The sting that follows death

Proper planning can avoid many of the wounds of bereavement.

We had been to a funeral. I said to my City friend: "My biggest worry is whether my widow could handle all those forms." Geoffrey replied: "I dread mine handing the portfolio over to the first broker who calls."

Taboo and trauma may well describe death, but it also means trouble financially, not least because the date is unforeseeable. Yet toil and loss on top of grief can be spared by administrative preparation and flexible financial planning.

For example, the household should always have the liquidity for three months' normal outgoings. This is easy and economical with 30-day, 60- day and 90-day accounts at a building society, say investment advisers, John Charcol.

Their technical director, Robert Guy, says: "Discounting death is a vital yet overlooked part of financial planning. Usually, a widow asks what to do with realised cash, although many will just leave it in a building society. There are better homes for lump sums, but any income may be more sensible than a previous portfolio that went for growth while the deceased had a salary."

Intermediaries such as Charcol also get enquiries from solicitors about holdings and policies that may form part of the estate. Carter Bells' probate expert, Russell Morgan, who belongs to the newish Society of Trust & Estate Practitioners, says: "The big question is whether death becomes an administrative act whereby the estate is governed by a will instead of delegating decisions to the next-of-kin who might inherit everything even without one." Mr Morgan urges clients to update their arrangements and assets periodically.

He says endless probate with poor files and loose ends is the worst headache from do-it-yourself wills. Buy the latest edition of Wills and Probate (which includes advice on living wills) from the Consumer Association which says most people die unprepared.

They say the will and records of investment and indebtedness should be in a safe and known place. There will be a dozen reference numbers for health, taxation, social security, public utilities and property alone. Insurance and pension policies, securities and savings should be kept in separate envelopes marked with key dates and references.

The computer-literate may have all this and other financial data - from accounts to certificates - on a disk and print-out, but a card-index will do.

A further refinement could be personalised forms, each with the relevant reference and addressee.

These would explain that (name) died on (date), so please act or advise accordingly. A book, Your Rights and 40 free factsheets - one covers (enduring) power of attorney - are available from Age Concern listing those to be informed of a death. The Inland Revenue does not insist on early notification, but doing this all round can save trouble and money, because there may be refunds on tickets, instalments, membership or credit- cards.

Banks will not stop standing orders until they know, and many life offices add interest on payouts awaiting probate only from the date of notification.

Inheritance tax does not touch widows or widowers, and there are ways for children to avoid all or some. Leonora Robertson of the Inland Revenue says: "Beneficiaries usually understand any liability regarding income and inheritance, but tend to overlook capital gains." She recomends form IR.45: What to do about tax when someone dies.

There is also a problem with the tax-free savings vehicles that die with the saver. A Tessa becomes taxable only from the date of death, but it goes into the estate, because there is no mechanism for allocating a Tessa to the survivor, even without the rebate.

It would be neater if tax-free plans could be written to pass automatically to a named next-of-kin on a taxed or untaxed basis, according to entitlement. This would save unscrambling and re-investing with all the delay, effort and charges. The institutions would then have to remit funds instead of winning a captive customer.

And my City friend Geoffrey could go to his rest assured that today's balanced portfolio should stand the test of time, if it is in blue chips or in accumulation unit trusts that can be converted to income ones.

But you should never bequeath cash from liquidised assets your descendants do not know where to invest.