Death is an inevitability we all confront, yet its financial shadow often lingers unaddressed until it’s too late.
Preparing for the end of life goes beyond emotional acceptance. It’s about ensuring your money aligns with your wishes and shields your loved ones from avoidable strain. The task can feel heavy, but it’s a necessity.
With rising funeral costs and legal tangles waiting, the consequences of inaction are potentially steep.
This article is the first of two parts exploring the financial implications of end of life.
In this first instalment, we’re looking at how to prepare financially for the end of life – whether that is something you want to be ready for yourself, or for a loved one.
Writing a will and keeping it updated
A will is the bedrock of end-of-life planning. Without it, intestacy rules – who inherits your estate when you die, take over, meaning your money and possessions might not go to the people or causes you intended. Dying without a will can leave your estate open to conflict. Drafting one can be a straightforward process, although the more you own — such as property, investments, pensions, business interests, or savings the more complexity is possible.
A financial planner can help here, assessing your estate’s intricacies and recommending whether a professional draft is wise. Life shifts; marriages, divorces, children and grandchildren all demand updates.
A planner can also prompt timely revisions, ensuring your will reflects your current reality, not a forgotten past.
Understanding inheritance tax and planning ahead
Inheritance Tax (IHT) casts a long shadow over UK estates. At 40% on anything above £325,000, the nil-rate band can shrink what you pass on. For example, if you were to leave behind £500,000, the amount over the nil-rate band would be taxed at 40%. This means the total to pay would be 40% of £175,000, equalling £70,000.
The residence nil-rate band adds £175,000 if you leave your home to direct descendants, but many still face big tax hits.
Gifting is a useful allowance. You can give £3,000 a year tax-free, while small £250 gifts to multiple people are also allowed. Larger gifts may escape tax if you live seven years after gifting.
Inheritance Tax is complex and difficult to navigate without professional expertise.
Planners can assist in mapping your estate’s tax exposure and suggesting strategies such as trusts or timed gifts. Their expertise can turn a daunting liability into a manageable plan.
Organising finances for easy access
When you’re gone, your family shouldn’t wrestle with a financial jigsaw. Multiple bank accounts, pensions, and investments can all blur into chaos without direction. Consolidating accounts helps, leaving fewer threads to untangle.
A financial roadmap, a list of accounts, providers and key contacts such as your solicitor, is vital. A financial planner can streamline this, reviewing your holdings and advising on simplification without sacrificing returns.
Unclaimed assets haunt the UK, with millions lying dormant from oversight. The UK Government has used nearly £1 billion in dormant assets in the past decade. A planner can help ensure nothing’s missed, sparing your loved ones a frantic search amid grief.
Funeral costs and prepayment options
Funerals carry a steep price tag. In the UK, the cost of a ‘basic’ funeral is nearly £5,000 according to Money Helper, with costs continuing to climb. Without preparation, this lands on your family at their rawest moment.
You could earmark savings in a clear account or opt for a prepayment plan to fix today’s prices. These plans vary, some skip extras like flowers or fees, so it’s important to make sure you understand what you’re paying for and if there’s anything missing.
A financial planner can help weigh your options, comparing savings growth against prepayment terms to find the best fit. It’s an unpleasant calculation, but helps your loved ones at a time where they will be at their most vulnerable.
Life insurance and covering dependents
For those with dependents, life insurance is a quiet shield. Term life insurance suits younger families, covering a set span, perhaps 20 years, to clear debts or fund kids’ futures, with policies in the UK available from £11 a month (based on a 40 year old non-smoker).
Over-50s plans can offer guaranteed payouts and no health checks, though premiums rise and sums shrink.
A financial planner can help tailor products, matching coverage to your debts or dependents’ needs, ensuring the policy covers the right risks and pays out what is needed.
Power of Attorney for financial decisions
Death isn’t the only threat, incapacity can hit first. A Lasting Power of Attorney (LPA) for property and financial affairs lets a trusted person handle your money if you lose capacity.
Registering starts from £82 via the Office of the Public Guardian. Without it, families face the Court of Protection, a costly, drawn-out ordeal.
Pensions and beneficiary nominations
Pensions until recently have been a useful way to pass on a legacy as they have been exempt from people’s estates for IHT purposes. However, this is changing from April 2027, making pension inheritance plans more tricky.*
This means pensions need to be carefully considered within a wider estate for IHT purposes. Because of the complexity of the product, and the potential tax liabilities, it is critical to consult with a financial planner to make a plan.
A financial planner can audit your pensions, ensuring nominations align with your wishes and helping you maximise tax benefits.
Talking to family about plans
It’s never comfortable to talk about money and what happens after we’re gone, but staying silent can create confusion and conflict. Share your plans with your loved ones, your will’s location, funeral preferences, and asset splits.
It’s tough, emotions might fray, but it averts worse happening – like fights over vague intentions or shock at hidden debts. Include practical details, the roadmap, and any insurance policies.
A financial planner can facilitate some of this with intergenerational planning in mind, explaining complex bits to your family, and bridging gaps in understanding.
They can also ensure your loved ones are in the best financial position possible should the worst happen.
Facing the inevitable
Preparing financially for death isn’t light work. It confronts us with the reality and finality of life. Reducing our lives to numbers and forms can be, at worst, very distressing.
Yet it’s not for you, it’s for those staying behind. Every move, a will, a gift, a prepaid farewell, buys them space to grieve without the strife of administration.
The UK system punishes the unprepared meaning higher taxes, more paperwork, and loved ones waiting longer to access what you’ve left behind. Act while you can.
*Based on current information available and provided. This may change in the future.
