Life Cover Death

OK, so there is a risk of unexpected costs in leaving my body to research, meaning that I need to still consider paying for funerals somehow, and if funeral plans are out of the question, then how can I make sure the costs are covered?

I have savings in various accounts – but I just realised that these accounts get frozen as soon as I die, and becomes part of my estate – so I am now worried that my wife will be unable to access money to cover my funeral costs – or even to continue with the costs of running the house and family.

I suppose I could simply set up a joint account and then whoever doesn’t die gets sole control of the account.

Some kind of investment is required. That much is clear – but how do I arrange this to work upon my death? How do I arrange for the investment to be accessible by my widow or family, and not be frozen into my estate?

Maybe if I did not leave a will, everything would simply transfer to my widow, and vice versa. I don’t know how quick the transfer may be. I’m guessing that the tax man might want to be involved, which might mean there is a financial problem for at least a period – and people will want paid – fees and charges as well as tax. That’s not the best time for complexity – and that is exactly what I am trying to avoid.

I think people exploit the situation to their own advantage. I can fully appreciate how attractive it is to allow someone else to take care of everything – and you just hand over money – whatever it costs.

This could be where Life Assurance comes into play.  If I remember rightly, there are two main types – Term and With-Profits (or Endowment) policies.

The Term insurance is about paying a small premium every month until the term is up – it only pays out on death during the term, whereas life assurance policies can be joint, can be cashed-in, offer bonus pay-outs on death and so on.

This is all from memory of getting mortgages over the years – I remember getting a Capital & Interest Mortgage (constant net rate annuity mortgage), and each monthly payment was made up of repaid capital and calculated interest – and I had to get Term insurance as security for the loan – to cover paying-off whatever capital was outstanding on death so the lender wouldn’t lose out and my debt would not be inherited.

Whenever I had an Endowment Mortgage, I paid only interest each month, and the policy was designed to pay off the whole capital on my death – with “terminal bonuses”. These mortgages got a good name because of this, but then got a bad name because they failed to pay off the capital when the mortgagee did not die before the term!

It looks like I need to talk to a financial adviser. The trouble is deciding on the amount of cover – I still do not know how much a funeral will cost today let alone in years to come!

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