PROTECTING MY FAMILY

What if something happened to me tomorrow?

  • 11 May 2020
  • 10 mins
  • The Covid-19 pandemic could be making you worry about how your family would be looked after if the worst happened.

  • For example, two-thirds of UK adults don’t have life assurance or other protection

  • Five simple steps could help provide much needed comfort.

What would happen to my family?

It may not have taken the Covid-19 pandemic for you to ask yourself this question, but it may well be keeping you awake much more often during this troubling time.

It’s hard to avoid 3am anxiety strikes when death and illness feature in so many headlines.

Even if multiple studies suggest that the majority of Covid-19 cases are mild or asymptomatic.

The pandemic has also highlighted that even in ‘normal’ times, things happen. Outside of the pandemic, recent analysis by the Office for National Statistics tells us that over 10,000 people die in the UK in a typical week in early April (based on 2015-19 figures). That’s 10,000 families each week coping with a bereavement, not to mention those dealing with non-fatal accidents or illness.

Five things you can do now

No amount of financial planning can magic away the grief, shock or pain of such times. However, an awful situation can become even worse if your loved ones face additional problems such as financial insecurity or problems over legal arrangements.

There is plenty you can do to protect against this – even in lockdown.

1. Where there’s a will…

The first step you can take to protect your loved ones is to make a will.

Obvious perhaps, but over half the adults in the UK don’t have one. Even those who do may find it no longer fit for purpose – perhaps because they’ve become parents, got married or separated, moved in with a new partner, bought property overseas or moved, say, from England to Scotland (or vice versa).

Admittedly, making or changing your will during lockdown brings complications – mainly because a will must be signed in the presence of two adult witnesses who won’t benefit from it.

Lawyers have been lobbying the government on this, and in Scotland the rules have been temporarily relaxed. However, in England and Wales, lawyers are discussing solutions such as socially-distanced signatures or witnessing through a window (using the precedent of a 1781 case involving a maid, a carriage and a rearing horse – we kid you not).

Good advice is important – both for witnessing the will and for preparing it.

2. Establish a power of attorney

A Power of Attorney (PoA) is another defence against the unexpected. It’s a legal document that lets someone (or more than one person) act on your behalf if you are incapacitated, it can cover:

  • health and welfare decisions

  • financial and property decisions

  • or both

PoAs suffer from the perception they are only needed for the very old or infirm. But Covid-19 has reminded us that the young, fit and healthy can also be incapacitated by illness (or accident). Without a PoA in place, their families may be unable to perform the simplest tasks like accessing their bank account, paying bills or keeping a business running.

Instead, they have to make a court application for a ‘deputy’ (or ‘guardianship’ in Scotland).

It’s a laborious process, often involving extensive paperwork, medical or social services assessments and possible delays of weeks or months.

Read more: Do you have the power of control?

3. Consider a living will

Another issue that’s come to the fore during the pandemic is the question of what care or level of medical intervention people want. Or don’t want. This is where a ‘living will’ can help you and your family.

It’s an umbrella term for different documents (advance decisions, advance statements, advance directives), telling healthcare providers and family members your preferences for medical treatment and care if you cannot verbally express your desires. Some are legally binding and some are not, so advice is worthwhile.

With living wills and care plans, it’s important to bear in mind that you can’t always get what you want – to quote the Rolling Stones - especially when healthcare services are stretched,.

But a living will offers useful clarity to loved ones, easing difficult decisions about your medical treatment.

4. Protect yourself

UK government figures pre-pandemic showed that in the 2019, around 1.4 million working age people had a sickness absence lasting four weeks or longer; over 100,000 of them didn’t return to work at all.

Even if you have life, critical illness and income protection insurance in place, it’s worth putting them under the microscope:

  • Does your protection cater for the real costs of childcare and education?

  • Was it based on additional job-related benefits that you no longer have?

  • Are you over-focusing on life assurance at the expense of other scenarios such as long-term illness?

Good advice can help you ask the right questions here.

Read more: Do you need income protection?

These protection policies have no cash-in value at any time. If you don't pay your premiums on time your cover will stop, your benefits will end, and you'll get nothing back. If the benefit amount has not been paid out by the end of the selected term, the policy will end and you'll get nothing back.

5. Ask a key pension question

Our fifth action point is to check (and maybe update) who should benefit from your pension if you die before reaching 75 years of age.

Your pension savings do not form part of your estate and are therefore not covered by your will. Instead, you tell the schemes trustees (or ‘nominate’) who your beneficiaries will be. While your current scheme may reflect your present circumstances, what about earlier ones?

Can you remember the beneficiary arrangements you made for a plan you joined a couple of decades back?

Your choices will depend on the type of pension and whether you have taken any money from it.

Pensions are a long-term investment. The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits, which isn’t guaranteed, and can go down as well as up. The benefits of your plan could fall below the amount(s) paid in.

What now?

With most of the issues around protecting your family if something happened, the Covid-19 pandemic hasn’t changed anything, apart from, perhaps, people witnessing legal documents in parks and gardens. But it may have – usefully – nudged us into having conversations we have long deferred and thinking about financial planning.

These are never going to be easy topics, but a good financial adviser can help – putting everything in context, addressing issues like protection and inheritance planning, and tailoring everything to your own family situations.

They may not be able to protect you from grief or loss, but they can offer you some control over the future. This in turn could put to bed some of those 3am anxieties.

Important information

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Fees and charges apply at Schroders Personal Wealth.

In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.

Sources:

[1] https://www.fca.org.uk/publication/research/financial-lives-consumers-across-uk.pdf, June 2018.

[2] https://theconversation.com/coronavirus-bmj-study-suggests-78-dont-show-symptoms-heres-what-that-could-mean-135732, 7 April 2020.

[3] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/bulletins/deathsregisteredweeklyinenglandandwalesprovisional/weekending3april2020 14 April 2020.

[4] https://www.royallondon.com/media/press-releases/2019/november/five-misconceptions-about-wills/, 6 November 2019.

[5] https://www.thegazette.co.uk/all-notices/content/103547, accessed 19 April 2020.

[6] https://www.gov.uk/government/statistics/health-in-the-workplace-patterns-of-sickness-absence-employer-support-and-employment-retention, 15 July 2019.

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