It pays to face up to death

`I'm young, wills are for oldies,' you might wail. But as Jean Eaglesham explains, it is best to be prepared
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The Independent Online
It is the last great taboo. Death may seem an unthinkable (or at least unmentionable) event. But it is also inevitable. Even a 30-year- old man has a one in 10 chance of dying befoe the age of 60. Turning a blind eye to death can be a short cut to leaving more hard-earned and hard-saved money to the state or unloved relatives, rather than to partners or dependants.

Planning for your own death, or the death of your partner or someone in your family, can raise difficult emotional issues. It is easy to put off and many do just that, despite the reality that one of our big concerns is the financial well-being of those we leave behind.

For most of us the main requirement is to write a will. If you do not, you can unintentionally create serious financial problems for your partner or family, or, in some circumstances, hand back your wealth to the state.

Under complex English law on intestacy (dying without a will; Scotland is different), a spouse could, for example, be forced to sell the family home if it is worth more than pounds 125,000, since the portion of the estate over this threshold has to be split equally between the surviving spouse and the children.

If you are not married but living with someone, there is an even greater chance that you or your partner will suffer when one of you dies. Following a change to the law this year survivors now have a claim on their partner's estate if they have been "living together as man and wife" for more than two years. But this right (unlike with married couples) is not an automatic entitlement. As Caroline Kirby, of solicitors Nabarro Nathanson, explains: "You may have to start legal proceedings to enforce your claim, though most cases will probably be settled before they get to court." Ms Kirby also notes: "It is believed that the right to claim does not apply to gay couples."

If your estate is relatively complex (you own your own business, for example, or an overseas property) you should get professional advice from a solicitor or bank on drawing up your will. This is also true if your estate is likely to be worth significantly more than the pounds 200,000 threshold for paying inheritance tax. In this case, the advice should extend to the (many) ways of minimising the tax liability.

But if your estate is relatively straightforward you could save the typical pounds 50 to pounds 100 fee charged by solicitors to draw up a will simply by completing one of the forms sold in stationers.

Whichever route you take, it is important to review your will at least every five years to make sure it still reflects your wishes and financial circumstances.

For many people, this is as much financial planning for death as is needed. But if you are terminally ill, there are some simple financial steps that can either provide more spending money now or increase the amount of money you leave when you die.

"The first step is to use any option under your existing life policies to increase the sum insured [the amount paid when you die] without taking further medical tests," says Alan Dickinson of Ivan Massow Associates, a London firm of independent financial advisers that has a number of clients with Aids and specialises in financial advice for gay people. Many endowments and other life policies taken out before the Aids scare broke in the 1980s do have such an option and it is quite legitimate to make use of it.

If you want to increase the cash you have available now (at the cost of reducing the amount of money you leave when you die), the next step is to talk to your pension provider. "It's sometimes possible to get the death benefits early, or convert some of the pension fund into a lump sum," says Mr Dickinson. Taking these benefits early, which is mostly a possibility with occupational schemes, will however also mean that you get them at a reduced value compared with the normal payout time.

Similarly, if you have any life insurance policies, ask the insurer if it will pay out some of the lump sum benefit before you die. Normally, of course, policies only pay out on death. Again, if the insurer agrees, you will only be offered a percentage of the normal payout.

This option tends to be available only on policies taken out recently, and only from some firms. If your insurer refuses to convert the policy benefits into cash, you could consider a "viatical" settlement.

This involves a third-party company buying the policy from you and paying you up to 80 per cent of the benefit as a cash lump sum, depending on both the illness you have and how long you are expected to live. Typically, viatical deals are offered to people thought to have at most three years left to live.

The viatical market started in America after the onset of Aids-related deaths and has acquired a controversial reputation because of the dubious tactics adopted by some companies. These are said to include the deliberate slow processing of applications to delay giving the policyholder his or her money and to bring closer the day when the buyer collects the proceeds (when the policyholder dies).

The four UK companies that offer viatical deals are keen to distance themselves from this kind of approach. David Barclay-Miller of International Viatical Settlements, for example, says that "private investors [buying policies from terminally ill people] are looking for quick high returns. But we reinsure the risk so we will pay money back to the estate if you die earlier than expected". This should reduce the risk of the terminally ill getting a poor deal overall.

The viatical market is very small in Britain, but some commentators have predicted a boom in the market now that the responsibility for paying for nursing home care has largely shifted from the NHS to private individuals.

There are around half a million old people in residential and nursing home care, according to Age Concern. Rather than being forced to sell their home to fund this care, some people might opt to sell a life insurance policy instead.

But the Association of British Insurers advises you in the first instance to ask your insurer what it can offer.

What to do when someone dies

THE main tasks include:

Registering the death. Every death in the UK must be registered at the local register's office (address from public libraries) within five days (eight in Scotland). The official will need to see the death certificate, which the doctor who attended the deceased person should provide automatically to the next of kin.

Arranging the funeral. "It pays to shop around", asking for itemised quotes, according to a survey published by Manchester Unity friendly society, which found that the cost of identical funerals varied by hundreds of pounds. The survey discovered that the average cost of a funeral with burial is now pounds 1,523 - 38 per cent higher than three years ago.

Sorting out the will. If the person who has died appointed a bank or solicitor as one of his or her executors then that professional should do most of the work of administering the estate. But the fees charged by banks, in particular, are very high in relation to simple or relatively small (under pounds 100,000) estates. If the person did not appoint a professional then the executors (who might be two of the adult children, for example) can still choose to get professional help. It is always worth doing this if the estate is complex, if there might be family disputes, or if there is likely to be an inheritance tax liability. If not, it pays to consider the DIY route. It is worth getting a guide such as the Which? Wills and Probate book (pounds 10.99).