Most people have considered what happens when they die. Far fewer have considered what happens if they become seriously ill, have an accident, or lose the ability to deal with money while they are still alive.
That can create a real problem for the people closest to you. Your family might know you have pensions, ISAs, bank accounts and insurance. But would they know where to find everything? Would they know who to call? Could they pay the bills if you could not? Could they speak to your pension provider? Could they make financial decisions for you if you were not able to?
A will helps after death. A Lasting Power of Attorney helps while you are alive, because it allows someone you trust to act on your behalf if you cannot. A clear family finance file helps that person know what exists, where to look and what to do first.
What is a Lasting Power of Attorney?
A Lasting Power of Attorney, or LPA, lets you choose someone you trust to make decisions for you if you cannot make them yourself. There are two main types. One covers property and financial affairs. The other covers health and welfare. The property and financial affairs LPA can help with things like:
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paying bills
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dealing with bank accounts
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managing investments
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speaking to pension providers
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dealing with tax
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handling property
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collecting pension income or benefits
This can be very useful if you become ill, lose mental capacity, or simply cannot manage things yourself for a period of time. Without an LPA, your family may have to apply to the Court of Protection before they can help. This can take time, cost money and add stress at an already difficult point.
“My spouse will just deal with it” may not work
This is a common assumption, but it is not always right. Being married does not automatically mean your spouse can manage every account, pension, or investment in your name. A bank may not give them access. A pension provider may refuse to speak to them. An investment company may need formal proof that they have authority to act for you. That is why an LPA matters. It gives your chosen person legal authority to act on your behalf.
But an LPA is only part of the answer. It gives someone permission to help, but it does not tell them what you have, where to find it, or what you would want them to do. That is why it helps to have a simple family finance file.
What should go in your family finance file?
Your family finance file does not need to be complicated. It should help your family answer three basic questions: What do we have? Who do we contact? What needs doing first?
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Who do we contact?
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What needs doing first?
Start by listing the main things your family may need to know about, including:
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bank accounts
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savings accounts
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Cash ISAs
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Stocks and Shares ISAs
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pensions
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investment accounts
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life cover
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income protection
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mortgages
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loans
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credit cards
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household bills
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business interests
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your accountant
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your solicitor
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your financial planner
You do not need to write down passwords. In fact, you should be very careful with them. But your family should know where important records are kept and how to find the right people. A secure password manager can help, as can a short note kept somewhere safe.
What should your family do first?
If you became seriously ill, your family would need a simple order of action. They may need to:
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Make sure there is enough cash in the right account
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contact your employer or business
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Contact your financial planner.
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Contact your solicitor
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contact pension and investment providers
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Check insurance policies
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Check mortgage payments
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understand what income is still coming in
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avoid making rushed decisions
That last point matters.
When families are under pressure, they can make quick decisions that later cause problems. They may sell investments at the wrong time. They may take pension money in a way that results in more tax than necessary. They may keep too much in cash because they are worried. They may also miss insurance claims, pension benefits or important deadlines. Good planning lowers the chance of these mistakes.
What should my financial planner know?
Your financial planner should know more than just the value of your pensions and investments. They should understand your family situation and what would need to happen if you could no longer manage things on your own. For example, they should know:
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Who would deal with money if you could not
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whether your LPAs are in place
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Whether your pension nominations are up to date
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What income would your family need?
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What debts would need paying
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What insurance would pay out
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whether your spouse or partner could cope financially
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whether care costs may become an issue
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Whether your plan still works if your health changes
This is where cash flow planning can help. It can show what may happen if income stops, care costs start, or one person has to manage the household finances alone. Do not leave this until it is urgent. You can only set up an LPA while you still have mental capacity. That is why it is best to deal with it before it becomes urgent. You hope it is never needed. But if it is, your family will be glad it exists.
A simple checklist
If you want to make things easier for your family, start here:
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Set up a Property and Financial Affairs LPA
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Consider a Health and Welfare LPA
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Check that your will is up to date.
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Check your pension nominations.
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Make a list of your pensions, ISAs, accounts and policies.
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Keep adviser, solicitor and accountant details in one place.
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Make sure your spouse or chosen attorney knows where to find the file.
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review it once a year
