Planning for vulnerable health is key to your financial plan

Nobody wants to think about a death or serious diagnosis in the family, but that is what is required to ensure you and your loved ones’ financial future is safe and secure.

Nothing in this world is certain, Benjamin Franklin famously said, except death and taxes. Yet despite the undeniable inevitability of both, many people can often refrain from putting in the necessary planning to ensure their families are financially protected if the worst case happens.

Few people are comfortable confronting their mortality, but planning for death is essential to preserving the hard-earned money saved and invested throughout your lifetime, and maximising the opportunity for your loved ones to benefit from that legacy. Generally speaking in the UK, the further out you can plan, the more avenues available to preserve your wealth on death.

Against the backdrop of a global pandemic, a growing NHS waiting list, the rising costs of care and double-digit inflation, there has scarcer been a more pertinent time for anybody, but particularly those approaching their twilight years, to consider what are the steps you need to take to protect yourself and your family should you find yourself in a vulnerable state of health.

Life cover

If you or a loved one is diagnosed with a critical or long-term illness, there are undoubtedly ways in which your Ascot Lloyd Independent Financial Adviser can support you. However, one crucial avenue that is unlikely to be available to you at this stage is life protection, as insurers will typically not cover you for preexisting conditions. Unfortunately, millions of people can leave it too late to consider life cover, which can leave their families financially exposed and struggling to make ends meet.

Life insurance is an extremely effective way of protecting your family should you pass away. Some policies will also allow you to claim whilst you are still alive if you are diagnosed with a long-term illness that prevents you from working, an opportunity which many vulnerable clients have been very grateful to Ascot Lloyd Independent Financial Advisers for highlighting to them.

“I always think of one client in particular who was extremely thankful that we discussed adding this cover into his life protection,” says Scott Moody, Chartered Financial Planner at Ascot Lloyd. “He did end up, unfortunately, being diagnosed with a long-term illness, however, the sum of money that the insurer paid out was life changing for both him and his family at a difficult time.”

Inheritance tax planning*

Originally intended for the super wealthy, millions of people now fall within the scope of the inheritance tax (IHT) threshold, which at £325,000 is not much higher than the average price of a house in the UK. There are several effective ways to mitigate your IHT liability, but many require careful planning years in advance, which is time that is too often not on your side if you wait until you or a loved one has been diagnosed with an illness before starting to think about it.

The tax-mitigation techniques range from making gifts to establishing a trust, but both need to be in place at least seven years before you die to maximise the opportunities to reduce your IHT liability. If you haven’t put thought into this and there has recently been a worrying diagnosis in the family, there are still ways in which an independent financial adviser can help you, but the sooner you can have that conversation, the better. Amidst a constantly evolving tax landscape, Ascot Lloyd is continuously monitoring ways in which to support your family’s financial future.

“A long-term client, an 80-year-old man, recently called me to say he has been diagnosed with pancreatic cancer, with chemotherapy starting in four weeks,” says Scott Moody, Chartered Financial Planner at Ascot Lloyd. “He wanted to ensure his family is looked after and that everything is in place. We guide people in these difficult situations and help with the administration to make it easier for family members. But the most impactful conversations we had were many years ago when we put in place his life cover and established a trust to simplify his estate management and protect the value of his assets.”

Preparing for the worst

Many other issues need to be considered to reduce the stress, mentally and financially, when a loved one enters a vulnerable health state or passes away. Many people think about writing a will, though not as early as they perhaps should, but often not given as much attention is the incredibly important need to give someone you trust power of attorney.

There are different kinds of power of attorney which you should discuss with your financial adviser, but broadly it concerns giving somebody the legal authority to make important decisions for you, including financially and health related, should you lose the mental capacity to do so yourself. If you do not legally identify a power of attorney in a will or related document, there is the risk of strangers or family members you don't trust making critical decisions on your behalf.

Planning for later life care is also something everybody should consider when thinking about their financial future. The cost of care is substantial and, though we’d all like to think we won’t need it, it is a necessity for millions of people. Trying to calculate what the cost of care will be at various stages of your life is a challenging barrier to planning effectively for retirement, but Ascot Lloyd has intelligent modelling tools which are able to adjust for tricky variables like inflation.

“As you approach an age where people are statistically more vulnerable to certain illnesses, you need to look at what you've got inside and outside your estate. If anything happens, what will happen to it all?” says Scott Moody. “That means having conversations around life cover, inheritance tax liability and long-term care needs. They might not sound like comfortable conversations, but they are ones we have every day at Ascot Lloyd in a highly sensitive and productive manner.

“I understand why people don’t want to face up to their mortality. It can feel like tempting fate. But the sooner you can start planning, the more avenues that will be available to you.”

If you’d like to discuss with your Ascot Lloyd Independent Financial Adviser the issues you need to be thinking about to protect your family should something happen, please contact them in the usual way. Alternatively, get in touch now to speak to a member of  our friendly team.