Preparing for illness, old age and death

Money Advice Service

It’s essential to plan how your money should be handled in the event of an illness or death. Good planning will help make sure you or your family are ready to meet any of the costs that might arise. It will also allow you to provide for your loved ones and ease the burden on them.

Put your financial affairs in order

Being well organised about your money is a good idea at all times.

But it can be particularly important in old age, when there’s an increased risk of illnesses that might make managing your money difficult or impossible.

This need not mean anything very elaborate.

Keeping all your financial documents in one place is a simple but effective first step.

Another is to keep a clear list of all your finances:

  • Your spending
  • Sources of income
  • Debts
  • Savings, investments or property.

This kind of information will make things much easier for anyone you later ask to help manage your affairs.

To learn more, read our article Putting your affairs in order.

Handing over control of your finances

It makes sense to have plans in place in case you become too ill to manage your money.

A friend, relative or professional adviser can be a great help. But if you become unable to take decisions about your finances, you can set up a legal arrangement to let them do so on your behalf.

This arrangement is a power of attorney.

There are two different kinds, suitable for different circumstances:

  • Ordinary power of attorney — you use this to give someone a temporary right to handle your financial affairs, for example, if you’re in hospital for a while. You might need a solicitor to set this up and it will cost around £150.
  • Lasting power of attorney — you would use this to give a chosen individual the right to manage your affairs for you on an ongoing, indefinite basis. (This term applies in England and Wales. The equivalent in Scotland is a continuing power of attorney, and in Northern Ireland an enduring power of attorney).

Unlike an ordinary power of attorney, a lasting power of attorney remains effective even if you become mentally incapacitated.

A lasting power of attorney must be registered with the Court of Protection and is more expensive than an ordinary power of attorney.

You should set up a power of attorney in advance of when you might need it.

You can only validly set one up when you have ‘sufficient mental capacity’, which means the ability to make decisions for yourself.

For somebody else to handle your affairs without a power of attorney can be costly and complicated.

What happens to your money when you die?

Make a will

If you die without making a will – referred to as dying ‘intestate’ – the law specifies how your money will be divided.

This means your assets won’t necessarily be passed on in the way you’d prefer.

If you want to decide who gets what, you need to draw up a will.

It’s possible to write one yourself, but even small technical mistakes can make a will invalid so it’s generally a good idea to get help from a solicitor or professional will writer.

Important: if you have married since making a will, your marriage will probably have made the will invalid.

Planning your estate

In addition to using a will to say who should inherit your money, there are steps you can take to minimise the amount of Inheritance Tax that must be paid on your estate.

Read our Top five ways to cut your Inheritance Tax.

Preparing for long-term care and funeral expenses

Long-term care

Arranging and financing long-term care can be daunting and complicated.

Funeral costs

Funerals can be expensive, but there are ways of preventing these costs burdening your family:

  • You can save regularly into a savings account earmarked for funeral expenses.
  • If you have life insurance, check whether there are extra benefits if the proceeds are used to cover funeral costs. Make sure the proceeds are written in trust so they are easily available after your death and don’t form part of your estate.
  • With a funeral plan you pay a lump sum or instalments to a provider who invests the cash and then uses it to cover the costs of a funeral you have chosen. Check the terms and costs of funeral plans carefully – often they’re poor value compared with a straightforward savings account.
Find out more about Planning a funeral.

This article is provided by the Money Advice Service.

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