January 31, 2025
In my role as a Chartered Wealth Manager, I am often talking about the financial consequences of death, including managing finances after bereavement, and what’s on your bucket list?! Encouraging our clients to enjoy their money whilst they are able to.
Being British there are two topics we don’t discuss openly or at all, Death and Money.
I firmly believe that it is much better to communicate about these matters which are unequivocally linked. Being open about money promotes healthy relationships, and if this can be achieved with the wider family, then some useful financial planning can be discussed and facilitated.
Have you planned for your death? We are all going one day. The overquoted phrase by Benjamin Franklin in 1789, ‘Nothing is certain except death and taxes’ still rings true today.
So what to do to prepare?
1. Prepare Financially for Your Inevitable Death:
Planning for your own passing is a crucial step to ease the burden on your loved ones, ensuring a smoother estate administration process. Make sure your affairs are in order, including ensuring that your executor or administrator has access to all necessary documents. This includes ensuring you have a valid Will and setting up a lasting power of attorney (LPA). You may think you are too young for this, but death and incapacity can happen at any age, so don’t procrastinate.
2. Discuss Finances Before Death:
Open conversations about finances and Wills can help prevent misunderstandings, family fallouts, and legal disputes, making managing finances after bereavement more structured and less stressful. Contested Wills are on the increase with over 10,000 annually and a 5% increase between 2023 and 2024, often requiring intervention from the probate registry. Families are often dysfunctional, and I have yet to come across a family like The Waltons!
3. Letter of Wishes:
Most good solicitors will suggest that you have a ‘letter of wishes’ to accompany your Will. This can be a letter to your ‘trustees/executors’ named in your Will to provide them with guidance in respect of the distribution of your assets. You may have a special item of jewellery, a watch, or other items which you wish to pass to a specific family member, and if it’s not reflected in your Will, it can create arguments once you’ve gone. I have such an item, and it is clearly referenced in my letter of wishes. This letter can also contain details of your desired funeral, as well as instructions regarding any life insurance policies that may apply. Simple, or like me, a big happy send-off. What music would you like, etc.?
4. Get your finances in order:
Leaving a complicated mess for your executors to sort out can be difficult and extremely time-consuming, complicating the estate administration process unnecessarily. If you have made family or friends executors, the process can be very stressful. Needless to say, if you have appointed professional executors, then undoubtedly more time sorting things out means more fees for your estate. So make sure you document your assets, make a list, and ensure your Executors know where you keep your important papers. They don’t necessarily need your numbers, but the location of your papers with an index would be useful, particularly when dealing with the estate and ensuring all assets are accounted for.
5. Engage a Financial Planner:
By seeking independent financial planning advice, this process enables you to gain clarity on your finances and help get them in ‘apple pie order.’ At the same time, you can review your investments and gain expert input and, if possible, streamline your affairs. I particularly enjoy this part of what we do at Piercefield Oliver, as it is invaluable and creates clarity.
6. Inheritance Tax (IHT):
It is wise to establish if your estate is potentially liable and how much tax would fall due. How would your Executors pay this? Would they need to account for debts and taxes, including potential capital gains tax liabilities? Is there some planning you can do to minimise the potential liability? With IHT receipts hitting £6.3bn for April to December 2024, a £0.6bn rise compared to the same period last year, this tax is not going to disappear anytime soon.
7. What to do when someone dies:
There is a lot to organise, and if the person who has passed away has implemented the above, it will be a lot easier to manage arrangements post-death, easing the burden of managing finances after bereavement. The family can focus on grieving and organising a good send-off instead of trying to navigate the finances with the associated stresses. You don’t necessarily need a solicitor to help administer an estate. We are in the privileged position of being able to help our clients and their families navigate the process of obtaining the Grant of Probate and ultimately distributing estates. A more complicated estate may require the input of a solicitor, and if this is the case, I recommend that you ask if they can work on a fixed fee or at least set a reserve fee for the work, as the costs can easily run away. In short, the better organised your financial affairs are, the smoother the process.
So, prepare for an organised death, do it now, then you can get on with living without the worry of what you might leave behind!
After a loved one passes, start by notifying relevant financial institutions, gathering important documents, settling outstanding debts, and applying for probate if needed.
An executor or administrator is responsible for managing the deceased’s estate, ensuring debts and taxes are paid, and distributing assets according to the will or intestacy laws.
You can minimise inheritance tax by making lifetime gifts, setting up trusts, using allowances, and seeking professional estate planning advice to structure your assets efficiently.
If a person dies without a will, the rules of intestacy determine how their estate is distributed, which may not align with their wishes. It’s advisable to create a will to avoid complications
To simplify estate administration, organise financial documents, list assets and debts, appoint a trusted executor or administrator, and seek professional financial planning advice.