It’s good to talk money: Helping elderly relatives manage their finances

Emma Peck

Private Client Adviser, Farnborough

Throughout time, societies have known that in order to survive, knowledge and experiences must be passed on through the generations. By passing on this knowledge, families could take what their parents learned in order to improve their own futures.

Fast forwarding to today, parents and grandparents pass on their knowledge to future generations all the time. All except one critical piece of knowledge that often gets left behind – money.

Significant financial challenges

It can be difficult talking about money, making people reluctant to engage in such conversations. Nowhere is the need to discuss finances more important than with the elderly, who can experience significant financial challenges relating to insufficient savings, or unexpected major events such as serious illness, relationship breakdowns and bereavement.

Research also shows that over half of UK adults don’t make a Will. Even among over 55s, 30% say they haven’t spoken to anyone about their wishes on death.  Some elderly people simply believe they don’t have enough money to warrant making a Will.

Avoiding talk about finances can leave families feeling anxious about what lies ahead and poorly prepared to deal with the decisions that elderly relatives may face. A recent study by Schroders found that 44% of 35-59s “are worried about managing their parents’ finances when they can no longer do so”.

Engaging in early conversation is key

As awkward as conversations about money may seem, there are huge benefits in having them before it’s too late, including:

  • Helping them to manage their finances effectively.
  • Maximising the value of the estate, with careful planning to protect family wealth.
  • Ensuring all elements of their estate are distributed according to their wishes.
  • Ensuring the elderly’s wishes for care are respected.
  • Protecting the wellbeing of everyone concerned by knowing what’s coming.

Broaching the subject

If you are struggling to find your way into a conversation, consider involving your Origen financial adviser. We are experts in facilitating family conversations – we can provide clarity around the rules, check that everyone’s financial plans are on the best path, as well as suggest ways to protect more of your family’s wealth. Here’s some of these topics that may be relevant to you and your family.

  • Reviewing living costs. Younger generations can play a huge role in ensuring an elderly relative’s money is spent wisely. This could mean checking utilities, insurance, bank accounts and subscriptions to make sure they’re still relevant and competitive. The best deals could be online where older generations may be less confident. They can also make sure that all tax allowances are claimed, including, for example the marriage allowance. Your Origen Financial Adviser can help all generations to ensure they maximise all of their tax allowances.  This enables families to retain more of their wealth.
  • Minimising Inheritance Tax (IHT). Years of house price increases, soaring inflation, and tax freezes have pushed an increasing number of families above the IHT threshold. Reducing your tax liability can be done in a number of ways, including setting up a trust (gift trusts, discounted gift trusts and loan trusts are common) and gifting e.g. exempt gifts, potentially exempt transfers and chargeable lifetime transfers.
  • Making a Will. This is critical to ensuring the desired distribution of assets. It’s also important to update a Will regularly, and particularly after any significant life changes, such as the family births, divorce, remarriage, or the death of a spouse or partner. It’s a little-known fact that marriage revokes your Will, meaning you need to write a new one.
  • Creating Lasting Power of Attorney (LPA) documents. As well as making a Will, it’s wise to set up an LPAs (in England and Wales) or Continuing Power of Attorney (in Scotland). This involves appointing a trusted person to make decisions ­­– either financial or health related ­– should the elderly person become unable to do so. It may be worth making LPAs at the same time as a Will to save money and prevent distress further down the line.
  • Funding care. Another issue that can cause great anxiety is erosion of wealth due to long term care costs. One way of protecting wealth from future care costs is to take out an investment bond at a time when care isn’t needed. Investment bonds – medium to long term investments with a life insurance company – are excluded from local authorities’ calculations of individuals’ contributions towards their care. Another option is to take out a type of insurance policy known as an immediate needs annuity, when care is needed.  This is advisable if you are able to put down a lump sum, from the sale of a house, for example. The income from such a plan is tax-free if it’s paid directly to a registered care provider such as a care home.  Origen can help you if your family needs this kind of advice, which can help to ring fence the cost of ongoing care, leaving more available as a legacy.
  • Keeping things in order. Lastly, ensure that paperwork is filed safely and that relatives know about it. Aside from the Will, wishes relating to trusts and pensions should be recorded in separate letters of wishes – detailing who the money in each pot should go to – and stored with the Will. Keep track of any gifts (using a gift log), as well as income and expenditure, as this will help prove that they qualify for IHT exemption.

Families make the best decisions together

When families talk about their finances together, it brings everyone peace of mind, allowing you to enjoy your time together without anxiety about the future.

At Origen we support clients across all generations, so whilst financial planning needs may vary, our advice is tailored to you and your family’s specific circumstances. That way we help everyone meet their financial goals, whatever the generation.

If you’re ready to discuss your family’s financial planning needs please call your usual Origen adviser, or our Client Services team.

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