Cost of living crisis

Why estate planning is crucial, even in a cost of living crisis

7 min read 12 Jan 23

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Summary

If the strain of making ends meet during the current cost of living crisis has meant you’ve pushed long-term financial planning aside, that’s understandable. But failing to create a long-term plan can carry serious consequences, especially when what you’ve neglected is completing your estate plan.

Everyone has an estate – the word just refers to everything you own. Your estate plan is a plan that you create to set out what happens to your money and possessions when you die. No one likes to think about this, but failing to have an estate plan can have serious consequences for those you love.

It doesn’t have to be difficult to get started. Here are some basics to help you take the first steps.

Make a will and review it regularly

Did you know that if you don’t make a will, there are set rules about who would inherit your estate, and those rules may be different from your wishes? If you have no will, you’ll have no say over who gets everything you leave behind. If this were to happen, the consequences could be devastating for those you leave behind.

If you’ve already made a will, please remember that it’s important to keep it up to date. A change in family circumstances, changes in inheritance tax rules and wider legislation can all affect your will so as a rule of thumb, you should look to review your will at least every five years.

Set up a Power of Attorney

A moment may come when something happens to you that prevents you from looking after your own affairs. A Power of Attorney, or POA, lets a family member or friend represent your interests and make important financial or medical decisions for you. People sometimes make the error of thinking that a POA means they’ve automatically handed over control to someone else. This isn’t true. The POA is in effect only when you’re unable to act in your own interest, and can be a temporary measure.

It might help to think of a will as something that helps your loved ones after you die, whereas a POA is designed to help you while you’re still living. If you haven’t set up a POA, don’t wait. If you become unable to make your own decisions, the court may appoint someone to manage your affairs for you. This may not be a person you’d want to be making decisions on your behalf.

Make sure you know who stands to inherit your pension

Your pension is likely to be one of your most valuable assets (sometimes worth even more than your family home). Many people assume that their will would dictate who inherits their pension, but this isn’t the case. Your pension actually falls outside the control of the will. So it’s very important to plan for what happens to your pension and who will receive it when you die.

When setting up a pension, you normally would’ve been asked to complete a ‘nomination of beneficiary’ form. The people you name on that form will be who will normally inherit your pension.

But over time, many of us have held several jobs and it’s easy to forget who we nominated as a beneficiary. That’s why it’s important to check and review this information and make sure the pension is going to the right person. Get in touch with your pension provider if you need to get this information.

Speak to your loved ones about your plans

It’s important to make sure your loved ones know how to get hold of all the information and documents they will need after you die. This means making people aware of the location of your will, your POA, and any other documents they may need in what will inevitably be a difficult time.

Living for the present, but planning for the future

This article merely touches on a few points related to estate planning and only scratches the surface. The important thing is to remember that none of us know what the future holds, and it’s very important to take steps to create an estate plan if you don’t currently have one.

And sometimes there’s even a silver lining – it can be a big relief to know your affairs are in order because then you can concentrate more fully on what’s important, which is enjoying life and living each day to the fullest.

Could you benefit from Financial Advice?

Managing the transfer of your money and possessions after you’re gone is a complicated area with many financial and legal hurdles. But it doesn’t have to be difficult.

We recommend you speak to a financial adviser. If you don’t already have an adviser you can find a financial adviser that's right for you.