THE SOCRATES COLUMN
 
True wisdom comes to each of us when we realize how little we understand about life, ourselves, and the world around us.

One of the most important things you must do for your family

In our last column we talked about the importance of ensuring a financially secure retirement in an age of growing longevity. Today we discuss another topic which, even though it may be uncomfortable, is nevertheless imperative to address to ensure that your family is always properly looked after. This is the requirement to discuss the implications of your potential incapacitation through illness and your eventual death and to write down what to do under these circumstances.

I had a recent example where a client in Africa died and I received the news from his widow who was not only distraught but also highly anxious that she had not become involved in the financial affairs of the family while her husband had been alive. She was, in effect, at a loss to know how to meet bills and how to access family assets.

As her financial adviser I agreed to help her and to go through her late husband's financial files. These were substantial and, as is often the case, not well collated. In the process of review, I came across UK National Insurance records, indicating that a UK State Widow's Pension was due, a life insurance policy, tucked away with other papers, and a number of sundry bank accounts in joint names and including the couple's children. In all, we managed to uncover assets with a value over £100,000: a sum that was badly needed at a vulnerable time for the widow.

Thanks to her husband's careful financial planning, he had certainly eased the financial consequences of a loss of the breadwinner and especially at a time of maximum vulnerability. However, all this sensible planning that the husband had put in place was almost made redundant by his failure to tell the rest of the family about these assets. Unless his widow had had the help of a professional to establish exactly what assets were available to her, she may not have had the immediate access to funds that was so desperately needed at the time.

This experience made me realise that I was also guilty of the same mistake and motivated me go home and write a note to my own wife telling her of all the family assets, where they were located, who to contact and what to do in the event of my death or incapacity.

It is often the case that finances and health issues remain undiscussed within families. They remain just a bit too awkward to discuss, or even too complicated. In many family relationships, only one of the two partners manage the finances, the other partner - along with the children - are often left completely out of the picture. But it is not only the partner who should understand and be generally informed about family finances, but also the children. Gone are the days when these matters were private or just not talked about. Young people today worry about their parents and in particular about provisions for retirement and healthcare. I had a conversation with my son recently who admitted that he thought that the family money would eventually go in healthcare costs and that he was worried that the money would eventually run out. This was not how I saw it at all, but it did indicate the necessity of a proper discussion on the "what- if" scenarios. We were both reassured after the talk.

With increasing longevity, it is quite possible that, even if provision for this is made, the parents may still become a burden on children. What is worse is if this situation arrives unexpected. In the US, about a quarter of high net-worth children surveyed by US Trust have already provided financial help to their parents. This figure is likely to increase, and support of parents by children is now a growing phenomenon.

There are obvious things that one can do about this problem, from ensuring adequate savings and retirement resources but also to sharing details with children in good time. Assembling a document that includes written medical directives and identifying who will have power of attorney is a good step. Estate planning discussions including what assets might be in the estate, current wills, taxation arrangements to be made on death, pension arrangements, executor information, trust information and so on should take place. These are all areas where your Financial Adviser can assist.
What is certain is that communicating this information will ensure that those who are going to look after you in your old age are fully aware of what to do and when. Peace of mind for them and you is a pretty good inheritance in itself.

There are obvious things that one can do about this problem, from ensuring adequate savings and retirement resources but also to sharing details with children in good time. Assembling a document that includes written medical directives and identifying who will have power of attorney is a good step. Estate planning discussions including what assets might be in the estate, current wills, taxation arrangements to be made on death, pension arrangements, executor information, trust information and so on should take place. These are all areas where your Financial Adviser can assist.

What is certain is that communicating this information will ensure that those who are going to look after you in your old age are fully aware of what to do and when. Peace of mind for them and you is a pretty good inheritance in itself.

Posted: October 2014

 
 
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