Introduction

When putting your affairs in order, there are various aspects of financial planning that you should consider. Not all of these will be appropriate to your current needs, but you may find that some are.

Joint Savings Accounts

You should be aware that, in the event of your death, all your bank or savings accounts are likely to be frozen until a Grant of Probate or Letters of Administration (when you die without a Will) have been issued.

This process can often take several months. You, therefore, need to ensure that your Next of Kin or any other family member who is financially dependant on you will not be left in the position of not having access to any money.

You need to address this situation as there are many examples of families who have found themselves not only grieving for their loved one but having to take out immediate loans to pay the household bills.

The solution is to have a joint account or joint savings. In the event of your death, joint accounts will automatically pass to the surviving joint account holder. They will not have to wait until a Grant has been issued. They will be entitled to the whole balance of any joint investments.

We therefore recommend that you have in place an account in joint names with your spouse or partner.

Life Insurance

You should consider for a moment the financial effects that your death would have on your family. If you are in any way concerned that your dependents could suffer financial hardship, then you should think about taking out life insurance.

Life insurance, also known as life assurance, is a policy that pays out a sum of money upon the death of the policy holder or insured person. A well chosen life insurance policy will give you welcomed peace of mind and will ensure that your dependents will at least avoid financial problems at a time when they are grieving and trying to come to terms with their loss.

With life insurance, it is very important that you choose the correct policy that best suits your specific requirements.

Long Term Care Insurance

Long term care insurance provides a planned way of paying for care which is not covered by private medical insurance. With an aging population, an increasing number of us are going to be afflicted by chronic conditions including prolonged illness (cancer) and progressive cognitive disorders (dementia) from which we are unlikely to recover.

The cost of long term care is substantial and is going to be a major worry for many of us in the future. We all should give due thought and consideration to this now in order to plan properly for our families’ future.

Equity Release Schemes

If you are over sixty, an equity release scheme may be a way of releasing a cash sum from your house without having to move. The money you borrow under the scheme is repaid from the proceeds when your house is sold after your death or when you go into long term care.

With buoyant house prices in recent years, equity release schemes have grown rapidly in popularity with the older generation who find themselves asset rich but cash poor.

Equity release schemes have suffered historically from a poor reputation largely as a result of mis-selling and lack of regulation. This has changed in recent years. The market has become increasingly mainstream with a growing number of leading mortgage providers entering the market.

The two most common schemes are as follows:

Lifetime mortgages

Lifetime mortgages offer either a single lump sum, a series of drawdown payments or regular monthly payments which are set against the value of your property. During your lifetimes, you and your partner continue to live in the house. There will not be any monthly repayments.

When the last survivor of you and your partner dies or goes into long term care, the house is sold. The mortgage lender receives their loan amount together with compounded interest which will have been rolled up with the loan.

Checklist if you are proposing to take out a lifetime mortgage

1. Make sure the lender is reputable.
   
   
2. Ensure that the lender is registered with the Financial Services Authority.
   
   
3. Confirm that the lender belongs to Sale Home Income Plans (SHIP) a self regulatory
   organisation dedicated to the fair and proper marketing of equity release plans.
   
   
4. Take professional advice from an independent financial adviser who specialises in equity release schemes.
   
   
5. Compare interest rates that different lenders are offering.
   
   
6. Check early repayment terms. You don’t want to be stuck in a mortgage charging a high rate of interest unable to change because of onerous early repayment terms.

Home reversion schemes

Home reversion schemes involve selling your house or a share of it to an investment company (called the reversion company) for a lump sum or an income for life (or sometimes a combination of both). You then remain in your house for the rest of your life rent free (or for a nominal rent).

You should note that the reversion company will pay you a discount to the full market value of your house. If you sell 50% of your house to them, you will usually only receive 15%-20% of the current value. The exact amount will depend on your age. The older you are, the more you get.

When the house is sold after your death, the reversion company receives all the proceeds (including any growth in value) if you sold the whole house to them. If for example you sold them half the house, then your estate will receive 50% of the proceeds.

Checklist if you are proposing to take out a home reversion scheme

1. Make sure that the lender is reputable.
   
   
2. Take professional advice from an independent financial adviser who specialises in equity release schemes. This is particularly important as home reversion plans are not currently regulated by the Financial Services Authority. This should change later this year.
   
   
3. Confirm that the lender belongs to Sale Home Income Plans (SHIP).

Funeral Plans

You might want to consider purchasing a funeral plan. A funeral plan allows you to make a provision towards the costs of your funeral. Many people find it gives them peace of mind knowing that all the arrangements that they want have been paid for. Very often, people are also keen to ensure that the financial cost to their family is kept to a minimum.

There are currently over half a million people in the UK who have a funeral plan in place.

Please note that information which we provide through Lasting Post is in outline for information or educational purposes only.  The information is not a substitute for the professional judgment of a Solicitor, Accountant or other professional adviser.  We cannot guarantee that information provided by Lasting Post will meet your individual needs, as this will very much depend on your individual circumstances. You should therefore use the information only as a starting point for your enquiries.

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