The UN observes International Widow’s Day on 23rd June to address the poverty faced by widows around the world. We outline how you can plan to protect your loved one financially in the event of your death.
Financial planning for times of loss
It is estimated that nearly one in ten widows worldwide lives in extreme poverty. While your death might not leave your partner penniless, newly widowed adults often face financial strain that can be overwhelming, especially during a time of emotional distress.
Some of the challenges they may face include:
- Loss of income of a breadwinner
- Loss of childcare
- Lack of experience managing household finances
- Unpaid debts
- Funeral and medical expenses
- Succession issues
- Inheritance tax
Thankfully, there are lots of things that you can do now to ease the burden on your loved ones when you die.
Loss of income of a breadwinner
Losing a family breadwinner will inevitably have a profound financial impact on a family. It can lead to problems in maintaining a standard of living, keeping up with bills, or paying the mortgage and school fees and comfortable lives can spiral downwards frighteningly fast. In the worst-case scenarios, substantial lifestyle adjustments may be necessary such as moving house, possibly to a different country, and changing schools.
Fortunately, there’s an easy financial solution: life insurance. We believe that life insurance is a key foundation of financial planning for anyone wishing to protect their family. Do not be tempted to skip it because none of us knows what life has in store for us.
Loss of free childcare
Stay-at-home parents are often neglected when it comes to life insurance, and most of us underestimate the value of their contribution to a household. You might be shocked at Insure.com’s valuation of a mother’s contribution to a family: $140,315 per year. Of course, we’re all about equality here at Infinity and would like to point out that this applies equally to stay-at-home dads! Whether you agree with that figure or not, we recommend life insurance for parents who don’t work, as well as those who do.
Lack of experience managing finances
Widows who have taken a back seat in managing household finances frequently find themselves at sea when they lose a partner. That’s why it’s crucial that both partners in a relationship are involved in all aspects of financial planning including budgeting, bills, investments, and insurance.
In addition, it’s a good idea to keep a master list of bank account details, insurance policies and investment products and to share passwords so that the surviving partner does not ‘lose’ any investments or find themselves unable to access funds.
Unpaid debts
Leaving your partner high and dry with a mortgage to pay is not cool. All major debts should be taken into account when working out your life insurance requirements so that in the event of your death, the outstanding amounts are taken care of by the insurer.
Working out how much life insurance you need can be hard and many households are chronically under-insured. In the US, for example, LIMRA estimates that 40% of Americans live with a life insurance need-gap.
We recommend taking the advice of a financial planner who can sit down with you and ensure that you have adequate cover that takes into account all your debts, as well as your family’s day-to-day expenses.
Funeral and medical expenses
It’s heartbreaking when the stress of losing a partner is compounded by additional financial and emotional stress because funds are not available to cover funeral and medical expenses. This can be easily avoided with forward planning.
Medical expenses should not be an issue for anyone with a comprehensive health insurance policy and again, this is one of the financial planning foundations we encourage all our clients to put in place.
Funeral costs can be factored into life insurance. This will usually be paid out quickly following a death so a loved one won’t have to wait for probate to be completed to access funds.
Succession issues
The only way to ensure that your assets will be distributed according to your wishes is to state them clearly in a will. Do not make assumptions that everything will go to your partner, put your wishes down in writing so there is no room for interpretation or error.
We can’t state this any more clearly: you need a will!
Inheritance tax
Depending on where your assets are located, your estate may be liable for inheritance tax. Laws vary from one country to the next and can be extremely complicated and/or punitive, depending on your personal situation. These problems can be exacerbated by the cross-border issues which often affect expatriates.
You should take advice on the IHT laws that apply to you and discuss with an expert how you can minimise your IHT liability by legal means. An estate planning strategy adapted to your situation could save your partner thousands.
To summarise
If you want to make your passing as stress-free as possible for your partner, you need to check you have the following:
- Sufficient life insurance
- Comprehensive health insurance
- Detailed financial planning records
- A valid will
- A tax-efficient estate planning strategy
An Infinity financial planner can help you with all these aspects of your financial planning to ensure that your loved one is protected, whatever happens to you.
Planning to support your partner upon your death is the ultimate act of love so don’t delay, contact us to discuss your requirements with one of our professional financial advisers.
A leading provider of expat financial services and wealth management services across Asia.
