In the UK, talking about your finances is often considered taboo. Many people believe it’s rude to compare salaries and you might feel uncomfortable discussing the details of your financial situation with your friends and family.
Fortunately, attitudes are shifting and the younger generations tend to be more open about their financial situation. Indeed, according to Standard Life, 61% of Generation Z – those born between 1997 and 2012 – are comfortable talking to their friends about money, while 71% would discuss it with family members.
However, only 50% of those aged 55 and above are comfortable talking to friends about financial matters.
Additionally, Money Age reports that 10% of high-net-worth individuals avoided discussions about wealth planning and long-term financial goals because they were worried about causing disagreements. A further 27% said they find talking to their families about their finances uncomfortable.
As such, although attitudes are changing, you might still hold back from talking about your wealth, particularly when it comes to difficult topics such as estate planning or protection.
This could mean that you’re underprepared for certain situations and may find it more challenging to reach your financial goals.
Yet, if you have open conversations with your loved ones, you may be able to strengthen your financial plan and protect yourself and your family from the unexpected.
Read on to learn about three difficult financial conversations you should stop avoiding.
1. Estate planning conversations could ensure your wishes are fulfilled and reduce stress for your loved ones
Estate planning is one area that you might neglect because you don’t want to have difficult conversations about your own passing, and you wouldn’t be alone.
In fact, Canada Life reports that 51% of UK adults don’t have a will in place. Additionally, 15% of adults said the reason they don’t have a will is because they don’t want to think or talk about death.
However, if you pass away without a will, your estate will likely be divided up according to the rules of intestacy. Under these rules, if you have children, your spouse or civil partner will inherit:
- All property and personal belongings
- The first £322,000 of the estate
- Half of the remaining estate.
The remainder is then split equally between your children. If you have no surviving children, the remainder of the estate could be passed to other direct descendants such as grandchildren or great grandchildren.
Conversely, if you have no direct descendants at all, your spouse or civil partner normally inherits the entire estate.
In some cases, this may align with your wishes. Yet, it could mean that other family members such as siblings, aunties and uncles, or cousins don’t inherit anything, even if you wanted them to.
Additionally, if you’re not married, your partner won’t automatically inherit anything from your estate if you don’t name them in a will. Instead, other family members including parents and siblings will benefit. The situation could become even more complex in blended families.
Having an open discussion with your loved ones and creating an estate plan ensures that your wishes are fulfilled. You can also gather all the relevant paperwork and talk to the executors of your will about their responsibilities. Further to this, you might plan parts of your funeral and pay for them.
Making these arrangements now could make the administrative aspects far less stressful for your family when you pass away.
2. Discussing protection could help your family prepare for the unexpected
You may not consider how likely you are to experience a serious injury or fall ill, especially if you’re currently in good health. That’s why you may avoid conversations about protection, but this could leave you and your family vulnerable.
For example, if an illness or injury means you can’t work for a period, you may lose some or all of your income. This could make it more difficult to meet your short-term financial obligations and save for the future.
Yet, if you have income protection, you could receive regular monthly payments to cover your expenses until you can return to work.
In another scenario, if you’re the main breadwinner and you pass away, your family could be left in a difficult financial position as they no longer have your income. This might mean they’re unable to pay the mortgage and other important bills or prepare for the future.
However, your family could use a lump sum from life insurance to pay off the mortgage, cover general expenses, and contribute to savings and pensions.
Unfortunately, if you shy away from conversations about protection, you may not have these vital safety nets in place.
Even if you do have life insurance, you might not have adequate cover to protect your family. Indeed, Which? reports that only 35% of mortgage holders have enough protection to cover all the household expenses if they pass away.
That’s why it’s important to discuss protection and regularly review your needs, especially if the value of your home changes or your outgoings change. This ensures you have the necessary protection in place if the worst happens.
3. Deciding how you would divide assets may reduce disputes during a breakup
When you’re in a happy, healthy relationship, you likely won’t want to talk about the possibility of a breakup. After all, discussing it could make it feel as though it’s an inevitability, rather than a worst-case scenario.
However, if you and your partner don’t discuss how you will handle your assets in the event of a breakup, you might create more stress during an already difficult time.
If you’re married or in a civil partnership, the courts may decide how you split your assets, based on the needs of each party. However, if you disagree on the split, the process could be much longer and more emotionally challenging.
Conversely, if you’re not married or in a civil partnership, you are not legally obliged to split your assets. Normally, each person retains any assets they owned on entering the relationship.
Yet, you may disagree on how to share joint possessions purchased during the relationship. Additionally, one person might argue they’re entitled to a share of certain assets, even if they don’t own them. For example, this could be an issue if one person owns a property but both parties pay the mortgage.
With no legal framework in place, it could be hard to resolve these disputes. If you discuss this difficult topic now, you might be able to come to an agreement beforehand.
Unmarried couples could also consider a “cohabitation agreement” which lays out the division of assets after a breakup.
Talking about uncomfortable topics with your loved ones can be hard, but it’s worthwhile because it could mean that you make difficult life events easier for yourself and your family. It could also mean that you’re better able to reach your financial goals, no matter what happens.
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These difficult conversations may be easier to navigate with the support of a professional financial planner.
Please get in touch to find out how our team of VouchedFor Top Rated planners could help today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning or will writing.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.