Are you putting off difficult conversations about money?

Money and the financial realities of getting older can be awkward and uncomfortable topics of conversation in families.

Many are put off discussing the subject with their parents through fear they’ll appear overbearing, while some parents don’t want to acknowledge that they may need help in the future.

Whatever the reason, the financial and emotional cost of avoiding these conversations can be high.

Starting the conversation

The key is to start the conversation, the earlier you start the more options you and your parents will have. It’s important to involve your siblings in the conversations to ensure a shared understanding of your parents’ wishes and plans. It’s unlikely to be a ‘once and done’ discussion, it’s important to review plans regularly as circumstances change.            

Powers of Attorney

One of the cornerstones of financial wellbeing is making sure that people we trust can make decisions of our behalf if we lose the capacity to do so. This is key at any age but can become more important in later life.

Each parent can set up a Power of Attorney to cover their individual financial affairs, which allows the people they appoint to make decisions about their money and property, should they be unable to do so. This can include accessing their bank account to pay their bills.

Not having one in place can mean that should a parent lose mental capacity, the family may need to apply to the Court of Protection to manage their day-to-day finances, which can be an expensive and time-consuming process. A Power of Attorney cannot be set up after a parent has lost mental capacity.    

Inheritance Tax

Inheritance Tax is a growing concern for many families. There are generous reliefs available for owners of qualifying trading businesses, farmers and landowners that can help pass on family wealth tax efficiently, but it’s important to understand how they work, to ensure the family doesn’t miss out.

One of the most effective ways to mitigate Inheritance Tax can be to make gifts during your lifetime, but planning early is the key. It’s important to bear in mind that if a parent loses mental capacity, those holding Power of Attorney are restricted in the gifts they can make.   

Wills

To ensure that your parents’ assets are distributed in accordance with their wishes, they need valid Wills. If not, their assets are split according to the laws of intestacy, which may not be the ideal outcome for the family.

There are a wide range of options available to cater for most family’s circumstances, getting advice can help your parents make the right decision for them.        

Pensions

One of the big advantages of pensions is that in most cases anything remaining in the fund on death can be left free of Inheritance Tax. For this reason, it can make financial sense for some people to take income or lump sums from other investments before accessing their pension.

Life insurance

If your parents have life insurance in place, it’s important to ensure it is written in trust. If it isn’t, the value will be included in their estate for Inheritance Tax, meaning the family could lose up to 40% of the proceeds.

The good news is that putting your life insurance policy in trust will not only keep it free from Inheritance Tax in most cases, it will also speed up payment in the event of a claim, as the family won’t need to wait for probate. If your parents have life insurance policies that are not in trust, they should contact their provider, as many will make trust forms available free of charge.   

Don’t forget yourself

Having conversations with your parents about their finances may make you think about your own situation.

Powers of Attorney and Wills are important to put in place whatever your age, while protecting you and your family’s income in the event of accident or illness is becoming increasingly important, as well as saving tax and providing for your own retirement.

When planning your family’s financial future, it can make a real difference to talk to an expert. An NFU Mutual Financial Adviser can use their experience and expertise to advise on the options available to you.

What's next?

You can give us a call on:

0800 622 323

A member of the team will be able to support you in arranging an appointment with an NFU Mutual Financial Adviser to discuss your individual needs.