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Info Centre - Protecting your family

This isn’t easy to talk about, but the thing that changes the most when you have a baby is your priorities. To make sure your family is protected against the financial repercussions of one or both parents dying, you need to spend some time addressing the worst case scenarios.

Life insurance

If you have a mortgage, you may already have some life insurance. Depending on your job you may also be a part of a company scheme that has a Death in Service provision, although this may not apply while you're on maternity leave. Check with your employer if you're not sure. Your independent financial advisor will be able to tell you if you have sufficient cover.

If you have no cover or think your current cover is insufficient, now is the time to think carefully about taking out a policy to provide for your family in the event of one or both of you no longer being around. When you're buying a policy, you might find that proceeds upon your death are made as a lump sum or as an annuity, which is paid over time in regular payments. Try to take independent advice when you're about to buy your policy and speak to your insurer when completing the application form, as incorrect submissions can result in non-payment.

Other insurance policies

You may also like to investigate income protection policies particularly if you foresee your family being reliant on a single income after the baby's arrival. Critical Illness cover is another type of insurance you could take out to protect your loved ones. Now's a good time to make a list and review your existing policies, including any work benefits that you may not have thought were important until now.

Before buying any insurance policies you should seek financial advice from a suitably qualified advisor. You may also need to speak to the insurance company directly when completing the application form, as incorrect submissions including non-disclosure of information can result in them refusing to pay out.

Wills

If you're not married and die intestate (i.e. without having made a Will), your estate should automatically pass to your children in trust if they are under 18 years of age. If you are married, your estate should pass to your spouse and other relatives in accordance with the relevant laws of intestacy. A Will can help you be in control of who receives your assets, as you'll undoubtedly want to provide for the future of your baby. We know it's not nice to think about but it's better to consider writing a Will now rather than leaving it until it's too late.

There are many ways you can make a Will. For example, Will kits are available in high street stationers and some banks provide a Will service. And, of course, you can use a solicitor for your Will. It is possible to write your own Will, although it is advisable to consult a solicitor. The Citizens Advice Bureau can also provide you with advice on making a Will.

A solicitor should also be able to advise you about inheritance tax (IHT) and how this could affect your estate once you've died. If you leave behind any combination of property, savings and life assurance policies worth over £325,000 (2009-2010 tax year), any excess above this will be subject to inheritance tax at 40%. For further information on the laws around IHT, please see www.direct.gov.uk

Guardians

It's really important to consider who you'd want to bring up your children if you couldn't. You should appoint at least one guardian to look after your child, and a good way to ensure your wishes are carried out is by putting this in your Will. Guardians could be close friends or members of the family but you need to make sure they would be willing to take on this responsibility.

This isn't fun stuff, but it's still important and worth considering now that you have a baby on the way.