Your financial plan is a roadmap for your life that helps you prioritise what is most important to you, make financial decisions with these priorities in mind and bring you closer to the life you want. And having a written will and a lasting power of attorney (LPA) is a fundamental part of any financial plan.
The impact of the recent health crisis led to a surge in people thinking about their later life plans. In the 12 months since the pandemic, 25% (4.9 million) of UK adults created a will wrote their will, 5.5million updated their will, and 7.8million have started to think about a will. In recent years, the number of registered lasting powers of attorney also drastically rose to more than five million.
Yet, despite this surge, 56% of British adults (29.5million) remain without a will. Meaning their property and assets will be shared out according to the intestacy rules, and people they might not otherwise have chosen could end up inheriting from their estate.
So, why is it so important to have a will in place? In summary, it’s about ensuring your wishes are met and relieving the stress for your loved ones when they’re grieving.
In terms of when is the right time to write a will, the answer is as soon as possible!
Life is unpredictable, and having this document in place will provide reassurance that no matter what happens, the people you love will know your wishes, and your estate will reach the right people.
But remember, a will is a working document and needs revisiting and updating throughout your life.
As a general rule, you should review your will and beneficiaries every five years. Otherwise, it would be best if you revisited it anytime something significant changes, such as:
- The death of a beneficiary or executor
- The birth of a child or grandchild
- Marriage or divorce
- Separation from a partner or a new partner
- Moving house
- Approaching retirement
Your will includes the names of any beneficiaries who you wish to receive an inheritance from your estate. But you also need to carefully consider who will be the executors and trustees (if necessary).
For more on the role of an executor and trustee, you can read our previous article here.
Marriage and divorce
It’s important to remember that marriage (or civil partnership) automatically revokes a will already in place unless you’ve made the anticipation of it in your will.
Divorce doesn’t automatically revoke a will. When you separate, until your decree absolute comes through, any provisions made in your existing will remain in force. So any gifts to your former spouse/civil partner or appointments for them to act as your executor are still valid, even if you’ve been separated for years.
Once the divorce is final, and you receive the decree absolute, any provisions or gifts to your former spouse or civil partner lapse, and the rest of your will remains in place. However, if you only appointed them as sole executor and beneficiary, intestacy rules kick in. That’s why it’s always recommended to update your will when you separate.
Lasting power of attorney
Wills and lasting powers of attorney are usually talked about in conjunction with each other. But you may be wondering what the difference is and why you need both; a will deals with your assets and wishes when you die. A lasting power of attorney deals with your affairs, financial or health, whilst you’re alive but unable to deal with them yourself.
A lasting power of attorney is a legal document that you make whilst you’re still fit, able and have the capacity. You pick the people you trust the most to deal with any decisions on your behalf in the future, should you not be able to anymore; these are your attorneys, and they step in when you need them the most.
The two types of Lasting Power of Attorney
There are two types of lasting power of attorney, and you can choose one type or both.
1. The Property and Financial Affairs Lasting Power of Attorney
This lasting power of attorney allows an attorney to make decisions about your money and property. Such as:
- Managing your bank accounts
- Paying your bills
- Selling your property
- Collecting your benefits or pension
2. The Health and Welfare Lasting Power of Attorney
This lasting power of attorney gives an attorney the power to make health and care decisions regarding things like:
- Medical care
- Later life care
- Life-sustaining treatment
- Daily routine
Both types of attorneys can apply if you lose the mental or physical capacity to make your own decisions. However, you can also use the Property and Financial Affairs lasting power of attorney while you’re still able to make your own decisions but would maybe prefer someone else to.
You can register for both lasting powers of attorney or just one. Having both can be useful when it comes to going care. For example, your attorney could make decisions on your health and care, as well as take care of your care fees.
You can appoint multiple attorneys to act together (Joint) or separately (Jointly and Severally). Jointly provides a bit more of a safeguard, as both must agree to any decision, whereas Joint and Severally is a bit more practical on a day to day basis, as they can decide together or separately if one dies or isn’t available.
Who and when?
Some questions that naturally crop up at this point include ‘who should I appoint as my attorney?’ and ‘when will my attorney know to act on my behalf?’.
Firstly, speaking to a financial planner or solicitor will help you understand more about the responsibilities of your attorney and decide who is best to take on the role. It should be someone you trust. More often than not, this will be a family member, but it could also be a friend, business partner or your solicitor, for example.
To future-proof your plans, we recommend you appoint more than one attorney or have a replacement attorney. And while you still have the capacity, you can remove any unwanted attorneys from a lasting power of attorney or make a new one if you change your mind later down the line.
Secondly, there is no black and white answer to when your attorney will know to act on your behalf. It is generally a matter of whether you’re able to make a sound decision at the time of needing to make it. And if it becomes difficult to decide, your attorney can seek advice from a mental capacity expert.
Protecting your future
With an ever-increasing ageing population, life expectancy in the UK has increased due to better living conditions, improving habits and medical advancements. But whilst we live longer, research shows many of us aren’t protecting our future and making appropriate provisions, with over half (56%) of UK adults without a will.
What’s more, only 30% of people aged 75 and above have a lasting power of attorney (POA) in place, meaning 4 million do not have a POA. And more than 5 million people aged 65-74 are without a POA.
Yet, staying ahead of the curve by taking the time to put these measures in place now could save you a lot of time, money and stress in the future. So the best thing you can do in life to protect yourself, your family and your wealth from any nasty surprises is to focus on your general resilience.
General resilience means having a bit of a safety net or a contingency plan if the unexpected should happen. We can’t prepare for every possible worst-case scenario, but what you can do is give yourself a headstart by making your finances more resilient.
The easiest way of doing this is to follow some basic financial planning fundamentals, including having a will, making a lasting power of attorney and building an emergency fund (to name a few).
As financial planners, we look at every aspect of your finances, putting your needs front and centre of your plan. To get you the best possible outcome, we collaborate with other professionals. Over the years, we’ve built up a bank of trusted professions that we believe will put your interests first – from lawyers and solicitors to tax experts and business consultants. So you can rest assured that your finances are in a safe pair of hands.
If you have any questions or want to discuss getting your affairs in order, please feel free to get in touch with us any time to have a chat with one of our independent financial advisers.