As you step over the threshold into married life, you should know that the world of your personal finances has changed forever as well. There are a number of financial matters to consider, and steps to be taken, as you and your partner embark on your new journey. Here are our top tips on what you should be thinking about, as you return from honeymoon.
Get under the covers (life cover, health cover, & income protection)
If you haven’t got them already, you should seriously consider both life insurance and health insurance as a married couple. Life cover will probably be required to guarantee your mortgage repayment, but do consider extra cover for your spouse and family to compensate for the loss of income, if they lose you. Also consider separate policies, rather than joint cover. For just a little extra, you have two policies, so that the surviving spouse is still covered after the first one dies. In health insurance, a critical illness policy insures you against being unable to work due to events such as heart attack, stroke, or cancer, and pays out a single lump sum which could, for instance, clear your mortgage. Income protection insurance, on the other hand, pays out a monthly sum to replace your salary in the same situations.
Write life policies ‘in trust’
When taking out a policy, ask your financial adviser to set up your life insurance in trust. This moves the policy outside your ‘estate’ (the bundle of assets that make up your wealth) so that it can be paid to your family right away, if you die. The insurance money will not be tied up while solicitors go through the formalities of sorting out your assets (‘establishing probate’), which can take upwards of three months. It will also protect your insurance from the prospect of inheritance tax at 40%.
Consider your mortgage options
These days, seeking a first time buyer mortgage generally involves at least a 10% deposit and then some careful choices – preferably based on good advice from a qualified expert. What mortgage do you choose – a fixed rate or variable rate mortgage? Your adviser can also help you present a strong application which ‘ticks all the right boxes’ with the mortgage lender.
Look at your pension provisions
You need to set up a pension plan, now that you are a couple, perhaps soon a family. In drawing up your pension you can name your spouse as its beneficiary, in case you die before retirement.
Options for the self-employed
If you are self-employed and your spouse is not working, you can take on your spouse as an employee, pay them just under the taxable rate (between £4,940 and £5,715 a year), thus rendering that amount of your family income tax-free. You can also set up a pension of up to £5,000 p.a. for your spouse, who will also qualify for the second-level state pension as well.
Take control of inheritance planning – make a will
By making a will, you take control of the welfare of your spouse and family after your demise, and ensure they get everything. Put another way, if you fail to make a will, other relatives could have a claim on parts of your wealth. In a worst-case scenario, your spouse might have to sell your house, in order to meet your obligations to those relatives.Â
Pension provisions should always be a priority. Writing policies in trust is also a necessary task. Writing single life policies is also a great tip