2020-02-16
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Guide to your legal and financial lifetime

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Posted on 10 April 2015

As the song says “life is a roller coaster” but it’s nice to be prepared for those legal and financial milestones that you'll meet along the way. Forward planning is vital to ensuring your financial future and enables you to have security, freedom and be prepared for those bumps in the road that you're bound to encounter.

Our guide helps you navigate through the key stages of your life and highlights some of the main areas you need think about and where to find advice. 

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Setting off on the right financial path with your dream career

The start of your career is an exciting time in your life and is probably the first time you’ll have any significant money in your pocket. Therefore it is good time to acquire sound financial habits that will last you a lifetime! 

Negotiating your salary

You’ve just landed your first job, this is your first step to financial security and freedom. It’s important to understand your value to the business and not be too shy in negotiating your salary and benefits package. If you don’t ask, you don’t get! If you negotiate professionally, your employer is likely to appreciate your approach and see it as a useful skill.

Are the benefits benefiting you?

Benefits for employees, sometimes referred to as perks (perquisites) or fringe benefits, are any type of compensation that is not part of your salary. They tend to include things like healthcare, subsidised memberships, discounted tickets or childcare incentives. It is important when negotiating your new role that you include the most valuable and tax efficient benefits for you.   

Pensions

Retirement may seem like a long way off but it’s never too early to start your pension planning. Many employers offer a company pension after a qualifying period, or if not, it is wise to consider investing in a personal pension so that your future is secure. You should seek professional advice before choosing a pension plan.

Contract of employment (things to look out for)

Like all contracts it’s important to read it before you sign. Most contracts are quite straightforward so there are some standard terms you can expect to see included such as hours or work, rates of pay, and sick pay and holiday entitlements. The contract will often refer to the employee handbook so it’s important to familiarise yourself with it and keep up to date with any policy changes.

Should you be clearing your student debt?

You may have just left university with a significant student debt and are continuing to accumulate further debt by paying for your first car and household items for your new accommodation. Your first reaction may be to try and pay off that debt before starting to save for other things but it may not always be the best option.

Saving for your future

Your immediate future may seem the only thing of interest and saving for your first ‘R’ type car or exotic holiday may be high on your list of priorities. However, there is no time like the present for exploring tax efficient ways of saving money for the longer term, such as buying your first home, whilst still enjoying the here and now.

Wedding

Ensuring love and finance is a match made in heaven

Meeting the love of your life is an important milestone in your life. Understandably, finance is likely to be far from your mind when deciding to commit to each other. Nonetheless, it is important for your financial and legal security that you address some common points before you dive in to something serious and legally binding.

Pre-nuptial agreements

When in the throes of a budding relationship it is difficult not to let your heart rule your head. A pre-nuptial agreement may not be the most romantic thing to discuss but it is not just about who gets what if you split up, it can also help to sort out financial and legal issues while your relationship is sound.

Your legal rights – marriage, civil partnership, co-habiting

Many people who co-habit assume they have the same rights as those who are legally married or in a civil partnership, however this is an urban myth. The term 'common law' husband or wife is not legally recognised and so it is important that you understand the legal status of your relationship.

Managing your money

There are many theories about the best way to manage your money as a couple whether you’re married or cohabiting. As you’d expect there are benefits to managing your money jointly - for instance to pay household bills - as well as keeping separate accounts for your individual use. It is a personal choice but we’ve given you some advice below to help decide what’s right for you. 

Managing your individual and joint debts

The total personal debt in the UK at the end of January 2015 was £1.469 trillion. It is a national problem that affects an awful lot of people. In a relationship it is important to understand how your joint debt and your partner's debt affects you and vice versa.

Life insurance

Rather like making a will, insuring your life is one of the things most of us know we should do but don't quite get round to organising. If you have a mortgage, you are likely to have mortgage life insurance but this will only cover your mortgage in the event of your death. Life insurance is there to provide for your loved ones if you die while they are still dependent on you. However, there are certain things you need to be aware of and choices for you to make; the information below should guide you through. 

Inheritance and making a will

Many people put off making a will and the younger you are, the less likely you are to make it a priority. Sadly, none of us know what might be round the corner so it is important to set out your wishes clearly so that your money and assets go to those you’d like to leave them to. For example, did you know that, under intestacy rules, your estate will not pass automatically to your partner if you are not married? The expression “common law spouse” isn't a legally recognised term and therefore your partner is not considered next of kin. Two thirds of people in the UK never get round to making a will.

Row of houses

Finding your perfect home without over stretching 

Your home is likely to be the biggest investment of your life, so it’s important to get it right. Searching for your first home or looking for the next house for your move up the property ladder, imagining your family living there, is an exciting time. However, you need to have the right finance in place and understand the legal aspects of property purchases; you don't want to discover there are no building regulations for the extension you like so much! 

Affordability

It’s easy when you’re house hunting to get carried away with what looks like a dream home without looking in detail at what you can afford. It's not just the mortgage costs, there are also legal fees, moving costs and the inevitable costs of property refurbishment, repairs and maintenance to take into account.

Mortgage

Mortgages, especially for first time buyers can be a minefield. It can be difficult to know who to listen to: the bank, a financial adviser or a mortgage broker, all of whom will have their own agenda. It’s vital you don’t just concentrate on the short term; for instance, could you still afford the mortgage if interest rates were to rise dramatically?

Legal costs

‘Conveyancing’ is the legal transfer of property ownership. Moving home is supposed to be one of the most stressful times in a person’s life. Choosing the right conveyancer can make all the difference to the whole process, after all you want the biggest purchase of your life to go as smoothly as possible.

A second property

Many of us dream of having a second home in the sun, a place to relax and unwind with family and friends and escape the rain. Or buying a second property to rent out and use as an income source. There are many benefits of doing so but it’s important to understand how to make the most of your purchase and ensure you’re using all the available tax breaks and, particularly if you are buying abroad, that your purchase is legal.

Making a will 

Making a will is the only way of making sure that your money and possessions go to the people you want them to go to. Nobody wants to think about dying but it’s one of the few certainties in life so it is wise to plan. Did you know that if you die intestate (without having made will) then the state decides who benefits?

Family wellies

Securing the future for your children

For most people raising a child is the most important thing they'll ever do. Everyone wants to give their children the best possible start in life and a sound financial standing is a good place to begin. Putting your legal and financial matters in order before the birth of your children is a wise move - time can be at a premium afterwards! 

Legal rights and responsibilities

Parental legal rights have changed immeasurably over the last few years and will no doubt continue to change. Both mothers and fathers have rights to parental leave after the birth of a baby and are now legally entitled to share that leave if they wish to do so. All parents should be familiar with their basic rights and responsibilities. 

Insurance

When you have children, it is even more important that they can be provided for if you die before they reach maturity. Life insurance can help to ensure that your family's financial needs are met.

Finance

The cost of raising a child and supporting them through university has risen to an estimated £227,266. This includes funding the early essentials such as nappies, a pram, car seat, cot and clothes as well as school fees, trips and activities later on.

You can give your child a financial leg-up by investing on their behalf. This is not only tax efficient but also helps to instil good financial habits in your children. 

Benefits and tax

The overall cost of raising a child is high. However, there are some ways of increasing your child care budget without having to earn an extra penny; these include childcare vouchers, tax credits and school schemes.

Making a will 

It's particularly important to make a will when you have children. Not only do they need to be financially looked after but also a will is where you can nominate a legal guardian for them. This is a difficult subject and nobody wants to think about death, particularly if they have children. However, not doing so can result in your family suffering unnecessarily while your estate is administered under intestacy rules. Making a will puts you in control of future arrangements for your children. 

Legal guardians

In simple terms, a guardian is the person you would like to be responsible for your children if you and your spouse die before they are 18 and this is stated in your will. If you do not specify who you would like to look after your children, the courts will decide and it may not be the person or people you would have chosen.

Couple separating

Taking the financial worry out of separation and divorce

No one plans to separate or divorce but it is a sad fact of life. With approximately 40% of marriages ending in divorce it is wise to understand the legal and financial side of separation. 

Mediation

Since 2014 it has became compulsory for divorcing couples to attend mediation where a neutral negotiator will work with a couple to try and find a solution that works for the whole family. This is not relationship counselling, it is designed to help a separation go smoothly rather than help a couple remain together.

Splitting assets

It's a cliché that couples who are separating argue about who has the dog, the lawn mower and the furniture while the larger joint assets are rarely discussed. If relations between the couple remain amicable they can decide on the assets without a long drawn out legal process. However, there are no rules on the division of assets in the event of divorce; if you end up in court, it is left to the judge to decide what is fair and reasonable.

Legal and financial

When emotions are running high in a separation it is sometimes difficult to see what is "fair" in terms of a settlement. On the whole people don't want things to be unpleasant, especially if there are children involved. The guidance below shows you how things are usually settled and how you can protect yourself and your future. 

Children

Negotiating residence and access rights is a sensitive process. Although in the majority of cases it is the mother who is usually awarded custody, fathers' rights are not overlooked. Ensuring that fathers have proper contact time is acknowledged as crucial to children's welfare whose well being is central to any settlement. 

Money

Plan your finances for a secure retirement


Your retirement should be something to look forward to: you’ve worked hard and raised your family and now it’s time to relax and enjoy your free time. However, for many this is not the case, as more and more people retire with debts. Planning ahead for your retirement can help to relieve financial worries.  

Plan for your retirement

Many people don't start to think about retirement until it’s just around the corner. However, if you want to retire in relative comfort, then you need to start planning at least ten years beforehand and longer if you want to build up a decent pension. 

Paying off your mortgage

Your mortgage will be the ‘cheapest loan’ you’ll ever have in terms of the interest rate, so you need to decide if it is the right time to pay off your mortgage. The guidance below will help you make your decision. 

Debt

It is a sad fact of life that one in five people now retire in debt. This can be a worry with no salary coming in and the future can look bleak. However, there are ways of clearing your debts so you can enjoy your retirement. 

Releasing equity

Cash flow is often an issue when you first retire and you may struggle to maintain your standard of living without a salary. Equity release is one solution to boosting your income but it’s not the right decision for everyone. 

Pensions 

A pension is the main source of income for most people who have retired and is likely to be a combination of state, company and private pensions. Since April 5, the law regarding pensions has changed giving people much more flexibility about how and when to take their pensions. Whatever you choose to do, it is important that you seek professional advice before making a decision.

Tax

There are different approaches and ways you can reduce your retirement tax bill if you plan ahead. 

Is your will up to date?

Your will is a work in progress; as your circumstances change you need to update your will so that it reflects your current status. For example, you may like to leave something to your grandchildren.

Power of attorney

It is sensible to decide who you would like to manage your affairs, in case you become temporarily (or permanently) incapacitated or are abroad for any length of time, before the need arises rather than afterwards. If you appoint someone you trust with power of attorney it means that you can discuss how you would like your affairs to be dealt with.

Inheritance tax planning

In the 2015/16 tax year, inheritance tax is payable on that portion of a person’s property and possessions worth more than £325,000 at the time of their death.  The rate of 40% is applied to anything above this threshold. It is therefore paramount that you plan ahead to avoid paying more than is needed.

Holding hands

Making sure you budget for your lifetime care needs


Old age is inevitable and the older we get, the more likely it is that we will need some sort of care either in our own home or in a care or nursing home. Funding such care is a major concern for most people.

Who pays for your care?

It is likely that you will have to contribute towards your care needs. It’s therefore important that you understand your options and the associated costs. 

Selling your home

For most people, their home is their major asset and many fear that they will have to sell it in order to fund future care. This is not always the case and there are some measures you can take to protect your home. 

Power of attorney

Appointing a power of attorney is important so that you have some you trust in place to make important decisions for you. You do need to plan ahead because if you lose capacity and have not appointed a power of attorney, your loved ones will need to apply through the court of protection which can be a costly, drawn out process.

Flowers

Grieving for the loss of a loved one without the financial worries

Losing someone you love is one of the most painful experiences of your life. You don't want to be worrying about the practical, legal or financial aspects at this time. The details below will help you to navigate your way through the period after someone dies. 

Legal checklist

There are certain things you need to do when a loved one dies. Although your funeral director and solicitor can help you with these it is helpful to know what they are so you feel confident that nothing has been missed. 

The probate process

Probate allows the executors (those appointed to manage the affairs of a loved one after they have died) access to the deceased's assets including investments and bank accounts. They can then settle any debts and distribute the estate in accordance with the deceased's will, if one has been made. If there is no will in place then the deceased has died 'intestate', in which case the court will set out who should deal with their affairs and inherit their estate. 

 

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