The song referenced in the headline was the infamous tune from Monty Python’s Life of Brian and in 2014 was the most-played song at funerals in the UK.
Although now replaced by Frank Sinatra’s ‘My Way’, more and more people are opting for a funeral as a celebration of life over a traditional service, with music playing an increasing part in that – be it a favourite, poignant or uplifting song, or one that just makes people smile and laugh. There’s even a website to help.
So then, if traditions are changing, why still aren’t people discussing their wills and estate/IHT planning with their families? Continuing the musically inspired theme…
I Don’t Want To Talk About It
The old-fashioned reason was that the male in the household dealt with all the finances etc and didn’t discuss with the family, or the ‘we’re not wealthy enough to pay IHT’ syndrome – yet IHT receipts have doubled over the last 20 years and increased ten-fold since 1980, according to HM Revenue & Customs Tax & NIC receipts 21 July 2020, with c.5% of estates now paying IHT. Of course, IHT is devilishly complicated and you need professional financial advice to plan appropriately, especially as the modern family unit changes.
Typically, people don’t like to think, let alone talk, about their mortality, as it always seems far into the future (when it’s too late!).
However, coronavirus has brought client’s and their family’s mortality into sharp focus and as a result, many advisers have reported an increase in requests to discuss wills, lasting powers of attorney (LPAs) and estate/IHT planning. Despite the current turmoil, now is the very time to be discussing later-life and legacy planning with clients and their families.
Going Underground or The Only Way Is Up
From a planning perspective, it makes sense to start the conversation by asking if the client has made any plans for their funeral and whether they have communicated their wishes to their family. Whether they wish to be buried or cremated can make a big difference to the cost – with the total cost of dying now being £9,493, according to the Sun Life Cost of Dying 2020 Report – let alone ensuring their wishes and music choices are known!
One method of funding for this cost is to use a guaranteed whole-of-life (WOL) plan written in trust. Cover worth £10,000 would cost a 60-year-old non-smoking male £27.40 per month, according to a Zurich quote from August this year.
Best Laid Plans
As the chorus goes, ‘Tell me why all the best laid plans fall apart in your hands and my good intentions never end, the way I meant’, is especially true if nothing is put in writing! Of course, making a will, and keeping it up to date, is imperative to ensure that not only are your funeral wishes carried out, but also who you leave your estate to and how.
How Will I Know
There’s a saying ‘where there’s a will theirs a relative’ and given modern day extended and complicated families – separation, divorce, remarriage, step-children – discussing it with your family is crucial. Communicating your wishes can (help to) avoid arguments e.g. which children, possibly from different relationships, do you wish to benefit and in what way, manage expectations and, of course, surprises – as while it may be Cool for Cats at the local cat charity to receive a significant gift, your dependants and relatives may not be purring as loudly!
Money, Money, Money and Sunny Afternoon
While the lyrics state ‘…must be funny…’ and ‘The taxman’s taken all my dough…’ many executors often find the process of estate administration far from funny, especially dealing with complicated HMRC forms and the payment of IHT! While the OTS (Office of Tax Simplification) IHT review is looking at ‘Simplifying the design of the tax’, little has happened yet, but watch this space… There are many tried and tested planning techniques for holding assets in, or gifting them into, trust, but clients don’t always like the loss of control and access to capital (or market volatility) – which may all be more prevalent in the current climate! Therefore, the use of protection to fund the IHT liability should be considered. Using a guaranteed WOL plan written in trust, for £100,000 on a joint life second death basis, for a retired non-smoking couple both age 65, would cost £200.16 per month, according to a Zurich quote from August this year.
Don’t Worry, Be Happy
As a result, many adviser firms have seen an increase in enquiries for WOL written in trust to cover the IHT liability, as it provides cover from day one, compared to the two- or seven- year qualifying periods for gifting.
Existing conversations around protection have also gained a greater sense of urgency for clients who are keen to lock-in premiums at current age, health and rates. While medical evidence may be required, most lives can be offered cover immediately, and only those where more detailed health information is required or who are above non-medical limits, will take longer.
Some, like Zurich, also provide free cover during underwriting, of up to £1m for IHT planning – which can further remove any concerns during underwriting.
One objection is often around the affordability of WOL premiums, but the Zurich WOL calculator can help demonstrate the value the sum assured is adding over and above the premiums. Using the previous example, on second death at age 86, the plan would pay out almost double the premiums (equivalent to 5.9%pa growth net of tax and charges) and the premiums wouldn’t exceed the sum assured, until age 107…
Of course, if the WOL premiums are too expensive, then why not consider convertible term.
And if the IHT liability is funded for, rather than reducing the value of the estate, both the executors and beneficiaries will be happy!
Making Plans For Nigel
One final benefit of doing estate planning and discussing it with your family, is that you can proactively do intergenerational planning.
Rather than just leaving money to your children on your death, why not make IHT-efficient gifts while your alive, so you can watch and appreciate them getting ahead in life. Uses typically range from paying for house deposit, weddings, private education/university fees for grandchildren, to help starting a business or using a WOL policy in trust to create a controlled legacy on death.
Another method maybe for clients to pay the premiums on an income protection or critical illness policy for their children, as not only does this pass on wealth in a controlled and IHT-efficient way, but it also protects their capital, as well as safeguarding their children’s income and the financial stability of future generations.
The underlying theme of this article is the use of protection, to fund the costs of a funeral or any IHT liability, plus to safeguard the next or future generations. Either way, client conversations should emphasize the peace of mind and reassurance protection provides the client and their family.
While I have written this article in a light-hearted song-oriented manner, it shouldn’t take away from the seriousness of ensuring that clients have a will (plus LPA) and funeral, estate and IHT plans in place. Different advisers have different approaches to broaching these subjects with clients and music may be one such way!
Of course, clients must Keep Talking with both their adviser and their family, to ensure that planning is up-to-date and develops as their circumstances (and legislation) change.
Andy Woollon is a retail specialist presenter at Zurich
- Always Look On The Bright Side Of Life – written by Eric Idle for Monty Python’s Life of Brian film and released in 1979
- My Way – written by Claude François/Jacques Revaux and released by Frank Sinatra in 1969
- I Don’t Want To Talk About It – written by Danny Whitten and released by Rod Stewart in 1975
- Talk – written and released by Coldplay in 2005
- Going Underground – written by Paul Weller and released by The Jam in 1979
- The Only Way Is Up – written by George Jackson/Johnny Henderson and released by Yazz in 1988
- Best Laid Plans – written and released by James Blunt in 2010
- How Will I Know – written by George Merrill/Shannon Rubicam/Narada Walden and released by Whitney Houston in 1985
- Cool for Cats – written by Chris Difford/Glenn Tilbrook and released by Squeeze in 1979
- Money, Money, Money – written by Benny Andersson/Björn Ulvaeus and released by ABBA in 1976
- Sunny Afternoon – written by Ray Davies and released by The Kinks in 1966
- Don’t Worry, Be Happy – written and released by Bobby McFerrin in 1988
- Making Plans For Nigel – written by Colin Moulding and released by XTC in 1979
- Protection – written by Robert Del Naja/Grant Marshall/Andrew Vowles/Tracey Thorn and released by Massive Attack in 1994
- Finally – written by CeCe Peniston/Felipe Delgado/E.L. Linnear/Rodney Jackson and released by CeCe Peniston in 1991
- Keep Talking – written by David Gilmour/Richard Wright/Polly Samson and release by Pink Floyd in 1994