, you need to plan now to assist your attorneys or executors. You need to compile a list of digital assets, including social media accounts and email addresses. You should record any automatic payments and the amounts that are charged to debit and credit cards and provide details of how to access these accounts.
Talk to Executors and Beneficiaries
Major life events can prompt people to talk to their loved ones about inheritance matters. Loved ones need to know the basics of their family’s estates and their plans. It does not have to be all doom and gloom, though – there are some positive events, such as a birth in the family or a marriage, which can prompt people to evaluate their plans. You should use these opportunities as a way of talking to your family about your will and inheritance intentions.
Review Ownership and Devolution of Assets
Even if you have a will in place, some assets will not be affected by this. While joint assets eradicate the requirement for probate, they also distribute assets to the co-owner – who may not be the intended beneficiary. Careful planning can ensure assets pass to your intended beneficiaries, while ensuring individuals have the legal right to use them if required.
Similarly, life insurance and pension payments are made at the discretion of the trustees. Therefore you should check that you have an up-to-date nomination form in place, which is evidence of where you would like these payments to be made.
Effective Tax Planning
Many clients are not aware that they may be able to structure their income; gains on investment and potential inheritance tax liabilities in such a way as to reduce overall tax.
Making gifts during your lifetime and to charity through your will, can reduce your Inheritance tax liability; income tax and capital gains tax can be reduced by restructuring and pensions can also be a tax-efficient way of planning – provided they are structured correctly. You should seek guidance on tax issues to reduce your current and future liabilities, so that more of your wealth is passed to the next generation.
Talk about Family Heirlooms and Personal Possessions
If you are struggling to talk to your family about your future plans, a good place to start can often be family heirlooms. People love to hear stories about relatives and items that are important to the family. It also helps the family to know what they will inherit from previous generations.
While later life planning can seem a daunting prospect for many clients, once they start the preparations, maintaining it will become second nature – peace of mind is not complicated if you are given the right tools and advice.
At Magenta, we have devised a later life and final wishes Manual which helps our clients to organise their later life planning and have meaningful conversations with their family. We also have an Accredited member of SOLLA (The Society of Later Life Advisers) who specialises in providing sensitive and empathetic guidance to the elderly and their families. Please do contact us if you would like to discuss this in more detail.
