You need to make plans and have a conversation about what will happen to your finances when you die.
Very little seems taboo nowadays, but a couple of things people tend to avoid talking about are money and death. And even more so when those two things are combined.
It’s understandable. No one wants to consider losing their loved ones, so if you don’t talk about it you can avoid the idea that it’ll ever happen. And to discuss money in the same context does seem like bad taste.
But this conversation is vital. When someone dies, dealing with finances is one of the last things loved ones want to do, and it can even lead to greater distress if funds are frozen and income drops.
So anything we can all do beforehand will be a huge help – and the first step is to talk about it. I’ve done this with my parents, my wife and my sister too.
This isn’t just about inheritance (though that’s still very important). It’s also about how bills, funeral wishes, debts and more.
And everyone needs to do this, whether you’re young or old as you don’t know what could happen.
How to start the conversation
This probably isn’t one chat. You’ll want to talk about your own wishes and situations, but potentially also ask your loved ones about their plans.
It’s important to have these chats with everyone who could be affected. So start with your partner so you both know the situation. Then once you both know what you want, talk to your parents or your grown-up kids – or both.
I think it’s better to do this in person, or if not a phone or video call. Check if it’s a good time to have a talk too.
You might want to start the chat by asking them have they thought about it, and stress why it’s so important. If they haven’t then it’s probably best to give them a few weeks to consider what they want.
Remember a big part of a conversation is listening, so be sympathetic and don’t be judgemental.
If they really don’t want to talk about it, don’t be too pushy, but explain to them why it’s really important to at least consider what they want and put it in a will.
What to talk about
These are the key topics to talk about.
Whether you want to be buried or cremated, funerals can be very expensive. The average basic funeral now costs £4,417 according to SunLife. And it’s a lot more in London, where the average is £5,693.
Though cremations are cheaper, you’d still need to find an average of £3,858 for one that includes a service. It’s all really pricey.
Remember this is just “basic”, so it could be higher still when you add in things like limousine hire, food for a send-off and flowers.
So all very expensive, and not everyone will have money in their estate to cover these costs. And even if they do, these funds won’t necessarily be available to pay the costs at the time.
Which means there’s a very good chance loved ones will have to use their own money if they have it, or borrow money if they don’t – which can lead to debt.
One way you can help now is to think about what you’d actually want, and then discuss it with your family. If you are happy with something basic then say. If not, it’s easy for grieving loved ones to avoid some cheaper options which might be perfectly fine.
When my gran died 10 years ago I took on things like choosing the coffin and stone so my mum didn’t have to. There are so many different options at a huge range of costs. I can see how easy it would be to go for a higher specification. It would have been so much easier if I’d know what my gran would have liked.
You could also look at a funeral plan where you prepay, though these aren’t without their own pros and cons. Here’s a really good guide and cost comparison from Money Saving Expert.
What happens if you get seriously ill
It’s not just dying that could impact your finances and your family. Think about what you want to happen if your body or mind deteriorate to the extent you can’t look after yourself.
This can range from whether you want to be resuscitated through to whether you’d want to be cared for at home.
It’s worth having a power of attorney in place while you’re full with it mentally so you can be sure someone you trust is able to make decisions on your behalf.
If you have kids that are still at home you need to make plans for who will look after them until they are 18 if you and your partner both die at the same time.
You’ll need to ask family or friends to agree to be legal guardians, and then put this into your will.
It’s your money, and you can do what you want with it so this isn’t necessarily something you have to talk about with your wider family. But you absolutely should discuss this with your partner and work out together where you want everything to go.
It’s also an opportunity to plan around inheritance tax as there are things you can do to minimise how much of your estate is lost in tax.
What you need to do
Once you’ve had a chat about these topics, you can then take a few actions that’ll make it easier to deal with money matters when you do die.
Sort out a will
This is the most important one. In fact, even if you can’t bring yourself to have the chat, at least get it down on paper. It not only makes it easier for everyone, it also means your money will go where you want it.
Without a will your estate (i.e. everything you own including property, savings and possessions) will go be distributed according to the law. For example if you’re married most will go to your spouse. But if you’re not, long-term partners could miss out completely.
You can make a will yourself for free, or use an online will-writing service relatively cheaply, and if it’s really simple there’s no reason to not do this.
But if anything is more complicated then you will probably want to talk to a solicitor. There are a couple of ways this can be done for less, including Free Wills Month in March and October and Will Aid in November.
We did the latter last year in exchange for a charitable donation and the process really made us think about what we wanted.
This guide from Which? magazine takes you through the different will options.
Consider life insurance
Now you’ve been thinking and talking about death, it’s logical to see if you can afford life assurance. This is an insurance policy which in exchange for a monthly fee will pay out a lump sum on death.
This is actually a lot cheaper than you might think. I used to have this via my work, but once I went freelance I took out a personal policy.
List your bills and accounts
This is really important if you’re the person who tends to deal with most of the bills at home, but you should list all your different bank and pension accounts too.
There are two reasons for this. First, if you have anyone else in your home they’ll need to make sure they can pay the bills, then transfer them over to their name.
Second, you don’t want them to miss out on a savings or pension pot. If these are all written down in a list then it makes this so much easier at what will be a horrible time.
So write down the account and customer numbers, but be careful about listing passwords. You could look at using a password manager to help keep those secure.
Don’t forget to also include any debts – they’ll need to be paid out of your estate so if loved ones know they exist they won’t be surprised later on.
Oh – and make sure people know where to find this list (and your will).
Make sure your partner has access to money
When you die, your bank accounts will be frozen while the estate is being sorted according to your wishes. But if you have all the money in your account that could mean your partner has limited access to cashflow – and this can last a while.
So, open up a joint account and make sure there’s always some money in there. If you can, it’s worth having a joint account or joint savings account with funds that aren’t touched. Here’s more on the good and bad of joint bank accounts.
Share the workload
Similarly, you need to make sure you both have access to bills.
Because of what I do, I’ve tended to be the one who looks after most bills and bank accounts. Yes it means I can get the best deals and rates, but the downside is that my wife isn’t as on top of everything as she would like.
So we’ve made sure to split some of the bills between us, and wherever possible to have them in joint names.
If you haven’t done this yet, it’s worth doing that now, and helping your partner know what’s what and why.