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How to leave a legacy and not a financial burden

We look at six ways you can plan and take action now to help your loved ones when you die.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

We often feel a bit awkward when talking about death and our finances. But at some point, we all have to have the talk about what happens to your finances when you die.

One of the horribly unfair things about bereavement is that while you’re facing an emotional crisis, you somehow have to be capable of dealing with all sorts of complicated financial and administrative tasks at the same time.

So while we can’t help our family bear the pain of losing us, we can take some sensible financial steps now to avoid adding more stress for loved ones.

Please note this article and our guides are not personal advice. This article is a brief overview of a complex area so if you are unsure how to proceed please ask for specialist advice. Tax rules can change and any benefits depend on personal circumstances.

1. Make a Will

You might be thinking, surely my money will go to my nearest and dearest when I die even if I don’t have a Will?

Sadly, that’s not always the case, in fact dying without a Will could bring severe financial difficulties to your loved ones.

A Will is legally binding and can be the foundation of your estate plan. Writing a Will means choosing who will benefit when the time comes, as well as how and when.

If you don’t write a valid Will, your estate will be subject to intestacy laws, which will determine who benefits. This could differ from your wishes. If you’re not married to your partner, for example, they might inherit nothing.

2. Consider your dependants

Your Will is an opportunity for you to make it clear how any dependants will be cared for. You should name a guardian to look after your dependents, if both parents were to die. We recommend speaking to any potential guardians in advance to make sure they are happy with the responsibility.

You also might need to think about trusts. You might want to leave assets for children in trust, so they can be managed until they’re old enough to inherit them.

Download our guide for more about trusts

3. Make a Lasting Power of Attorney

You might become unable to manage your own affairs later in life so making and registering a Lasting Power of Attorney (LPA) to let someone carry out your wishes during your lifetime can help. This must be in place before you lose the ability to make your own decisions.

There are two types. One covers financial matters such a paying bills, and the other health and welfare decisions like organising care. Completing an LPA doesn’t mean someone can immediately control your life, it can only come into play at the point of need if you specify this and they must act with your best interests in mind.

The benefit is you can choose who can act for you if the time comes. But if you don’t appoint an Attorney, your loved ones will have to apply to the Court of Protection if you lose the ability to make your own decisions. This can be a slow and expensive process and you wouldn’t necessarily be able to select your own Attorney, or specify how you’d like your affairs to be managed.

4. Simplify things

The best way to make sure your family knows about all your assets is to leave a detailed list and keeping this list safely with your Will. This should include all your accounts, investments, pensions, life insurance, debts, mortgage and any insurance that covers the mortgage.

It’ll also make life easier for your loved ones if they don’t have to wade through several current accounts, old savings accounts and share certificates. Look at what you could potentially consolidate without losing any valuable benefits, and consider an investment service where you can keep different types of investments in one place.

Before transferring any investments you should check you won’t need to pay high exit fees, and you won’t be giving up any valuable benefits or guarantees. You should also ensure it is right for your objectives and attitude to risk. If you’re unsure whether transferring is right for you ask for advice.

How transferring works

You should also try to make it easier for them by finding all your paperwork and accounts and keeping them together in a safe place. This includes account details and statements, but also paperwork like birth and marriage certificates, divorce decrees and name changes by deed poll. If you complete a tax return, the person named to administer your estate (your executor) will also need the information required to complete a return for the final year.

5. Nominate your pension beneficiaries

Normally, pensions fall outside of the estate and you can name as many beneficiaries as you like and there’s no IHT for them to pay. It’s important to let your pension provider know who you’d like to benefit from your pension. You can do this using an expression of wish form. Your nomination is not legally binding, but it does make your intentions clear.

If you die before you’re 75 and your pensions are below the lifetime allowance currently set at £1,073,100, your beneficiaries can usually withdraw money from the pension without paying tax.

If you die aged 75 or older, withdrawals will be taxed at the beneficiary’s rate of income tax. If they’re a Scottish taxpayer the Scottish rates will apply.

You can nominate beneficiaries of your HL SIPP account in a few simple steps. You can change a nomination at any time and should review it whenever your circumstances change.

Nominate a beneficiary

6. Think about day-to-day money

While your estate goes through probate, your accounts will be frozen, so it’s worth making sure that your loved ones have a reasonable sum of cash in their own name, so they have access to any cash they might need during the process. Many couples choose to have a joint account for this purpose, which then passes directly to the other account holder before probate.

More tips and a free guide

For all of our tips and hints on how to leave a legacy and not a financial burden for your loved ones, download our guide to saving inheritance tax.

Download guide

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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