Life is full of twists and turns, and sharing that adventure with a partner can make the ride both more manageable and more complex.
If you have a partner, you may decide to make financial plans for each new life event as they come, whether that’s having a child, getting married, or ending your relationship.
However, planning early and being prepared for life’s events can help ensure the long-term financial security of the two of you, as well as other loved ones.
Read on to learn about why you and your partner should work together to financially prepare for life’s big events.
Welcoming a new child or grandchild into the family can significantly impact your finances
Whether you’re welcoming your first child, third child, or fifth grandchild, it’s important to ensure your financial plan accommodates them.
For instance, it’s a good opportunity to review your wills. You may also want to make plans for how you will one day help them get onto the property ladder or support them through their education.
Planning with your partner can help ensure you direct your wealth in the most effective way. This could include:
- Opening a Junior ISA (JISA) on their behalf
- Starting a pension fund for them
- Setting up a trust with a specific intention in mind, such as paying for their school fees.
The right approach will depend on what you want the money to achieve and when you expect them to need it. It will also depend on your collective finances.
For instance, if one of you has a higher salary, they may want to make regular JISA contributions. Or, if another has a lump sum stored away from an inheritance, they could put it into trust for a specific event in the child’s future.
Planning collectively can give you greater control over how best to use your wealth and provide financial support, rather than leaving important decisions until the money is needed.
Preparing for a life alone can be beneficial even if you never need it
No one wants to plan for the possibility of divorce or separation, especially when happily married. But making sure you both understand your individual financial positions can strengthen your financial plan as a couple, whether you end up spending your life together or not.
Pensions are a good example. If one partner earns considerably more than the other, or one has taken time out of work to care for children, you may have built up very different levels of retirement savings.
Talking about this openly can help ensure that you are both working towards a retirement that gives you financial independence and freedom. It can also have practical tax benefits in some circumstances. For example, where one person is approaching or exceeding their pension Annual Allowance, it may be worth considering whether they could contribute to the other partner’s pension as well.
The same principle applies to other major assets, including your home. Understanding how a property is owned and what would happen to your share if you separated can help avoid uncertainty later. Reviewing the ownership structure can also be useful from an inheritance planning perspective, particularly if your family circumstances have changed.
None of this means you need to approach your relationship as though it is destined to end. Quite the opposite. Having an honest understanding of your individual finances can give both of you greater confidence and independence while you’re together.
It’s important to have a plan in place for when one of you passes away
If you remain together throughout your lives, there is a good chance that one of you will die before the other. It can be an uncomfortable thought, but planning for it can make a significant difference when the time comes.
An estate plan can help ensure that the surviving partner is financially supported and that your collective wealth passes according to your wishes. This might involve reviewing your will, pensions, and life insurance, as well as considering how your assets are owned and whether there are any potential Inheritance Tax (IHT) implications.
Discussing your wishes while you are both well means you can make those decisions together. You can agree who you want to benefit from your wealth, what you want to happen to particular assets, and how you want the surviving partner to be supported.
Good estate planning can also make your wealth more tax-efficient. Depending on your circumstances, making decisions about wills, pensions, and gifting in advance could help mitigate future IHT.
Planning for the death of a partner ensures that when one of you eventually has to face it, there are fewer financial decisions to make and fewer uncertainties to deal with.
Get in touch
Whatever stage of life you are at, we can help you and your loved ones build a plan that accommodates all of you.
To speak to a financial planner, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
