This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
The COVID-19 pandemic has been a stark reminder of our own vulnerability. Here in the UK, after so many years of peace and a rising standard of living for many people, it has been easy for lots of us to forget that life can be frail. How can you prepare your household finances to weather the worst, even as you plan and hope for positive years ahead?
Below, our team at Elmfield Financial Planning in Padiham, Burnley offers some thoughts on how to protect your family’s wealth and finances from tragic events. Although the topic is not pleasant, we hope it encourages you that it is possible to lay out a sturdy safety net for your loved ones whilst continuing to enjoy the present. We hope you find this content useful. If you’d like to speak to an independent financial adviser then you can reach us via:
T: 01282 772938
A legal will
60% of the UK population does not have a will. For some individuals (e.g. those with no assets or dependents) this may not be an issue. Yet for many – especially those with children and/or partner who rely on their income – this presents a real threat to a household’s financial stability. Should you die without a will, your estate (e.g. money, property and possessions) is dealt with under the UK’s intestacy rules. This may result in assets being passed to the wrong people or they may be inherited in a ‘tax-inefficient’ way. Unmarried couples need to take particular care, since your estate does not automatically pass to your surviving partner, tax-free, when you die. This is the case even if you have lived together for a long time and have children.
Power of attorney
You may have heard the sad story of Kate Garraway recently. Her husband, Derek, was put into a medically-induced coma in 2020 after contracting COVID-19 and exhibiting serious symptoms. During this time, Kate told the media that this situation had created enormous financial difficulty for her family, since many bank accounts and insurance policies were written in Derek’s name. She could not act on his behalf due to a lack of power of attorney (POA).
POA is a legal document giving authority to a trusted person (or people) to make decisions on your behalf, should you lose mental capacity. There are different types of POA for different situations including Lasting Power of Attorney and Ordinary Power of Attorney. A financial planner can help you identify the appropriate policies you need to ensure your assets can be accessed by loved ones in case of emergency.
Emergency fund
It is usually unwise to hold large savings in cash due to the poor interest offered by banks in 2021 (which hardly keeps up with inflation). Yet most financial planners recommend keeping 3-6 months’ worth of living expenses readily available in an easy-access account. This can help you cover an unexpected large cost such as an urgent home repair. It can also help to review your insurance policies for key, expensive items which might otherwise deplete an emergency fund – e.g. boiler and heating insurance, which could cost as little at £3 per month.
Life insurance
You may not need life insurance if you are single, have no dependents or assets. However, for families it can be very important – particularly for homeowners. Suppose the main breadwinner in your household dies prematurely whilst the mortgage is still due to be paid. Without a lump sum from a life insurance policy to settle the outstanding debt, this can leave surviving family members in a very strained financial position.
You can explore a range of options in this respect including individual policies for each parent (single life cover) or a shared policy for the two of you (joint life cover). You may wish to review your life insurance every few years to ensure it has kept up with your changing circumstances and with new events (e.g. divorce). It is also a good idea to check whether your employer offers any “death in service” benefits via your contract, to ensure no needless overlap in policies.
Other policies
Aside from life insurance, there are other forms of financial protection which may suit your goals and situation. Critical illness cover, for instance, provides you with an important lump sum if you are diagnosed with a condition specified under the policy (e.g. heart attack). Income protection is also a good option for those looking to maintain a steady stream of monthly income should they no longer be able to work for a period of time – due to injury or illness. Here, it can help to speak with an experienced financial adviser to ensure that your chosen policies fit well together, offer good value for money and provide the cover you need.
Invitation
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you. Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
