Few of us want to spend time thinking about our deaths, or perhaps even less, about a time when we are still alive but unable to make our own decisions. As a result, many people delay preparations that might help their families look after them when they are unwell or deal with the administration that follows their death, from how to organise a funeral to gathering all their family member's assets.
Most parents want to make their children's lives easier, however, and a little planning now can go a long way to help them in the future. In this article, we set out a few suggestions for ways to do this as well as one thing not to forget, as follows:
DO
- Write a Will;
- Appoint guardians for your minor children;
- Prepare a list of all your assets, including digital assets;
- Write out your funeral and burial wishes;
- Make a lasting power of attorney (LPA);
- Make plans for your business succession.
DON'T
- Forget about tax planning, both during your lifetime and in your Will.
And in more detail…
TO DO:
Write a Will
One of the most helpful things you can do for your family is to write a Will directing how and to whom you would like your assets to pass after your death. If you don't do this, your property will pass by intestacy – a set of legal rules that aims to encapsulate a fair division between any spouse or civil partner you might have, your children, and if you have neither, other members of your family.
These rules rarely reflect how you actually would wish to share out your property and may have unfortunate consequences – disinheriting a long-term partner, for example, if you are unmarried, or leaving out people that may have been important to you – this might include friends, carers or your favourite charity.
In certain circumstances, your estate passing by intestacy may lead to family disputes, or even legal proceedings, for example, a claim for financial support by a long-term partner, child or other dependant. Such claims can rapidly eat away at the value of property you left in your estate. They may also leave your family, and others you care about, upset that you did not think about how you would like them to benefit after your death.
As part of a will-writing exercise, it is always helpful to discuss with your family how you are planning to pass your property, especially if this is not in equal shares. Disputes are far less likely if people understand your reasons for the way you have made your Will.
If discussion is difficult, for logistical or time reasons, you might consider writing a letter instead, which can be read or sent to members of your family to help them understand your thought process. It is not uncommon for people who have been left out of a parent or loved one's Will to be far more upset when they feel they have not been considered, rather than because they have missed out financially.
Appoint guardians for your minor children
This will not apply to everyone writing a Will but, for those who have minor children it should be an essential part of the Will-making process. However, it is one which is often avoided, perhaps because it is too upsetting, or because people prefer to leave the decision up to their family, should the worst happen.
However, at a time when your children are grieving for the loss of either their only parent, or both, they will need certainty, and debates over which members of the family should look after them will not help with this.
Before appointing guardians, it is important to discuss your choice with the people involved, and to make sure they are happy, and will be able, to step in (usually with financial support from your estate). People may think that a sibling who already has children may be a better choice than one who has no experience of them, but there may be reasons why this is not the case. Only a frank conversation will allow you to make the best arrangements.
Prepare a list of all your assets, including digital assets
After someone has died, the last thing their family wants to do is search through their letters, correspondence and other belongings to determine what they owned, where they held their bank accounts etc. Therefore, making a clear and detailed list, including relevant contact details, and updating it regularly, is hugely helpful for your family, both after your death, and possibly even before, should you lose capacity to make your own decisions. Where relevant, instructions on how to access passwords, for example, through a password manager, will also be useful.
Digital assets should not be overlooked. Those which have a material value – cryptocurrency, non-fungible tokens etc - are the most obvious ones to consider, but there are others. For example, photographs may have huge sentimental value to friends and family, but if they are stored virtually, as many are now, they will need to be told how to access them.
Social media accounts are personal to the individual and, to arrange for them to be accessed or deleted, your executors will need to know what accounts you have and whom to contact. Some internet providers and social media companies have arrangements for after death, in some cases allowing for a memorial page to be created, and in others for the account to be deleted. The arrangements for each are different, and some are far more advanced than others.
The Society of Trust and Estate Practitioners (STEP) has provided some helpful information here. The information at this link will help you to determine what you need to do in advance to ensure that after your death, your executors can access the information they need about your accounts.
Write out your funeral wishes
It is a good idea to specify what sort of funeral you want after your death, and how you would like your body to be treated – for example would you like to be buried, cremated, or your body left to medical science? If you do not do so, the decision will be left to your executors and family and may not be what you would have wanted.
Again, it will be a difficult time for your family, and anything you can do to reduce the number of decisions they have to make will be helpful for them, even down to choosing the hymns, music or readings you would like, and where your funeral and burial should take place.
Prepare a Lasting Power of Attorney
While many people do spend time thinking about what they want to happen to their property after death, it is equally important to consider what will happen if you lose mental capacity, whether because of illness, injury, old age or otherwise.
To ensure that, as far as possible, you will continue to be supported financially, and that your day-to-day needs will be taken care of as you would wish, you should consider executing lasting powers of attorney (LPAs). There are two types of LPA - property and financial affairs LPAs (which can be used before or after loss of mental capacity, as you choose) and health and welfare LPAs (which can only be used once you have lost capacity) - and you can have either or both. You can appoint the same people, or different ones, to act as your attorneys for each type of LPA.
It is important to bear in mind that it can take some time to register an LPA after it is signed, so this is a task that should not be delayed.
Property and financial affairs
Property and financial affairs attorneys can look after your bank accounts and other assets and pay bills on your behalf. They can also make gifts in certain circumstances, where you might have been expected to do so – birthday presents to friends and family, for example. However, any such gifts should be at a level that you would have been expected to make.
Health and welfare
Health and welfare attorneys can make decisions about your day-to-day life and care – where you should live, how you dress and your medical care, for example. The type of decisions your attorneys can make on your behalf, whether in relation to giving or refusing medical treatment, or otherwise, will depend on the powers you give them in your LPA.
Ideally, any instructions you give your attorneys and other members of your family about your long-term care should be as flexible as possible, whether you include them in your LPA, a separate letter or just in conversation. For example, you might express a wish to remain at home for as long as possible, and then make suggestions for the type of care you would like should that become necessary, and circumstances allow.
Make plans for your business succession
If you own a business, you should ensure that you have planned for its future. Ideally, this should be a managed process of succession starting before you retire, but in some cases an early death or even loss of mental capacity may intervene before you are able to begin the succession process.
Loss of capacity
If you lose capacity while you are still running your business, you will need to have an agreed process to pass on your responsibilities. In some situations, putting in place a business LPA appointing an appropriate attorney to make business decisions on your behalf may be sufficient, for example in the case of a sole trader or, depending on the terms of the partnership agreement, a partner in a business.
However, an LPA cannot be used to delegate the role of a director of a limited company. In this situation, you should review the company's articles, and ensure that they include a clear and agreed process should a director lose capacity.
We have written in more detail on this topic here.
Business succession after retirement or death
Where you have a family business, you may want your children or other younger members of your family to take it over. Alternatively, you may be looking for a successor outside your family. Whatever your decision, it is important to communicate this to your family, whether they are your potential business successors or otherwise, and, if they are your preferred successors, determine whether or not they are happy to take over.
This is particularly vital if succession to your business may affect the shares in which members of your family will inherit your estate, either in value or in the type of assets each inherits. Discussing your plans with your family now and allowing everyone to have their say and to understand your reasons, may prevent expensive and divisive disputes after your death.
DON'T FORGET ABOUT TAX PLANNING
While inheritance tax (IHT) is paid by only around 5% of all estates, it is widely considered to be the most hated tax. Certainly, as property prices and general inflation increases, more of us are likely to be pulled into the IHT net over time. Therefore, it is always worth considering if there is anything you can do during your lifetime or in your will to reduce the level of tax that your estate will pay after your death, to maximise the value passing to your family and friends.
We are writing this note shortly after the UK Budget on 30 October 2024, before which there had been much speculation about likely changes to the IHT regime. In the event, the only significant changes to IHT relate to reliefs for agricultural property (APR) and business property (BPR) which will take effect in April 2026, and proposed measures in connection with IHT on pensions on which the government is consulting.
We will write separately on these changes but, in the meantime, you may find useful our article on IHT here, which touches briefly on the APR and BPR changes and considers the other reliefs and exemptions available under the existing rules.
This note suggests a few things you should consider doing in preparation for the future. Everybody's circumstances are unique and before taking any steps, you should seek advice to ensure that your plans work in the best and most tax-efficient way possible for you and your family.
If there is anything you would like to discuss in relation to your estate and succession planning, please get in touch with your usual Howard Kennedy contact, or a member of our Private Client team here.
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