It can be difficult to watch as those we love get older and are less able to manage their own affairs. Families and close friends often step in to help and offer assistance but may not always know exactly what their loved one would have wanted to happen in that situation. This is why it is extremely important to have those difficult conversations ahead of time and try to be as organised as possible.
We have prepared a handy checklist for families or close friends to work through with their loved ones to ensure that their affairs are in order, so they are best placed to be able to support them in the future.
1. Will
Having a will ensures that the wishes of the individual on their death are followed. This allows the individual to retain an element of control over their affairs and makes matters simpler and more cost efficient on death. Putting a will in place does not need to be hugely complicated or expensive and we are very happy to talk through the different options.
2. Power of attorney
A power of attorney is a lifetime document which allows appointed attorneys to deal with financial and/or welfare matters on behalf of an individual. Attorneys can step in in the event of incapacity or if the individual becomes unable to manage their financial affairs. It is a common misconception that spouses and civil partners do not need a power of attorney as they will be able to make decisions on behalf of their partner.
However, this is not the case. In this sense, a power of attorney is as important as a will. If you lose capacity and do not have a power of attorney, it will be necessary for your nearest relative(s) to apply to the Scottish court for authority to manager your finances and welfare. This process takes significantly longer and it is the court, as opposed to the individual, who decides who should be appointed.
3. Advance directive
An advance directive is a statement which dictates what treatment should or should not be given in certain medical situations. The advance directive allows the individual's wishes to be considered when they are no longer able to communicate them. Although not binding, medical professionals will usually follow the terms of an advance directive unless there is good reason not to.
4. Pensions
Individuals should ensure that all pension nomination forms are kept up to date. The distribution of pension benefits are not usually governed by the provisions in the will, but rather by the nomination forms which are held by the pension provider. Planning opportunities are available in relation to pensions and it may be appropriate to explore these for tax planning purposes.
5. Inheritance tax planning
Planning opportunities may be available to reduce exposure to inheritance tax on your death. Inheritance tax is payable at 40% which can in some cases lead to a substantial inheritance tax liability. Effective planning during lifetime can reduce the inheritance tax bill on death – taking early advice here is, however, key to successfully mitigating inheritance tax on death.
6. Care costs planning
The rising costs of residential care combined with an ageing population means that care cost planning has become increasingly relevant for many families. There may be steps which can be taken when an individual still has capacity to try and plan for care home fees. Obtaining professional advice as early as possible is important.
7. Digital assets
Many individuals hold digital assets, these can often be forgotten about during estate planning discussions. It is important to consider if and how these can be passed onto loved ones and whether service-providers allow for elections to be made about who should receive the asset on death.
8. Funeral instructions
A death declaration with funeral instructions can be included in a will. This would state if the individual had a preference in relation to burial or cremation, and who they would like to arrange their funeral. This can help alleviate the stress of planning the funeral, as the individual's wishes are clearly noted.
9. Important papers
A more practical point is to ensure that there is a folder which includes important details such as bank accounts, national insurance number, pension details and legal documents. Loved ones should know where to find this when they need it.
10. Difficult conversations
Sometimes the thought of having those difficult conversations can mean that they end up never taking place. However, it is important to have these conversations and appropriate provisions put in place to ensure that, in so far as possible, wishes can be respected and implemented.
If you are interested discussing any of the points included on the checklist in more detail, then we would be delighted to assist. Please contact your usual Brodies contact for more information on this subject.
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