Martin Lewis: We need to talk about money

If you’re reading this, you’re old enough to know life isn’t always happy and hassle free. And cheery chap that he is, our Money Saving Expert Martin Lewis says many people need to face up to it, sit down, often with friends and family and have the ‘unpleasant issues’ chat…

Need is the crucial word here. And it’s not just for those in the last trimester of life. Ignoring this costs – not just financially, but in hassle and emotionally too, both for you and your family. So I plan to be candid, plain, blunt and unemotional. Unpleasant issues happen and you need to plan for them. Here’s four of the big ones.

1. Free wills - you’re going to die, ensure you minimise the impact on your love ones

Die will-less and your affairs can be in limbo for years. So whatever your age, if you've assets eg, a house, savings, or a business, and people or others you'd like to look after, consider making a will.

This is even more important if you live with your partner but aren’t married or in a civil partnership. Your partner has no status under law – if you die they may not get the house or even the kids – even if you've been together 37 years and have 6 children. So it’s worth checking out (unmarried fathers of children born before 2003, need to check if they actually have parental responsibility if the child’s mother died, see the Govt’s website on parental rights).

Making a will can be costly. The gold standard is a solicitor drafted will. There’s full help in Martin’s ‘Free and cheap wills’ guide running through all the options.

Right now though there’s two big schemes on. October is Free Wills month in over 50 locations across England, Wales and Scotland, though go quick as appointments are scarce. It covers simple wills.

You’ll need to be over 55 for this (or if a couple making mirror wills, one over 55). The scheme is run by charities in the hope you’ll leave it a bequest – something in your will – though you don’t have to. Just enter your postcode on the Free Wills website and then call one of the solicitors close to you who are taking part to book an appointment.

Then next month is Will Aid, which is larger, open to all ages, and is across the UK, including Northern Ireland. The website lets you chose a solicitor to book an appointment, though do tell it you’re calling as part of the Will Aid scheme. Here solicitors give their time in the hope you’ll make a donation to one of nine charities they support including Action Aid, NSPCC and the British Red Cross.

The donation requested is £95 (£150 for couples) which you can make online before your appointment, though do print out the receipt and take with you to the solicitors to show you’ve made it. If you can’t afford it, you can give less, don’t game it though as it is a charity event.

2. One in three over 65s will develop dementia Thinking and talking about what would happen if our mental capacity deserted us is uncomfortable; it’s not just dementia – plus difficulties that can be faced by victims of stroke, serious accidents or more. If you lose your faculties through a stroke or dementia, don’t assume relatives can walk into the bank and access your money – not even if it’s just to pay for your care. If you’re not prepared, and your family have to take charge of your affairs, they will need to apply to take over via the Court of Protection.

This is a nightmare for many families that can drag on for many months, with costs that can be in the £1,000s. I hear many horror stories like Norma who said: “My Mum is deputy (via the Court of Protection) to my Dad, who has advanced dementia. It's a very long, drawn out and quite intrusive process. It's also expensive. Mum will have to pay hefty yearly fees too. I just wish we'd managed to get Power of Attorney instead, when Dad was more capable. He got ill very fast and we couldn't implement it.”

So consider getting a Lasting Power of Attorney (LPA) now while you have the mental capacity, where you nominate a trusted friend or relative to look after your affairs. This doesn’t mean you’re giving up control now. You can choose for it only to come into effect when you’re no longer capable. I’ve got one and I’m 44.

For simple financial affairs, you can set one up yourself by filling in the online form for England and Wales, £110 fee, for Scotland it costs £74, and for Northern Ireland it costs £115. Yet if you’ve more complex financial affairs I’d get a solicitor to set one up for you properly. It’ll cost around £700ish all in and you can use the Law Society’s Find a Solicitor tool, to find a solicitor near you. There’s also good info on the Alzheimer’s Society website.

You can also get a separate LPA specifically for health decisions, such as medical care and your daily care routine, should you be unable to. You register it in the same way as above but the two LPA’s are separate and are registered individually, so you’ll need to pay the same fees again – yet in Scotland if you register both at the same time you’ll only pay the one fee.

3. Are you hurting your spouse by looking after the finances? More than 60% of couples say one person deals with all the home's money issues. If you're reading this, my guess is that's you. Yet if you were hit by one of the three Ds - death, divorce or dementia – it could heap financial misery on the grief. That's because often the other partner is in the dark.

Too often people have asked me: "My partner just died, I'm in dire straits, I simply don't know where to start with the finances, what do I do?" One even struggled to access her husband's money to pay the mortgage.

So why not create a financial factsheet naming all product providers – from roadside recovery to investments, boiler cover to bank accounts. Keep it somewhere safe, but don't put too many security details in just in case. Then have a kitchen table briefing every few months to update and discuss.

4. Need cash from your house. Don’t leave it late. Those in their sixties living in large homes with kids who’ve long left the nest often plan to downsize as they’re asset rich, cash poor. Yet it’s often put off. I’ve often heard it’s always “a few years away” and then it gets to a point when “we’re too old to leave”.

It’s usually far better just to sell and downsize. If not that leaves the main option to use an equity release product, this is a way of spending the value of your home while you still live there. But with average interest rates at around 5.5%, they are far higher than most mortgages. And more significantly, as it’s usually paid from your estate or the sale of your house on death, you often don’t make any repayments, which means that, unlike a mortgage, you’re subject to vicious compounding.

Having said that, while it is more expensive, if you don’t have any dependents who need the money equity release means you maximise the gain for your money.

My two main tips for equity release are:A) Don’t just think ‘how much will we need for the rest of our life’ – as the sooner you borrow the more expensive it is, as it has longer to grow. So borrow what you need when you need it, and borrow more later if you have to.

B) Get advice before you do it from someone who is a member of the Equity Release Council – this trade body’s members at least promise your estate will never owe more than your house is worth.