In this lesson you will learn 💸
- What key documents you might need to be prepared for unexpected life events
- What they mean and do
Why would I need a pile of documents?
Getting important paperwork together can feel a bit premature, but the fact is that bad things do happen – critical illnesses, accidents, relationship breakdowns – there’s no way of sugar-coating that.
If or when you have to face any of these, you'll be glad you put precautions and documents in place that clearly define what you (or your partner) want to happen in these circumstances.
In no particular order, you should think about:
Your Healthcare Directive
This is also known as a living will, advance directive, personal directive, medical directive or advance decision. If you’re ever in a situation where you’re not able to make decisions for yourself – through illness or accident – this sets out your preferences, wishes, beliefs and values regarding your future care, e.g. where you’d like to be cared for, what you want done with your pets, etc.
Lasting Power of Attorney
Again, if you’re not able to act yourself, this states who you’d like to take over decision making on your behalf. This could relate to your care, welfare and/or financial matters. There are special rules you need to adhere to which can be found at https://www.gov.uk/power-of-attorney.
Last Will and Testament
This is where you officially state your wishes in terms of who you’d like to inherit your possessions, including property, art & jewellery and investments. You might choose individuals, groups or charities. You can create your will online or use a specialist wills service.
Life Insurance
If you have any dependents or debts, it’s extremely important that you take out life insurance. This will protect your family by paying out a sum of money in the event of your death.
Income Insurance
If you’re unable to work because of an accident, illness or job loss, this insurance will pay you a tax-free replacement income. This is particularly valuable if you’re self-employed or your dependents rely on your income.
Partnerships and Marriage Agreements
Your legal rights will differ, depending on your partnership status. There’s no legal recognition of a co-habiting couple so, in the event of a breakup, there are no laws to ensure a fair split of assets and income is made. This can be extremely costly and one or other party can be left high and dry if the split isn’t amicable. Those in a civil partnership or marriage have very similar legal rights. You can find a number of different online guides such as the Citizens Advice one to ensure you’ve thought through all the practical and emotional issues before making things official.
Prenuptial Agreements (prenups), Pre-Civil Partnership Agreements and Postnuptial Agreements (postnups)
These formal written contracts can help protect your pre-acquired assets in the event of a breakup. However, they’re not legally binding, only advisory to the Court. Ultimately, it’s the Courts, not the couple, that decide how financial and property claims should be dealt with.
Your action 📝
- Take this list as an inspiration and check which documents you might need
- If you’re in a partnership, it’s worth going through this list together to work out if there are any gaps
- Prioritise and focus on the most important ones for your current life circumstances
- Set a goal, action item or calendar for yourself for when you want to complete this