How to prepare your finances for death
It's never easy to think of how your assets will be dealt with after you die, but planning now can help reduce the chance of any complications. Here's where to start.
Write a will
A will should clearly outline how you want your assets separated and include details like who will inherit your house and who is responsible for your pets.
By preparing a will you can help whoever you choose to deal with your estate make the correct decisions on how you want your belongings distributed to family and friends.
Visit GOV.UK for guidance on writing a will
Appoint an executor
Choosing a suitable executor to your will is important to ensure it is properly observed and your assets are divided according to your wishes.
When you appoint an executor, they will be responsible for the following tasks after your death:
Collecting all assets in your estate
Calculating the value of your estate
Applying for a grant of probate (if applicable, for more details on probate you can visit the HMRC website)
Paying off any debt, bills, inheritance tax and funeral expenses from the estate
Splitting the estate based on instruction from the will
Keeping a record of all money going in and out of the estate, including that of the funds going to any beneficiaries
Who can be an executor?
You can choose to have up to 4 executors on your estate and these can be any of the following:
Your spouse (has to be younger than you)
Younger brother or sister
Niece, nephew or close relative
A close friend
If you don't have any of the above, you can ask a solicitor, accountant, your bank or a public trustee instead. However, you may get charged for using them, but this will be covered by the estate.
To help your executor and make the process of dealing with your estate as simple as possible try to maintain up-to-date financial records of your assets and keep your will updated as often as possible.
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Do you need to seek financial advice?
If you have over £325,000 worth of assets (savings, investments, property) then you could have Inheritance Tax taken off any amount above this figure when you die.
Inheritance tax is currently set at 40%.
It's important to visit a financial advisor to get a clear picture of your assets for this reason.
They can help you plan for retirement or even death and limit the deduction of unnecessary tax being taking off your estate.
Find out more on inheritance tax here
How a financial advisor could help
There are two approaches that a financial advisor may adopt, to help you limit the losses on your estate:
Gifting - You can give up to £3,000 in total each year. If you choose to give a much larger sum of money, then it will be included within your estate for at least seven years.
Learn more about gifting money here.
Trust - There are several Trusts you can set up, with the most popular type being the "Bare Trust". This Trust will give your chosen amount of money to a beneficiary straight away, if they are at least 18 years old.
Learn more about the different kind of trusts at GOV.UK.