When you’re looking at later life planning, it’s important to think about how you’d like your money to be handled and how you would pay for essential costs in the event of your illness or death. Sorting things out now will help make sure you or your family are ready to meet any expenses that come up in the future and take the pressure off. This action plan will take you through the things you need to think about.
What’s in this guide
- Deal with debts
- Review your budget
- Make sure you claim everything you’re entitled to
- Build up savings or get the right insurance
- Use formal arrangements to put your affairs in order
- Get informal help to manage your money
- Discuss long-term care
- Write a will
- Reduce your tax bill with good inheritance planning
- If you have to retire early due to illness and disability
- Plan your funeral
Deal with debts
It’s really important to deal with any problem debts before you tackle other money issues.
To help you understand more about your debts and what you need to do first, see our section Dealing with debt
Review your budget
If you’re going to have to manage on a lower income, it’s important to look at your budget to make the most of your income.
Reviewing your budget is also an essential step if you have debts you need to deal with. This is because it will tell you have much money you have left to pay the people you owe money to (your creditors).
Make sure you claim everything you’re entitled to
If you’re living on a lower income, you might be entitled to some benefits.
Build up savings or get the right insurance
It’s really important to have some money set aside to deal with unexpected emergencies if you can. However, if you’re living on a lower or fixed income it can be harder to build up savings.
Reviewing your budget might free up some money that you could save in an easy access savings account.
Taking out insurance can also be a cost-effective way to provide anyone who depends on you with an income or lump sum if something were to happen to you.
Depending on what stage you’re at in your life, insurance could provide income protection if you were no longer able to work. Or you could arrange for a lump sum to be paid to dependants through a life insurance policy.
To find out more about how insurance can be a cost-effective way of providing financial security for people close to you, see our section on Insurance
Use formal arrangements to put your affairs in order
If you’d like to be sure that your money would be taken care of if you weren’t able to make your own financial decisions, it could be a good idea to make a formal arrangement.
Formal arrangements are useful for everyone – but are really worth considering if:
- your finances are complicated, or
- the arrangements you need to make for people who depend on you are complex.
The most popular ways to do this are either through power of attorney or a trust.
Power of attorney
A power of attorney is a legal document that lets you give one or more persons the power to make decisions, and manage:
- your money and property, and/or
- your health and welfare.
A power of attorney can help you with:
- temporary situations – for example, you’re in hospital or abroad and need help with everyday tasks such as paying bills
- longer-term situations – for example, you want to plan for the unexpected or have been diagnosed with dementia and might lose the mental capacity to make your own decisions in future.
Get informal help to manage your money
You might also need to think about finding someone to give you a helping hand with day-to-day finances.
Here are some examples of what this might include:
- Help with paperwork – support to fill in important documents or understand certain terms. For example, information about your bank account, tax, or benefit payments.
- Help with meetings – someone to attend important meetings with you. For example, with a solicitor, financial adviser or benefits adviser.
- Support with day-to-day spending - someone to help manage your money on a daily basis. For example, filling in our free Budget Planner, switching your gas or electricity provider to get a better deal or drawing out money for you if you can’t get to the bank.
You might be able to organise some of these things yourself by rethinking how you manage your money.
To help you see what else you could do, read our guide Making your money easier to manage by yourself
Find out more about what support is out there in our guide Getting informal help to manage your money
Discuss long-term care
It’s hard to think about something that might not actually happen. But very often, care decisions have to be made by family. These are often unplanned because no-one had the conversation before help was needed.
If this were to happen to you, it might mean your wishes might not be considered or your money could have been used more efficiently to pay for your care.
If you want to talk to your family about long-term care but aren’t sure how to start the conversation, show them our guide Talking with older people about money. It gives great tips on what you need to think about
Write a will
A will is a legal document that sets out what you want to happen to all your worldly possessions when you die.
A will makes it much easier for your family or friends to sort everything out when you die. Without a will, the process can be more time-consuming and stressful.
If you don’t write a will, everything you own will be shared out in a standard way defined by the law – which isn’t always the way you might want. You can find out who gets what if you don't have a willOpens in a new window
A will can help reduce the amount of Inheritance Tax that might be payable on the value of the property and money you leave behind.
Writing a will is especially important if you have children or other family who depend on you financially, or if you want to leave something to people outside your immediate family.
It’s common for people to underestimate the complexity of their financial affairs. Choosing not to get an expert opinion when you’re writing your will can mean your loved ones are left with unanswered questions and extra expenses, or your will could be invalid or open to challenge.
If you want an easy and safe way to record important information in one place in case you need someone to sort things for you on your behalf, complete a LifeBook on the Age UK websiteOpens in a new window
What is a letter of wishes?
A letter of wishes is not legally binding, but it acts like a personal guide to help your executors and trustees. It can:
- help explain decisions
- help keep the costs down
- keep the will more concise, and
- include information on what to do with your social media accounts too.
Find out the benefits of having a letter of wishes on gazette.co.ukOpens in a new window
You can also find out what happens to your photos, music and social media accounts when you die on gazette.co.ukOpens in a new window
Nominate dependants if you have a pension
Many pension schemes will ask you to nominate a beneficiary, via an Expression of Wish or Nomination form. A beneficiary is someone who benefits from your pension after you die. So it’s important to tell your pension provider who you want to leave your pension to, and to update this if things change. Find out more in our guide What happens to my pension when I die?
Reduce your tax bill with good inheritance planning
Only around one in 20 estates are large enough to incur Inheritance Tax (IHT).
You usually won’t have to pay it if:
- the value of your estate is below the Nil Rate Band (NRB) of £325,000
- you leave everything above the threshold to your spouse or civil partner, or
- you leave everything above the threshold to an exempt beneficiary, such as a charity.
Any part of your estate above the NRB threshold might be liable for tax at the rate of 40%.
If you think this might affect you, you’ll need factor this tax into your plans when you make your will. It’s also important to keep a record if gifts are given in one document, and that it is kept up to date with the value, the date and the recipient of any other gifts.
Want to work out what tax you need to pay and when and some of the ways you can reduce it? Find out more in our guide A guide to Inheritance Tax
You can also find out about the ways to cut your Inheritance Tax in our guide Gifts and exemptions from Inheritance Tax
If you’re working hard to build up your pension pot, it’s a good idea to think about what will happen to your pension when you die. This depends on the type of pension you have and the options you’ve chosen. Our guide can help you understand the pension rules after you die.
If you have to retire early due to illness and disability
Sometimes, the future we imagined for ourselves doesn’t quite happen as we’d hoped.
Having to stop work early because of illness or disability can mean you have to reassess your finances and readjust your spending and planning for the future.
These guides can help you think about the things you need to do if you’re facing this situation:
Early retirement because of illness , sickness or disability
How to sort out your money if you become ill or disabled
Plan your funeral
Funerals can be expensive. But there are ways you can keep costs to a minimum and plan ahead so your family or friends don’t have to worry about finding the money at a stressful time.
There are several ways to pay for funerals upfront, but you’ll need to think about the pros and cons of each one:
- You can put money into an easy access savings account earmarked for funeral expenses.
- With a pre-paid funeral plan you pay a lump sum or instalments to a provider who invests the cash and then uses it to cover the costs of a funeral you’ve chosen. Check the terms and costs of funeral plans carefully – they’re often poor value compared with a straightforward savings account.
- If you have life insurance, check whether there are extra benefits if the proceeds are used to cover funeral costs. Make sure the proceeds are written in trust so they’re easily available after your death and don’t form part of your estate.
