How to secure your family’s financial future
As we get older, we naturally start thinking about the ways we can support our loved ones with money matters when we’re no longer here. But how can you start helping to protect your family’s financial future? In this article we take a look at some of the different ways you can protect your loved ones financially in later life.
1. Make a will
Writing a will is one of the best way to safeguard your family’s finances for years to come. If you die without making a will your money, property and possessions will be allocated according to the rules of intestacy, which may not reflect your wishes.
When you write a will, you can make an inventory of your financial assets, such as bank accounts and life insurance policies, so that your executors know where to locate these after you’ve passed away. You could also consider writing a letter of wishes, which can advise your loved ones on how you’d like your money to be allocated after you’ve passed away.
2. Name a legal guardian
Of course, writing a will isn’t just about securing your family’s financial future. If you have a child under the age of 18, it’s an opportunity to name a legal guardian who can look after your child(ren) if you were no longer around. A legal guardian’s responsibilities include many aspects of life that come at a financial cost, including providing a home, eating and nutrition, and financial support as required. It’s worth noting that grandparents, siblings and step-parents have no automatic legal responsibility for a child, so you will need to write clear legal instructions on what should happen to your children should the worst happen.
3. Appoint a Power of Attorney
A Power of Attorney is a legal document which gives someone you trust – your ‘attorney’ – the right to make important decisions on your behalf, including financial matters like buying or selling a property, in the event you no longer have ‘mental capacity’. You can set up a Lasting Power of Attorney at any time provided you’re aged 18 or over and have the mental ability to make decisions on issues like money.
4. Gift money to your family
You can gift your grandchildren, children, or another person up to £3,000 a year tax-free without paying Inheritance Tax (IHT), which is known as your annual exemption. If you don’t use your full exemption in one tax year, it can carry over into the next year, meaning you can gift up to £6,000 tax-free in a two-year period. You don’t pay any tax on gifts you make to a spouse or civil partner if they’re UK-based.
5. Consider over 50s life insurance
Over 50s life insurance may not secure your family’s financial future alone as it has a maximum payout of £10,000, but it can be put towards funeral costs or a small gift, or to help settle some unpaid bills. It may not cover the full cost of the funeral though. You can choose to add on the Funeral Benefit Option, which will provide you with an extra £250 towards your funeral costs. The money goes straight to Dignity Funerals Limited and a Dignity Funeral Director will take care of your funeral arrangements.
You can also make sure that when you do pass away the money is paid to your family quickly, without the need for lengthy legal processes. You can do this by placing the life policy under trust. This could minimise the amount of Inheritance Tax they’ll pay as well, as it won’t count towards the value of your estate.
Legal & General’s Over 50s Fixed Life Insurance is available with guaranteed acceptance (no medical questions) for UK residents aged 50-80. And of course, there are other types of life insurance that some applicants over the age of 50 can apply for, such as Term Life Insurance.
6. Establish a trust
By creating a trust, it should help to ensure that the money from the life policy can be paid to the right people quickly, without the need for lengthy legal processes. Find out more about life insurance policies written in a trust .
7. Research tax on savings
In most cases, you can earn some interest on your personal savings without paying tax. This includes your Personal Allowance, and depending on your Income Tax band, your Personal Savings Allowance. If you’re a basic rate taxpayer, you can save up to £1,000 in interest each tax year without paying tax on it. Find out more on GOV.UK .
8. Keep your key documents safe
In the event that your loved ones need to make a claim on a life insurance policy, or obtain key information to manage your finances, it’s vital that they know how to locate these details. You could store documentation using filing cabinets, a home safe or a public safety deposit box, or even retain documents online using cloud storage – just make sure your loved ones know any relevant passwords.