There are some things in life that no amount of planning can prepare you for. The death of a spouse is one of them.
The circumstances of such a personal tragedy are worse if the topic has always been avoided. According to the Dying Matters campaign group, seven in 10 people who lose a partner are not prepared financially.
This can have all kinds of negative effects. If the deceased was the breadwinner and managed the finances, it leaves their partner facing numerous challenges. This involves the administrative and legal burden of taking control of bank accounts, bills, insurance and transferring assets. At worst, it leaves the bereaved deprived of their main source of income and financial support.
No one likes to talk or even think about death. From the pragmatic perspective of wanting what is best for your loved ones, it is a nettle worth grasping. Research suggests a positive correlation between financial and practical preparation for bereavement and coping with grief.
Sharing the burden
Tragedy can strike at any time without warning. More than half of those bereaved by the sudden death of a partner are under 50 years old. This underlines why it is never too soon to start having that difficult conversation about death with your partner.
Just opening up and talking about what would happen if one of you died is the biggest hurdle. People feel they are being morbid or inviting unpleasant things to happen. It is important to focus on the bigger picture: the long-term well-being and security of your family.
There is plenty to talk about. Do both partners know how much money is in savings accounts, pensions and other assets? Would they know how to access them? A staggering £15bn in assets is not claimed by bereaved families in the UK, either because they don’t know about them or they don’t know how to access them. Are passwords and account information shared? Do both partners know how to pay all the household bills if necessary?
For some couples, talking about these things can be awkward. If one partner has been used to managing the finances, they may feel protective of their role. If a bereaved partner was left without access to bank accounts, they would face a legal fight to get by financially. If they had no knowledge of the bill-paying regime, they could soon find themselves in debt.
Capital offers its handy FileSafe service to clients. A secure cloud-based storage facility for important financial and legal documents which ensures that bereaved family members can access everything they require when the need arises.
Other conversations involve positive steps couples can take to prepare for the worst. An obvious one is writing wills. Married spouses and civil partners have rights in law to assets left behind by the deceased but it is possible for other family members to make a claim, leading to a protracted probate process. Making a will gives clarity and control, setting out where assets will go and who will manage the deceased’s estate.
Life insurance is used by people to offset the 40% tax on inherited assets over the value of £325,000. By placing a policy in trust, i.e. outside the legal scope of your estate, you can generate a lump sum payment equal to the inheritance tax. Life insurance placed in trust can be used to generate assets to pass on to children on the first partner’s death.
Any wealth inherited by a married/civil partner is exempt from inheritance tax. They are also entitled to any unused portion of their partner’s tax-free allowance. If someone passes their entire estate to their partner, the survivor gets double the tax-free allowance when they die.
This is where Capital’s award-winning expertise in financial and estate planning comes into its own. We offer a friendly, sympathetic ear to help start those difficult conversations about end-of-life planning, offering impartial, competent, practical advice on achieving the best outcomes for you. Click here to contact us today to find out more.