If there is one topic that none of us want to talk about, it is our own mortality.
When people are fit and well, the risk of dying feels distant and remote. When people are unwell, many feel it is defeatist to plan for the worst. Some superstitious people believe that if they put their affairs in order, they might get the tap on the shoulder, as if there is an orderly queue with priority places for those well prepared! If I had a £1 for everyone falling into the superstitious category, my wealth planning needs would keep several financial advisers busy.
Despite the fact that everyone would naturally like to minimise the stress and administrative burden for their loved ones when they die, few are aware of the steps they need to take to prevent this. Most adults need a plan in place for later life and death, but a lack of knowledge of the implications of not having a will or Lasting Power of Attorney (LPA) results in low levels of engagement.
Co-op research shows that three-quarters of UK adults still haven’t had conversations with loved ones about their wishes. Highlighting the impact that not having these conversations can have, almost a quarter of UK adults have taken on the role of executor and, of those who have, over a quarter found the role stressful and 15% found the experience upsetting.
This is largely because people do not understand what would happen to an estate on incapacity or death. For example, many assume that a next of kin would be able to act on their behalf, when really, they need to put an LPA in place. Similarly, many assume that their partner will automatically inherit their estate, when in fact they need a Will in place.
These are some of the many misconceptions about how the law works which means people take unnecessary risks often leading to unintended financial consequences. Financial advisers have an important role to play here – firstly to bring the topic forward as part of their regular dialogue with clients, to reassure them and metaphorically hold their hand as they navigate the estate planning process.
With the help of informed advisers, people can better understand how the law works and how they should use it to better protect their family and assets.
Why a will is not enough
In recent research undertaken by Co-op Legal Services, 75% of IFAs responded that better estate planning support would improve client satisfaction, retention and referrals. However, currently, only 10% of clients work with their IFA on their will.
Many clients assume that a Will is enough. However, 70% of the UK adult population do not have a Will, and the 30% that do think they have done all they need to do to plan for the future. By its very nature, a Will only takes effect on death – so offers no protection during a lifetime.
It is crucial that IFAs support their clients to understand that later life planning is about much more than just Will-writing. There are three fundamental requirements: a Lasting Power of Attorney, a Will and an estate health check. Often, only direct experience of a family member not having a Will or LPA highlights the real angst and stress of being without one. These are important issues, which most people may not fully understand, and talking about them needs to be normalised to ensure peace of mind and protection for families.
The Alzheimer’s Society predicts 1.6 million people will be living with dementia by 2040. No one wants to think about what will happen if they become unable to make decisions themselves through illness or old age but having an LPA in place can help alleviate the stress and cost to family members. Without one, relatives may be unable to act on their loved ones’ behalf, making financial matters and healthcare much more complicated. This can be a traumatic experience, and too often it takes direct experience of having to find a way through the maze to ensure their loved will find it more straightforward. With an LPA in place, people will have the ability to legally speak on their loved one’s behalf and make decisions on their welfare, which many may assume they are already entitled to do.
Choosing the right Will
There are several legal choices to be made when making a Will and it is important to understand all the options before making a choice. Different wills afford different levels of protection and wealth preservation for future generations. A Will is one of the most important documents you will ever sign and done well it can provide positive protection for family and wealth.
Though it is a misconception that writing a Will covers all eventualities once you pass, it is nevertheless a crucial aspect of later life planning. Without one, your estate goes into intestacy, which means administrative challenges, delays, difficulty accessing funds and potential emotional uncertainty. Writing a Will clarifies how your estate should be passed on, easing the burden during a distressing time. It will also help to expedite the probate process, which many people fail to understand the complexities of.
The final piece of the puzzle – the estate health check
Coping with bereavement is already an incredibly difficult time for all families, and regrettably one which has become more prevalent during this healthcare crisis. As such, it’s more important than ever that people become cognisant of what they can do now to avoid additional pain for their loved ones later. It’s clear from our research that there are too many misconceptions about what later life planning entails.
Yes – writing a Will is important, although the low-levels of Will-writing for people under 40 with assets remains a concern. However, writing a Will is not the be-all and end-all. It is vital to run a full estate health checking including for examples a check on joint bank accounts, gifting, property titles and more to ensure that the actions taken in life are not in any way contradictory or problematic at the time of the estate administration
This is where advisors have a crucial role to play in encouraging people to the next frontier beyond financial advice and to have the right legal documents in place to protect their loved ones when the inevitable happens.
An overview from Caoilionn Hurley, Managing Director, Life Planning & Legal Services at the Co-op