End of Life Financial Planning in Retirement – Ensuring Peace of Mind for You, and Your Loved Ones

As you move through the stages of retirement, it becomes increasingly important to consider end of life financial planning. This is not only about securing your own peace of mind, but also about ensuring your loved ones are taken care of when you are not around anymore.

In this article, we discuss the steps involved in organising your assets, including creating or updating a will, setting up trusts, and other strategies. These practical legacy planning steps focus on preserving your wealth for future generations, and ensuring you are doing all you can to efficiently pass on your estate when the time comes.

By taking the time to plan now, you can reduce the pressure on your loved ones, helping them avoid making ill-considered decisions, and providing them with financial peace of mind during an emotionally trying time.

What is end of life financial planning?

End of life financial planning is the process of putting your affairs in order. It is a time to give thought to:

• What you want to happen to your money and other assets if you become ill or pass away
• Who will take responsibility for handling your affairs should you become unable to do so yourself
• Who you will trust to manage and distribute your estate when the time comes

Also known as estate planning or legacy planning, the process can involve various tasks.

These may include accounting for end of life expenses, such as care fees or funeral expenses, making or updating your will, arranging or reviewing lasting powers of attorney, giving lifetime gifts, and/or arranging trusts.

Why is estate planning in retirement so important?

When you reach the later years of retirement, financial planning becomes more important.

Reducing the burden on loved ones at what will undoubtedly be a difficult time for them is probably foremost in your thoughts. But you will also want to make sure your wishes are carried out in line with your intentions.

Knowing that firm plans are in place can reduce anxiety, providing comfort to you, and your family. It can help refocus your attention back to enjoying the rest of your retirement.

End of financial planning aims to preserve the maximum amount of wealth possible for your intended beneficiaries, whilst providing you as much financial flexibility as possible so you can continue to enjoy your later retirement years.

Retirement financial planning: 6 steps for peace of mind

It is advisable that any financial planning journey takes place under the guidance of a specialist financial planner. Qualified, experienced professionals will be able to tailor a plan to your individual circumstances, taking time to consider the wider needs of your family.

They can look at every aspect of your financial situation, helping manage your assets optimally and tax efficiently to ensure you can meet your goals, or get as close to them as possible.

To help you better navigate the estate planning process, we have broken it down into six steps.

Step 1: Your Financial Inventory

In preparation for your end of life financial planning journey, a good first step is to make an up-to-date inventory of your assets.

This may include:

• Property
• Investments
• Savings
• Pensions
• Personal belongings

Once you are clear on what you have, it is time to think about what you want to happen to your assets after you have gone.

Step 2: Your Will

A will lets you decide what happens to your money, property and other assets after your death. It can also help ensure your beneficiaries do not pay more Inheritance Tax than necessary.

No will?

If you do not already have a will, now is the time to make one. If you die without a will, the law will dictate who will benefit from your estate.

Even if you are married or in a civil partnership, a will is essential. While spouses often inherit each other’s estates automatically, a will allows you to specify gifts to grandchildren, friends or charities. A well-structured will can also help minimise Inheritance Tax, protecting more of your estate for your loved ones. Without a will, your decisions may not be carried out as you intend.

Already have a will?

You may already have a will, but does it reflect your current wishes? Now is the time for a review. Consider:

• Have you gained new family members since you made your will, perhaps grandchildren or great grandchildren?
• Have any of your beneficiaries passed away, or their circumstances changed?
• Has anyone you are leaving gifts to divorced, married or remarried?
• Has your financial situation changed?

A well-prepared and up-to-date will is one of the most important steps in legacy planning, ensuring your current wishes are honoured.

Step 3: Your Affairs

It is wise to consider who you would trust to make important decisions on your behalf should you no longer be able to do so. A Lasting Power of Attorney (LPA) ensures your affairs are managed in line with your wishes should you lose mental or physical capacity.

There are two types of LPA:

1. Health and Welfare LPA: Allows your appointed attorney to make decisions about your medical care, daily routine, and life-sustaining treatment.
2. Property and Financial Affairs LPA: Grants your chosen attorney authority to handle your finances, such as managing bank accounts, paying bills, and selling property if necessary.

Should you lose mental capacity without an LPA in place, your loved ones will need to apply to the Court of Protection to manage your affairs. This can be time-consuming, costly, and stressful, with decisions potentially made by someone you may not have chosen.

Putting an LPA in place is a vital step in end of life financial planning. It ensures your affairs are in the hands of those you trust, protecting your interests when you might not be able to do so yourself.

Step 4: Your financial portfolio

Your savings and investments portfolio is at the heart of your wealth management strategy. For this reason, it is crucial to review and adjust it regularly, especially during estate and legacy planning.

Your financial planner will work closely with you to:

1. Review investments and savings: Examine your current investments and savings to ensure they fit your financial goals, as well as your risk tolerance at this stage of life. It is a good time to consider whether your investments are adequately balanced, and if any adjustments are necessary.
2. Make adjustments for current needs: As you progress through retirement, financial planning is important because needs and priorities can change. You may, for example, need more liquidity for potential care costs. Perhaps you want to structure your estate to minimise tax implications for your beneficiaries, or release funds to make lifetime gifts. Your portfolio could potentially be adjusted to reflect these needs.

With careful management of your financial portfolio, you could optimise the value of your estate, providing security for yourself now, and for your loved ones in the future.

Step 5: Inheritance Tax planning

Inheritance Tax (IHT) can potentially reduce the amount of wealth you pass on to your beneficiaries. Effective planning can help mitigate this impact.

There are various strategies that can be used, depending on individual circumstances:

1. Trusts: Trusts allow you to control how your assets are distributed, immediately or over time. They can offer tax advantages depending on how they are structured, and what type is used. It is important to realise that trusts carry tax and legal consequences, making professional advice crucial.
2. Lifetime gifts: You are able to gift money, property, goods, and stocks and shares during your lifetime. But there are limits to how much you can gift annually tax-free. These will depend on who you are gifting, and what the gift is for. The ‘seven year rule’ is important, because if you were to die within seven years of making the gift, then the recipient could face an IHT liability.
3. Life insurance: In some cases, a life insurance policy can be used to cover the Inheritance Tax payable when you die, or part of it. Providing it is a ‘whole of life’ policy, also known as ‘life assurance’, it should pay out any time the policy is in place. This can be useful if the IHT bill has to be paid before any property is sold, and there are insufficient funds available.

By incorporating these tools into your estate planning, you could potentially see more of your wealth preserved for those you leave behind.

Step 6: Funeral and care planning

End of life financial planning may also include funeral arrangements and potential care needs. Attending to these details in advance can relieve your family of difficult decisions at a trying time.

1. Funeral planning: Deciding on the details of your funeral, from the type of service to burial or cremation, can ensure your wishes are respected. You might also consider setting aside funds, or taking out a funeral plan to cover the costs.
2. Care planning: As you age, you may require additional care, whether at home or in a residential setting. Planning for these possible needs now, including considering the costs and how they will be covered, is important. Your financial planner will be able to talk you through the funding options available, and any strategies you can put in place to cover any potential expenses.

Proactively addressing these steps during the retirement financial planning process will help ensure your final wishes are carried out smoothly and with dignity, reducing the emotional and financial burden on your family.

End of life financial planning in retirement – we’re here to help

End of life financial planning is a crucial part of your retirement journey.

By organising your affairs, updating your financial portfolio, planning for Inheritance Tax, and making provisions for your funeral and care now, you could provide lasting peace of mind for both yourself, and your loved ones.

At Finli, our goal is to help you live your best financial life, whilst providing reassurance that you are doing all you can to look after those you care about, and preparing your estate to be efficiently passed on to future generations.

For expert advice, continuous support and guidance, and tailor-made solutions to your individual estate planning needs, we welcome you to get in touch.