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Life always has its ups and downs, and along the way it’s often helpful to prepare for any unexpected financial shocks you and your family could experience.
While it’s often worrying to think about the “what if?” scenarios in life, such as your death or an unexpected illness, it’s important to consider how these events could affect your long-term financial viability.
So, with Father’s Day upon us, continue reading to discover how you can offer your family the invaluable gift of preparation through financial protection and well-organised affairs.
Having a financial safety net in the face of the unthinkable could protect your family’s wellbeing
Sometimes, it’s tricky to predict events that can have a considerable impact on not just your own life, but also on the wellbeing of your family.
The good news is that financial protection can provide you with a strong source of financial security that may allow you to support yourselves during periods of hardship.
In fact, Aviva reports that it accepted 98.3% of individual protection claims in 2022, and has paid out more than £5.1 billion across 200,000 claims over the last five years.
Here are some unthinkable events that could occur in your life, and how you can act now to protect your family’s financial stability if they did happen.
You pass away suddenly
While it may be distressing to think about, consider what might happen to your loved ones if you passed away unexpectedly. Would they be able to support themselves financially without your help?
Life cover can give you peace of mind that your family may be adequately supported should you die suddenly. With a tax-efficient life insurance payout, your family could pay off a mortgage or clear other debts, enabling them to continue their lifestyle without having to make extreme changes.
You become seriously ill over a long period of time
Similarly, if you’re diagnosed with a severe illness or experience a life-changing injury leaving you unable to work, you may be without an income for some time.
It’s easy to think, “this will never happen to me”, but unfortunately, no one is invincible. In fact, the Guardian reports that more than 500,000 people in the UK could be diagnosed with cancer each year by 2040.
In these circumstances, you and your loved ones may have to use up your hard-earned savings to support yourselves during this period of hardship.
On the other hand, with income protection in place, you may receive a tax-free income until the policy lapses, you pass away, you return to work, or you retire. This income could match up to 70% of your usual salary.
Or, if you have critical illness cover, you may receive a one-off payment from your provider.
With these funds, you and your family can continue to pay off your mortgage, contribute to your pension, focus on your health and wellbeing during a time of stress, and maintain a substantial savings fund.
Ultimately, you can’t always control unexpected events, but you can take steps to protect your wealth before they happen. Financial protection should be an essential part of your long-term plan, as you can feel more confident that an unthinkable event may not have too grave an impact on your family’s financial circumstances.
Beginning the estate planning process early can bring your entire family peace of mind
Financial protection isn’t the only way you can prepare for the unexpected. In addition to this step, it may help to give yourself plenty of time to organise your estate before you pass away.
Here are three ways early estate planning can offer you and your family invaluable peace of mind this Father’s Day.
1. An up-to-date will can help reduce your family’s financial stress in the event of your death
Having an up-to-date will can make the process of dividing your estate as simple and painless as possible for your loved ones. Despite this, Canada Life reports that 31 million adults in the UK don’t have a will in place.
If you leave your family in the dark about your wishes, this may only add to their stress when managing your affairs.
Alternatively, when you have a concise will outlining your desires for your estate, it could make it easier for your family to make any necessary arrangements.
Better yet, it could help your loved ones avoid any disputes over your assets during this period of heightened stress and grief.
The earlier you make your will, the better, as it could provide you with lifelong peace of mind for your loved ones. It may also be prudent to regularly update your will to reflect your current situation.
2. A Lasting Power of Attorney gives nominated individuals access to your finances
If you become mentally incapacitated following an illness or injury, your family may need to handle your affairs on your behalf.
This is where a Lasting Power of Attorney (LPA) can help. When you register an LPA, you nominate one or multiple people as an “attorney” who can make decisions on your behalf.
There are two different types of LPA:
Health and welfare – Your attorney can make decisions on your behalf regarding your health and care.
Property and financial affairs – Your attorney can access your bank accounts and pensions, act on your behalf to pay bills, and even make protection claims in your name.
You should remember that you must register an LPA before an illness or injury, not after, as it’s too late to put an LPA in place once you’ve become mentally incapacitated. If you lose capacity without an LPA, the Court of Protection may put a “deputy” in place, and your loved ones will need to apply for the role of attorney.
3. A pension “expression of wish” form allows you to allocate your pension savings to your loved ones
Your pension does not usually form part of your estate for IHT purposes. As such, you may need to take an extra step if you wish to allocate your pension savings to your loved ones when you pass away.
Fortunately, you can do this by filling in an “expression of wish” form with your pension provider.
You need to fill in the details of your chosen beneficiaries and return the form to your pension provider. Then, the trustees of your pension scheme may use this to decide how your funds should be distributed according to your wishes should you die.
Without a completed expression of wish form, your provider may take longer to establish what will happen to your pension funds after you die, or your retirement savings could even pass to unintended beneficiaries.
Remember, it’s important to review your expression of wish form after significant life events, such as splitting up with a partner. In this case, your former partner may receive a payout against your wishes if you don’t update your form.
Get in touch
Father’s Day could be a fantastic opportunity to ensure you’ve prepared for the unthinkable, and to give your family the peace of mind that they may be financially supported should the worst happen.
Email info@athertonyork.co.uk or call us on 0208 882 2979 to find out how we can help you establish a safety net for you and your loved ones.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions.