OpinionJul 9 2014

Planning for the inevitable

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The old adage goes that there are only two certainties in life; death and taxes. While the latter is squeezed out of us on a regular basis, several studies this week have shown that people are not making sufficient financial plans for their inevitable demise.

Making a Will and checking it twice

A new study by Investec Wealth and Investment revealed that 64 per cent of adults do not have a will and of those that do, 32 per cent are out of date as they have not been revised to take into account of major life changes, including marriage, children and divorce.

Nick Gartland, senior financial planning director, conceded that most people have just not got round to making a will, despite 58 per cent planning to do so at some point in the future.

Of these, 25 per cent will use a lawyer or Will-writing service, 20 per cent are likely to use a DIY template and 13 per cent will write it themselves as a letter. This still leaves 20 per cent who do not plan on writing a will and face the prospect of dying intestate.

Catriona Syed, partner at law firm Charles Russell, said: “I am not surprised that the number of people who do not have wills is so high, as we all put off doing things which are difficult and for many of our clients, making a will is not straightforward.

“Clients often believe that all assets will pass to the surviving spouse or to their children if the spouse has already died, and we are always surprised at the misconceptions there are about what happens if someone does not make a will.”

The research pointed out the example of an individual that has children and is not married, or is divorced, the whole estate will be divided between any children. “This may seem good on the face of it, but could cause real problems between your children and your new partner,” added Mr Gartland.

Who gets the house?

As many as one in four parents intend to leave just a percentage – or even none – of their estate to their offspring because they ‘want them to stand on their own two feet’ or do not believe it is deserved, according to a study by Skipton Financial Services.

One of these is Sting, the lead singer of the Police, several media outlets reported said last month. According to reports, Sting told his six children not to expect to inherit much money (he has a £180m fortune) because he does not believe in trust funds.

The Skipton survey is at odds with the almost half of under 40s who admitted that they are banking on a large inheritance from their parents to get them on the property ladder, boost their savings or fund their retirement, despite less than a quarter ever having a conversation about what they are likely to receive.

Andrew Barker, managing director of Skipton Financial Services, said: “Traditionally your entire financial wealth and any assets would all be inherited by your children after your death.

“But it seems this is becoming a thing of the past as people want to use the ‘would-be’ inheritance fund to enjoy their own well-earned retirement or even because they feel their children have already had their fair share.

“As well as that, we are living longer than ever before, so it’s not realistic for young people to rely on their inheritance to fund their retirement.”

Insuring your legacy

An Aegon UK survey conducted by YouGov with 2,500 women found that for mothers, the health, happiness and financial security of their children were priorities, yet 49 per cent with children under 18 have never discussed with family what would happen if they died.

Additionally, 57 per cent of women aged 25 and over have no protection insurance whatsoever, despite 67 per cent now working to support their family. Those without protection cover cite affordability (37 per cent) as a key cause for not having it.

Dougy Grant, protection director at Aegon UK, said: “Whether it’s a reluctance to discuss the unimaginable, a feeling that protection isn’t affordable, or simply a lack of awareness about the services on offer, there are plenty of reasons why women aren’t insuring themselves for the benefit of their family.”

Mr Grant told FTAdviser that the firm has encouraged more investment and wealth advisers to make sure they do not just talking about aspirational savings, but what might happen in the event that life does not go to plan.

“Too many advisers have recently polarised into investment, mortgages or risk specialist, which is understandable, but we’ve had success recently in going to these specialists and making the point that protection should be the bedrock of any conversation you have in financial planning.

“We’ve seen a nearly 50 per cent growth in protection business being written in our investment specialist advisers over the last six months.”

Carl Lamb, managing director at Almary Green Investments, agreed that IFAs specialising in certain areas may be cutting corners on proper tax and protection planning, but that would presumably lead to more business for those advisory firms that do offer the full service planning for both life and death.

He said: “Proper education of both individuals and advisers is key, its important that people understand all the options and can access protection written in trust, get their Wills up to date and make sure their inheritance tax is in order.”