Lump
sums needed on or after your death
Unless you have already set money aside to pay for
your funeral(s) or have taken out some kind of funeral
plan, you will need to make an allowance for funeral
costs. Funeral costs depend on where you live, whether
you chose burial or cremation and how simple or elaborate
you want the funeral – and wake – to be.
As well as funeral costs, you should add to the list
lump sums needed to pay any of the following:
· Debts (including your mortgage if you don’t
already have a mortgage protection policy or an endowment
policy)
· Possible inheritance tax bills
· Gifts of money you have made in your will to
people other than your dependants
· The cost of replacing large items, such as
a company car which would no longer be available after
your death.
You should also consider making an allowance for about
two months’ worth of lost income that your dependants
may spend while they sort out their longer-term finances
and wait for the life insurance policy to pay out.
If you have savings or investments that your dependants
would be happy to use in order to meet these immediate
expenses, you do not need to enter an amount in the
calculator. However, if these expenses would wipe out
your emergency fund, for example, or you would need
to borrow money to meet them, you should add an amount
to either replenish your savings or pay off any loans.
Note that you should make sure that any savings that
would be used on your death are readily accessible in
a joint account.
Lump sums your dependants will receive on your
death
The lump sums that your dependants might receive on
your death could include:
· Payouts from any existing life insurance policies
· Life insurance – often called ‘death-in-service
benefits’ – from your employer
· A refund of your contributions if you have
a personal pension plan
· A modest lump sum that a widow would receive
from the state, provided that her spouse’s National
Insurance payments were up to date
· Capital raised from the sale of assets –
if your dependants wanted to move to a smaller home,
for example, or sell shares and unit trusts
· Other lump sum savings that could be used.
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