Good grief!
At the start of Dying Matters Awareness Week, we look at financial issues families must prepare for ... just in case
IT IS a subject no one likes to talk about. But this week ‘death cafes’, crematoria tours and ‘ask a funeral director’ sessions will all be on offer to the public at venues around the country as a notorious taboo is lifted.
These events are part of Dying Matters Awareness Week, organised by a coalition of groups including hospital trusts and trade unions, funeral directors and lawyers. The aim is to encourage more people to talk openly about the realities of dying, death and bereavement.
Among the thorny issues to be aired are the financial consequences of death – and how to prepare for them.
Follow The Mail on Sunday’s five steps to limiting financial grief.
1 MAKE A WILL
MAKING a will or ensuring it is up to date is often overlooked. About 60 per cent of people do not have a will and over half of those who have arranged one have never updated it, according to funeral company Co-operative.
Peter Savage is an independent adviser with national chartered financial planning firm Fairstone Financial Management. He says: ‘Many people fail to realise their worldly goods might not go to who they want if they die without a will.’
Writing a will is also an opportunity to organise how property and investments are owned. Savage adds: ‘For example, if you are married and want to leave your share of a property to someone other than a spouse it is best to arrange to have ownership as “tenants in common”, which lets you leave your share to whoever you want.’
Most people own a home through ‘joint tenancy’, which means the property is automatically passed to the spouse. Seeking professional advice on this matter is important, as the last thing you will want is for a widowed partner being forced to sell up. Do-it-yourself wills bought from stationers for as little as £20 are fine for simple arrangements. But expect to pay between £100 and £300 if using a solicitor.
Many charities will offer a free service for simple will writing in the hope of a bequest, though this is not compulsory. These include Cancer Research UK, Amnesty International and Guide Dogs. Members of trade unions may also be offered a free or discounted will.
2 INFORM
IT IS key to tell other family members where to find important financial information in the event of death.
This should include informing them where they can find the will, a list of all financial companies holding products in your name, including insurance, bank and building society accounts, investment funds and pensions. Include the name of any financial adviser, accountant or lawyer that you use.
If utility bills were held in your name then details of these accounts should also be included. List all relevant online passwords and keep them in a sealed envelope, either with a trusted relative or your solicitor – and make sure they are up to date.
Savage says: ‘Too often families are left scrambling around to find all these details.
‘This can delay the settling of the estate, which can take up to 18 months. This can be an issue as inheritance tax, if due, needs to be paid within six months of death.’
3 TAKE COVER
INSURANCE that pays a lump sum on death can be vital for families where few assets or investments have been built up.
Savage says: ‘Term assurance is a low-cost option that pays a tax-free lump sum on death that can give a crucial financial lifeline to those left behind.’
For older people with more assets built up there may be concerns about inheritance tax – charged at 40 per cent on estates over £325,000 (£650,000 for married couples, on the death of the second spouse). An additional £100,000 exemption is available this tax year to offset the value of the family home. For this group, whole of life insurance is an option. This type of life cover will pay out the sum assured whenever you die so long as you keep paying the premiums. The amount can be used to meet any inheritance tax bill and will be paid outside your estate on death. Ensure it is written in trust.
Though significantly more expensive, it can be worth paying the premiums to protect an estate from tax if that is a priority. Savage adds: ‘Often an elderly person will invest in a cash Isa each year. They are just building up their estate, and a potentially higher tax bill on death when they could buy a whole of life insurance policy instead to meet the cost of any inheritance tax bill.’
He recommends choosing a ‘guaranteed premium’, where the premium will be fixed.
A whole of life plan costs about ten times a term plan. According to broker LifeSearch, a non- smoking 40-year-old in good health wanting £150,000 of cover would pay about £13 a month for a term policy lasting 25 years (from insurers LV, Aegon and Scottish Widows). For a whole of life policy the premium would be £109 from AIG and Scottish Widows £111.
Another option is to consider a plan, such as on offer from insurer AIG, where 75 per cent of the sum assured may be paid to cover the cost of long-term care if a policyholder should need to enter a nursing home. For more complex affairs, trusts are often used to keep assets outside the inheritance tax net.
When money or property is put in a trust, provided certain conditions are met, it means you no longer own it. This means it might not count towards inheritance tax on death.
4 PLAN THE FUNERAL
THE average cost of a funeral is £3,675 according to recent research by insurer Royal London. While this cost can be met
from the estate, family may need to pay up front until the completion of probate, unless the deceased’s bank allows them access to their account. Sometimes banks will accept the death certificate in order to release funds.
Many people now choose to take out a ‘funeral plan’, which essentially allows someone to pay for their own funeral up front – with a lump sum or in instalments.
Plans can be purchased direct from funeral directors or specialist providers. Plans vary, so scrutinising details is all-important. For example, some plans will only cover the price of a cremation but would not meet the full price of a burial.
Consider choosing one from a company that is a member of the Funeral Planning Authority. These include AGE UK, Avalon, Co-operative Funeralcare, Dignity and Perfect Choice.
The cost of a funeral can be kept down by opting for a less popular time at a crematorium. Also growing in popularity are ‘direct cremations’ that cost as little as £1,000. There is no choice over the time and there is no hearse or ceremony involved. Relatives just pick up the ashes later and can arrange their own celebration at a time of their choosing.
If opting for a conventional funeral, families can compare the rates offered by different funeral companies and only sign up if happy with the service on offer. That also goes for someone buying a funeral plan.
You can get guidance from comparison websites such as About the Funeral or Funeral-booker. Tips on keeping costs down are available from The Natural Death Centre at naturaldeath.org.uk.
5 LAST WISHES
IF YOU want a funeral service with Robbie Williams’s Angels anthem playing you out, or to be buried in just a shroud in your back garden (this can be permitted so long as the plot is far enough away from water sources), make this known. You can write such requests into your will or in a simple letter to family or friends. Alternatively, My Funeral Wishes is a new free guide that encourages people to express their wishes in advance. The step-by-step document takes you through all the details you need to think about and, when completed, you simply share it with someone you trust to carry out your wishes. Devised by Dying Matters in conjunction with the National Association of Funeral Directors and Perfect Choice Funeral Plans, the form can be downloaded at dyingmatters.org.