In my previous articles for this publication, I have detailed how you can be in control of your finances, your divorce settlement and your retirement.
But what happens if an event derails your plans along the way? How do you keep control? And if the worse were to happen, do you feel confident that you are leaving your family in a good financial situation?
Lasting Power of Attorney
A Lasting Power of Attorney (LPA) is an important document for you and your family. Take the example of TV’s Kate Garraway. Amid the suffering of Kate and her children after her husband, Derek Draper, contracted COVID at the start of the pandemic, their heartbreak was compounded by the fact that Derek didn’t have an LPA.
Because Derek was in many cases the named person on the bills, investments, bank, and insurance policies, a lack of an LPA for finance and property meant that Kate was unable to access funds in his name or their joint accounts to manage her husband’s care or refinance their mortgage.
And a lack of a health and welfare LPA meant that she didn’t even have the legal right to see his medical notes, owing to data protection.
Many people think that an LPA is for elderly people but this isn’t the case; it’s a legal document for anyone aged 18+ that lets you appoint one or more people to help you make decisions or to make decisions on your behalf.
This gives you more control over what happens to you if you have an accident or an illness and cannot make your own decisions, as was the case with Derek Draper’s family.
If you don’t have one, sorting out the affairs of a loved one is complicated. If an LPA for property and finances is not in place, it is possible to apply to the Court of Protection to be appointed as a deputy but this is often a lengthy and expensive process. Only in exceptional circumstances will a deputyship for health and welfare be granted by the Court.
You can arrange an LPA through your solicitor or you can do it yourself online at www.gov.uk.
Are your finances protected?
The current cost-of-living crisis has certainly shone a spotlight on the vulnerability of household finances with many households completely dependent on the income they receive, with no ‘rainy day’ funds as a back-up.
However, it only takes one unfortunate turn of events to put that in peril, such as an illness or accident that prevents you from being able to work, whether for a short period or over the longer term.
This is why protection insurance policies, such as income protection and critical illness insurance, are so invaluable.
The former is designed to replace income to help cover outgoings such as mortgage repayments, rent, bills and other household essentials in the event of you being unable to work because of illness or an accident.
It typically pays out between 50% and 65% of your income after a pre-agreed deferral period (usually three to six months) has passed, and most policies will do so for as long as needed.
Critical illness insurance is designed to pay out a lump sum on the diagnosis of certain specified critical illnesses or medical conditions. Typically, these lump sums are used to repay debt such as mortgages but can also be used to replace income whilst you receive treatment for conditions such as cancer.
Is your family protected?
Life insurance, giving your family some financial security if you die or become terminally ill, is often overlooked but should also be an integral part of your financial plan. It offers more than just reassurance and financial protection, it helps protect a way of life for your loved ones if anything happens to you, for example by covering ongoing costs, like your mortgage, to enable your family to live with the same quality of life without having to make compromises or sacrifices.
It can also go a long way to providing for a retirement income for your spouse/partner if you pass away before having sufficient pension income accrued to pass on to them.
While the prospect isn’t a nice one to think about, having to worry about financial matters in the event of something bad happening is even worse and the main thing about protection and life insurance is that it gives you peace of mind.
There are several different types of protection and life insurances available; a financial planner can help you work out which would be best for you and your specific circumstances.
Photo: Heidi Marfitt