Eight steps to prepare your finances before you die

In Sweden, it’s common for older people to start de-cluttering their lives; getting rid of possessions they no longer need or want, before they die. The idea of Swedish death cleaning – or Döstädning – is that it can make things that little bit easier for your loved ones when you die.

The focus is very much on the emotional benefits of discarding all the junk you have accumulated over a lifetime and passing on those things you do treasure to the people you love.

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But this sort of “death prep” doesn’t have to be confined to having a good clear out. The same benefits can be achieved by sorting out your financial paperwork too, ensuring that your executors have everything they need to settle your estate when the time eventually comes.

Here are eight pointers to get you started:

1) Check your will

One of the first things your executor will need is your will. But do you actually know where it is and is it up to date?

It’s important you update your will after any major change of circumstances, whether that’s a divorce, marriage or the death of a major beneficiary. But even without any of those events it’s a good idea to review your will every five years or so. You might want to add new beneficiaries, such as grandchildren, or find that your views on who should inherit have changed. Making changes to your will might not mean you need to write a new one – small changes can often be added with a codicil.

If you haven’t written a will at all, make that a priority. Without a valid will your estate will be distributed according to the rules of intestacy, which may not reflect your wishes.

If you used a solicitor or will writer, they will likely be storing your will for you. This is the safest place for it, but it’s a good idea to have your own copy – contact your solicitor if you don’t have one.

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If you wrote your own will, you’ve probably got it at home. Ensure it is kept in a safe place and that your loved ones know where to find it. For peace of mind you can lodge it with the Probate Service for a fixed fee of £20. But again, if you’ve done this, ensure your loved ones know.

2) Write a letter of wishes

A letter of wishes isn’t a legal document like your will, but it can go a long way in helping your loved ones when you die. You can include whatever you like in it but a good starting point is funeral planning – from how it will be paid for (mention funeral plans if you have one) to how your remains will be disposed of, as well as what music or readings you might like at your send-off.

You can also say who you would like to inherit certain possessions in your letter of wishes, or use it as an opportunity to explain any of the decisions in your will, for example if someone has not been included or why one person has got more than another.

You should store your letter of wishes with your will, but it shouldn’t be attached to it.

3) Make a list of your assets…

Your executor will need to know where all your money is. This means it will be a big help if you can provide them with details of all your bank, saving and investment accounts, as well as all your pensions.

This is particularly important for online-only accounts where you’re unlikely to have much of a paper trail to provide clues. Include the provider details and an approximate value only – don’t be tempted to include account numbers, log-in details or passwords. Your executor will need to go through the proper channels to access your funds and close the accounts when the time comes.

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They will also need to know if you owe anything, so include details of any outstanding debts such as mortgages or credit cards too.

4) …and all your other accounts

Once you’ve listed all your assets and debts, it’s also a good idea to list all the other accounts you have from your broadband and phone provider through to your energy supplier and the various insurers you have policies with.

If you have a life insurance policy, be sure your loved ones know which insurance company to contact. It’s a good idea to leave details with your other important paperwork.

5) Who will inherit your pensions?

Although you can leave money in defined contribution (DC) pensions to your loved ones – you cannot include them in your will because they do not form part of your estate. Instead you need to tell your pension provider who you would like to receive the money. You can do this by completing an expression of wishes form.

You may well have done this when you opened your pension but, if you can’t remember, check. It’s particularly important to update your expression of wishes if you have divorced or separated from a partner or you have got married. You can also change it if it’s just a simple case that you have changed your mind about who gets what.

Your provider has the discretion to determine who receives your pension. If it doesn’t have an up-to-date expression of wishes form, it will conduct its own research to try and work out how the funds should be distributed.

6) Keep a record of your gifts

Your executor will be tasked with paying any inheritance tax (IHT) you may owe.  If you are likely to pay IHT, you can do your executor a massive favour by detailing any gifts you have made, including the name of the recipient, the value of the gift and the date it was made.

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Making regular gifts from surplus income is an excellent way of reducing an IHT bill as they will immediately be tax free. However, to claim this exemption, your executor will need to provide evidence that your standard of living wasn’t impacted as a result. This means you will need to leave detailed records of your income and expenditure during those years.

It’s worth looking at form IHT403 to get an overview of the information that will be needed.

7) Make plans for your pets

A big worry for many people is what happens if they outlive their four-legged friends, but there are steps you can take before you die to put your mind at rest. The law treats pets as possessions, so you can leave them to your chosen beneficiary in your will, but it’s important you discuss the matter with them first, to ensure they are happy to take the responsibility on.

You can also leave money to that person in your will, to ensure they have the funds they’ll need to care for your pet. Alternatively, you can give the task to your executor, leaving instructions about what you would like to happen.

If you cannot find anyone to take care of your pet you can try the RSPCA’s Home for Life scheme, or you can leave a dog’s care to the Dogs Trust through its Canine Care card.

8) Talk to your loved ones

If you are leaving behind a partner you might not need to do quite so much prep – they won’t need to close joint accounts, for example, or cancel your energy supply. However, if it’s largely been you that’s managed the household finances, it’s still a good idea to work with your partner to ensure they know what needs to be done and when, once you’re gone.

If, on the other hand, it’s children or other family members who will be sorting out your affairs, it’s makes sense to tell them about the prep work you have done and ensure they know where to find all your important paperwork. You can also share any wishes you have around what should happen after you have died and give them the opportunity to ask any questions.