Caring for your family from beyond the grave

If you are run over by a bus tomorrow, make sure your spouse and children are provided for.
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How would your children would cope if you died? It is upsetting to think about. If they are young, you would not be there to give them the start in life you had planned. But by making a will and ensuring you have enough life insurance, you can go some way to extending practical care beyond your own lifetime.

Partly because it is such an unpleasant subject to contemplate, many parents do not insure their own lives. "Nine times out of ten, they [breadwinners] are not covered and the state is not going to provide what they think it's going to provide," says William Meston of Winsec Financial Services, a firm of independent financial advisers.

Working out exactly what life cover you do have is an essential step before considering buying insurance. Financial advisers are bound by law to carry out a full fact-find on a particular client, to find out what their assets and liabilities are, before advising them which life products to buy, says Mr Meston.

If you belong to an occupational pension scheme, for instance, it may have a death-in-service element which would pay out a lump sum and pension to your spouse. And it is vital to make sure any debts, including a mortgage, would be repaid.

Life insurance comes in many forms. Term assurance covers you for a fixed period. This is generally cheaper than whole of life assurance, which remains in effect until you die. When buying protection for children, parents would usually only need their life cover to last until the youngest child has grown up.

How much cover should you have? "We insist that people have up to 10 times their salary in cover, and that doesn't include their mortgage," says Mr Meston. For example, a man earning pounds 20,000 a year would have insurance set to pay out pounds 200,000 on his death. Well-invested, this sum could provide an annual income of between pounds 10,000 and pounds 12,000, he says.

A cheaper way of providing dependants with an income is Family Income Benefit insurance. "It is not only cheaper but in a more suitable form," says Clive Scott-Hopkins of Towry Law, another firm of independent financial advisers. This is a type of term assurance which pays out tax-free regular income rather than a lump sum which you would then have to invest.

Insurance may protect your children from financial disaster, but how about ensuring your last wishes are carried out in other respects? Making a will can be crucial.

You may believe you have a simple family structure and in the event of your death your assets would simply pass to your spouse, if he or she outlives you, and your children if not. But it is dangerous to assume this.

Estimates suggest 60 to 65 percent of people die without making a will, although most of them have estates worth less than pounds 5,000. If you die without making a will, the intestacy rules apply. These can be very complicated, but generally the first pounds 125,000 of your estate is passed on to your spouse if you have one. The rest of your assets are then shared with any children you had or other relatives if not.

In a will, you can make clear who you would want as guardians to your children, were you and your partner to die together. If this happened and you had not specified, a court would decide who should bring your children up. The task would not automatically fall to the children's next of kin or godparents.

Unmarried fathers do not have the same rights as married fathers as far as care of their children is concerned, unless specified in a will.

Inheritance tax is another consideration. If your estate passes to your spouse, or if its taxable value is no more than pounds 200,000, then no IHT is generally payable. But in the absence of a will, some of your money may pass to your children and possibly become liable for inheritance tax at 40 percent. It is worth getting specialist advice on this, either from a solicitor, accountant or financial adviser.

There are various ways of making a will. Solicitors are professionally qualified to draft them, and could charge between pounds 30 and pounds 125. Alternatively, banks, insurance companies and will-writing companies could help you draw one up. However, some banks may require you to appoint them executor of your will, which can mean extra expense for your beneficiaries after your death.

Which?, the consumer magazine, found in 1996 that no type of will-writing professional was much better than others, though solicitors wrote the most wills rated as good.

WH Smith sells a Willwrite system, which costs pounds 25.50. You complete a questionnaire which is sent off for drafting, then back to you for signing. The Law Society warns against doing it yourself by buying a form at your local newsagent. "After you have died there will be no chance of double- checking with you what you had in mind. So often the wording in a home- made will is capable of at least two quite contrary interpretations," it says.

Winsec Financial Services: 01603 762388; Towry Law: 01753 868244

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