Protecting your family in the event of your death – 6 key steps to take

This week (8-14 May) is Dying Matters Awareness Week; the flagship campaign for Hospice UK which aims to create an open culture in which we’re comfortable talking about death, dying and grief. Find out more about their campaign here.

It’s not easy to think about, but when it comes to financial matters, the harsh reality is that we all need to consider what would happen in the event of our death, not only to ensure that our wishes are clear, but also to make life easier for loved ones around us. And knowing that you and your family are prepared for whatever might happen can bring real peace of mind.

You might be reading this and thinking that this doesn’t apply to you, as you’re young(er) and in good health, so you can put off thinking about these tricky topics for a few years. Please don’t. Especially if you have children. None of us know what’s around the corner...so this is one topic that really cannot afford to wait.

Here are six practical steps that all of us should be taking:

1. Talk. Even though you don’t want to. It may not be a comfortable discussion (at least to start with), even with your partner, but it’s important to discuss what might happen in the event that one of you were to pass away. If it helps, think of it as a practical, rather than emotional conversation, enabling you to start to plan for if the worst happened.

2. Choose a legal guardian for your children. Even though you don’t want to. Many parents cannot bear to contemplate this subject, but it’s so important to have a formal plan of who would take care of your children, to avoid additional heartache in the event that both parents were to die. A legal guardian has the legal authority to take care of a child and would be responsible for taking all parental decisions. It could be a friend or family member – anyone over 18 years old. You could choose to have more than one guardian (eg one guardian takes care of the child and lives with them, while another guardian could be responsible for managing the child’s assets) - but make sure the people you choose will agree on what is best for your child.

3. Make a will. Please. In short, your will gives you control over what happens to your estate after your death – in particular, who carries out those wishes, and who receives your estate. It’s also usually where guardianship wishes are recorded (which is often a reason why parents of young children delay making a will – because they can’t bear to think about difficult guardianship decisions). Without a will, the law decides how your estate is distributed, and this may not be what you’d choose. In particular, unmarried couples do not have the same legal rights as couples who are married or in a civil partnership (even if you live together and have children together), and making a will ensures that your partner can inherit as you wish. Please always ensure that you obtain appropriate legal advice to avoid any pitfalls.

4. Protect your family from the financial fallout. Money worries following the death of a loved one can be a source of additional anxiety and stress at a hugely difficult time. So it’s critical to think about what level of financial protection your family would need in the event of the death of you or your partner. This might be in the form of life insurance which pays out a lump sum (for example, to pay off the mortgage) or a family income benefit plan, which pays a monthly sum to your loved ones (in effect, a replacement income, or to cover additional costs) for a specified period (ideally until children have ceased to be financially dependent). You may already have some cover in place – for example, lump sum cover through your employer’s death-in-service scheme, or through a policy that you’ve taken out some time ago – but it’s important to regularly check that the level of protection still remains appropriate for your family’s needs, particularly if your circumstances change – for example, you change jobs, or move house..

5. Check your nominations - ensure the right people will benefit. If you have death-in-service benefits at work, or are part of a pension scheme, then you’ll have been asked at some point to nominate your preferred beneficiaries – ie who would receive those lump sum/pension benefits when you pass away (this is also sometimes called an “expression of wish”). Whilst not usually binding on the Trustees/administrators of the scheme (a structural requirement to ensure that such payments sit outside of your estate for inheritance tax purposes), these are important decisions to make and again, it’s important to keep them up-to-date, as your choices may have been made many years ago when your personal circumstances were different. It’s generally very easy to update your wishes, and just involves filling in a form provided by the scheme administrators.

6. Get organised with a “When I Die” file. And tell someone that it exists. It may sound heartless, but the reality is that the admin associated with the death of a loved one can be overwhelming, on top of the emotional loss. Even a little planning ahead can help to reduce that burden for those left behind. A “When I die” file – including items such as a copy of your will, life insurance documents, any letters of wishes, details of key professional advisers/contacts, details and key paperwork for your assets and liabilities - can make it so much easier for family members to access key documents. If you do go to the trouble of doing this, make sure you share its existence with trusted loved ones/intended executors so that they know where to find it.

None of us would really choose to spend time thinking about these uncomfortable matters. But we owe it to ourselves and our families to make sure that we do.

The information and guidance provided within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK. This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.