Five steps to spring clean your finances

With spring in the air, and perhaps more time on your hands during the evenings and weekends owing to the lockdown, now could be a good time to perform a spring clean on your finances.

Here are five of key actions that you may wish to consider.

Draft or check your will

When did you last review your will? Have there been any changes in your circumstances, including marrying, having a child, bereavement, or the break-up of relationships that could have an impact? You should consider whether any named executors and guardians remain appropriate, and more broadly, whether the terms continue to sit in line with your wishes. If you haven’t got a will, now would be a suitable time to set one up. 

Don’t ignore your pension

Regularly check your pension and how it is allocated. If you are fortunate enough to have accumulated multiple pensions over the course of your career, check that they are in line with your overall financial aims. If you have one, reach out to your financial adviser to undertake a wider review. You should also consider whether you have made any Death Benefit nominations. Your pension wouldn’t normally pass under the terms of your will, and yet it can still represent a significant share of your assets. Pension providers rarely chase you to update these nominations, so it is important to review them, particularly if you are reviewing your will.

What about life insurance?

Do you have death in service cover with your work (often employers will pay a multiple of your salary as a lump sum in the event of your death)? If so, consider completing a Death Benefit Nomination form to confirm who you want to be considered to receive any lump sum benefit. This could be a family member, a friend, a charity, a business or any other organisation, and will provide added peace of mind. If you have an independent life insurance policy, when did you last review it? For example, are you paying over the odds? Is the cover enough, or are you paying too much? Has the policy been assigned out of your estate? Without this, you can end up paying unnecessary inheritance tax in the event of your death.

How about digital assets?

Do you have a full overview of all your digital assets? Have you considered how loved ones might obtain access in the event that you cannot? The internet is less than a generation old, meaning that the systems and processes offered by companies to deal with death or loss of mental capacity vary wildly. It is worth making a plan and keeping key family members involved.

Set up a Lasting Power of Attorney

Do you have up-to-date Lasting Powers of Attorney (LPA)? These are documents to deal with issues arising out of a loss of mental capacity. Mental incapacity may arise at any age whether owing to an illness, such as dementia, or an accident. Having these powers in place can save family members a lot of stress and anxiety.

It is also imperative to think about your family. If you have elderly parents, when did they last undertake a similar review? If you have adult children, do they have their affairs in order and have they thought about the above?

There can be no doubt that death and taxes are far from happy subjects, but they remain two of the few certainties in life, so grasping the nettle now (and at least once every five or so years) is sensible, even if such powers not required for many years to come.

Tim Snaith is a partner, private wealth at Winckworth Sherwood.