The unpleasant but necessary business of planning for your death
Death comes with an awful lot of admin, says Merryn Somerset Webb. And if you don’t plan it right, it can come with an awful lot of expense, too. Here’s how to smooth your passage – in financial term, at least.
Are you ready for death? It's a miserable question, but one that might be worth thinking about because, like pretty much everything these days, it comes with an awful lot of admin, and if you don't get this done right, the possibility of an awful lot of expense.
Consider inheritance tax, the thing I know keeps an awful lot of our readers up at night (often with good reason). Numbers just out show that in 2016-2017, around 28,100 estates paid the tax; 15% more than the year before. The total proportion of estates liable for the tax is on the up, from 2.6% in 2009 to 4.6% in 2016-2017, and the average payment was also pretty hefty at £179,000.
You might want to see if you can do any planning to avoid a bill like that. The first bit of good news I have for you this week is that October is a fabulous time to get started. It is Free Wills Month in which participating solicitors will make or update a simple will for you for free.
If you haven't got a will and one-third of over-55s haven't now is the time. Making a will is the only way to be certain that your money goes to those you want to have it. Without one, legal defaults kick in.
In England and Wales that means that, while property and bank accounts held jointly will automatically pass to your spouse, the rest of your estate will not (nor will property held as tenants in common). Instead, the first £250,000 and half of the remainder goes to the spouse and the rest is split between any children.
That could then trigger a pointless tax bill. If everything goes to your spouse, there is no bill to pay. But if more than your estate's allowance of £325,000 goes elsewhere, there is. It's also worth remembering that a partner to whom you are not married will get nothing and nor will grandchildren or stepchildren. A spouse you loathe, but never quite managed to divorce, will.
If you have no family you might find it hard to be bothered with thinking about all this. But unless you have a particular fondness for the royal family or a conviction in the correctness of their charitable impulses you still should. In most of the UK, your money will go to the Crown if you die intestate. But if you live in the Duchy of Lancaster it goes to the Queen; if you live in Cornwall it goes to the Duke of Cornwall. As Hargreaves Lansdown points out, "accidently leaving your entire estate to Prince Charles" could be considered something of an epic admin fail.
But while a will is a good thing to have, it is also the absolute bare minimum of end-of-life admin prep you can do. Think of the other things. Have you arranged a power of attorney in case you need someone to take over your affairs before you actually die? Where are all the details of your investments, your Isas, Sipps, your cash bank accounts and any occupational pensions?
Then there are your life insurance documents and your digital assets your Facebook and Instagram accounts, for example. Should they be deleted on your death or not? And your online music libraries who gets your account?
This brings me to the second bit of good news I have for you today. As is usually the way, capitalism is busy providing: a group of companies happy to help ease the worries of old age. In the US, the likes of Cake and Everplans offer everything you need to get your papers in order and, as the latter puts it, "be a hero to your family" after your death.
For good measure on the hero front they also suggest you find yourself a "cleaner" to make sure you don't have to suffer "posthumous shame". Said cleaner is to go through your hard drives, email accounts, phone, social media and possessions to get rid of anything awkward (from the wrong kinds of club memberships and medication, to weapons, wigs and "toys").
Similar end-of-life admin services are appearing in the UK, though not yet with the "cleaner checklist". New to the market is Kinherit, which reckons it is pioneering a "different approach to end of life planning" one that offers peace of mind, co-ordinated handovers on death and asset protection, including discussions on IHT, using the residential nil-rate band and an understanding of complex trusts.
You can sign up for three different levels of service costing upwards of £250 but all offer a will, end-of-life planning and a secure online vault for your documents. You'll also get regular contact with Kinherit to remind you to update them with any major changes and the reassurance of knowing probate will be a piece of cake.
Longer established is Lexikin, launched in 2015, which offers to create a very secure record of your "assets, wishes, memories and legacies". On its website you can have a will drafted, store documents, index all your accounts (and your cryptocurrency passwords), social media and photo libraries, catalogue your physical possessions (and get them insured), use an asset calculator to leave a summary of your estate, find a wealth manager and direct your charitable legacies. The storage is free but there are fees for the professional services.
A note of caution: what capitalism gives, capitalism quite often takes away, as those stranded abroad with Thomas Cook will know. It's hard to make a good margin on death. Lawyers tend to think of writing wills as loss leaders hence, I imagine, their participation in a "free wills" month. And most people will use any displacement activity possible to avoid engaging with either paperwork or death so it is hard to drag them over the payment line. Just writing this column is making me feel tense.
It is no surprise then, that the only real way for companies to profit in the past has been to sell dodgy funeral plans something I would absolutely never suggest you buy.
That makes end-of-life launches risky. My guess is that the responsible companies will have their own end-of-life plan in place, determining what might happen to everything of yours they hold in their online archives if they go bust. I have some confidence in the firms I have mentioned here. But, given that your end of life is probably some way off 65-year-olds can expect to live another 21 years if female and 18.6 years if male the best question to ask before you commit your secrets to a planning provider is probably this: what happens if your end of life comes before my end of life?
- This article was first published in the Financial Times