How to get your family’s financial affairs in order before you die

“Dad’s dead – what happens next?”

A colleague of mine passed away last year after a long illness, and that was the title on the front of a folder he left for his family, writes Ian Dyall, head of wealth planning at asset manager Evelyn Partners.

It not only brought a smile to those who appreciated his dry humor, but was also an exceptionally thoughtful and useful gift for his family.

As a former financial advisor, he was acutely aware of how stressful managing an estate could be, and that he would no longer be there to manage the family’s financial affairs as he had previously done.

The folder contained everything his family needed to make the administration process as simple and stress-free as possible, with contact numbers of people who could help.

It’s an idea I’ve adopted myself, and it’s something everyone should think about, but what should be in the folder?

Savings, investments and assets (and debts)

Not long ago, every investment anyone owned had a paper trail. At some point within twelve months of the death, a statement would arrive by post, alerting the executors to the existence of that investment.

Today that is not the case. Most people have moved to electronic statements, which would be inaccessible to their executors, and some investments, such as bitcoin, are completely virtual.

The folder should contain a current list of what you own and where it is kept. If you have a financial advisor, it may be valuable to provide a contact number for them.

Your financial advisor should have a list of all your investments, debts, bank accounts and professional advisors.

In my colleague’s case, he referred his family to his friend, who was also a financial advisor and had the latest details of his financial affairs.

Consider which former employers have a pension scheme to which you belong and ensure that contact details are included.

As you do this, take the opportunity to ensure that things get to the people you want smoothly when you die.

You will need to nominate beneficiaries for any pension policies or death insurance policies from former employers.

Also include any debts you have, such as credit cards, mortgages and car loans, as these will need to be repaid before the estate administration can be completed.

If you have items that are difficult to throw away, you may want to provide advice on how to do so.

For example, I have a collection of guitars that are difficult to value and sell, so I have a list of their estimated values ​​and contact numbers of people I trust who can help sell them.

Your will and important documents

It’s a good idea to include a copy of your last will and testament, your durable power of attorney (if you have one), and any trusts you’ve set up.

Make sure these trusts have at least two trustees who are able to act after your death. If not, take action now to appoint new administrators.

As advisors, we regularly see cases where a client is certain that an investment is in trust and not part of their deceased parent’s estate, but the trust deed cannot be found and therefore cannot be proven.

If you are the beneficiary of certain types of trusts, in some cases they will become part of your estate upon death.

Copies of any trusts of which you are a beneficiary, or details of the trustees, will be valuable as your executors will need to provide details of those trusts when completing the forms required to administer your estate.

Steve Webb: Retirement questions

Registration of donations made

Your executors will also need to know what donations you made in the seven years before your death and possibly in the seven years before the first of those donations, i.e. up to fourteen years before your death.

That is very difficult for an executor to answer unless you keep records of the donations you have made.

If a donation is made regularly from income (rather than from assets) and does not affect your standard of living, it is immediately exempt.

That is a very valuable exemption, especially for people with a lot of excess income.

However, to claim this, your executors will have to complete a table showing what your net income was in each of those years and what your expenses were, broken down into expenses on mortgage, household bills, holidays and so on.

Unless records are kept, it is virtually impossible for an executor to find out what your expenses were seven years ago, so you may not be able to claim the exemption. Again, record keeping is essential.

The tables to be completed are in the form IHT403. The best approach is to make a copy of the necessary tables and fill out the form as you go so that there is an ongoing record of gifts made.

> How to legally avoid inheritance taxes – and save your family money

Banks, energy suppliers, contacts and a good business

Perhaps the most stressful part of managing an estate after death is cleaning out the person’s home and preparing it for sale.

It is very difficult to let go of the personal items that remind you of the person you have lost. While that is unavoidable to some extent, there are some practical things you can do.

It can help a lot to tidy up the office and organize it so that everything is easy to find.

My father recently asked me to help him arrange his own investments and we came across details of investments that had been cashed out long ago.

Fortunately, my father was able to tell me which investments were still current, but trying to do that after his death would be much more difficult.

I’d have to contact each provider to find out what happened to those investments, and many of those providers were bought by other providers long ago, so their records aren’t always as good as they could be.

Data from all energy suppliers, internet providers, car and home insurance, bank details, etc. makes it easier to pay the final bills and stop utilities.

Please note that once the bank knows that the account holder has died, the account may be frozen. However, many banks will still be willing to pay final utility bills or even release funds for the funeral if they receive proof of the bills. .

A plan to pay the inheritance tax bill

Whether reducing inheritance tax is a priority for you or not, if inheritance tax is likely to be payable on your death, it is worth considering how your executors will pay it.

Inheritance taxes must be paid before probate is granted, and probate is required before most companies will release assets.

That’s a problem because the executors of the will may not have the resources needed to pay the bill.

The debt on some illiquid assets, including real estate, can be paid in up to ten installments over a ten-year period, but many executors are forced to borrow money to pay the inheritance tax.

Some assets can be accessed prior to probate to pay the bill. National Savings and most banks will pay money directly to HMRC to settle the bill.

Any investments in trust are also managed by the trustees and do not form part of the estate. These can also often be used to pay the obligation.

By considering in advance what assets would be available and whether they would cover the liability, a lot of administrative hassle can be saved and the cost of borrowing to pay the bill can be avoided.

> Inheritance tax: an essential guide to what you need to know

Planning your funeral and remembering you

I have focused above on practical steps to simplify estate administration and while simplifying the stress of administration can help emotionally, there is a limit to what it can achieve.

That’s why it can be very helpful to discuss difficult topics, such as your death, with your children.

My close colleague lost her father last year. He was 90 and had been ill for some time, so he had the opportunity to discuss these difficult topics with her.

Before his death, they had discussed what songs he wanted at the funeral, whether he wanted to be buried or cremated and much more.

She said she found it emotionally helpful because she didn’t have to worry about those issues when the funeral directors asked. She knew she was doing exactly what her father would have wanted.

I guess the real message is that a binder can be very helpful, but it should not be a substitute for having difficult conversations with your family before you die.