Nine-step financial bucket list

Bucket lists have become increasingly popular in recent years. They take the form of a number of things you want to do before you kick the bucket. Here are nine items to add to your financial bucket list.

They aren't complicated or time-consuming but do them and when you die your loved ones won't have to struggle with a complicated estate or financial uncertainty.

1. WRITE A WILL

This is the most important thing you can do. A survey by Will Aid - a charity that sees will-writers across the land waive fees in November in return for donations - found that 52% of people don't have one. This can lead to all sorts of complications. It means your estate may not go to the people you want it to.

If you die intestate, without a will, then your assets are divided up according to the law. If you are married without children, then your spouse gets the lot. If you are married with children, then the spouse gets the first £250,000 and 50% of what remains, the rest goes to your kids. If you are unmarried, then your parents will receive your estate or other blood family members if your parents are deceased.

The laws of intestacy are particularly important if you are in a long-term relationship but are unmarried. Your partner will get nothing if you die, which can lead to a very complicated situation if you own a property together.

Getting a will written up is simple and costs less than £200. You can find a solicitor at lawsociety.org.uk.

Once you have a will, make sure your family know where to find it. If you get it drawn up by a solicitor, they should keep a record of it on file. Finally, make sure you keep it up to date. If you divorce, separate, marry or anything else major changes in your life, be sure to update your will. Otherwise, you may end up leaving your money to someone you really didn't want to get a penny.

And it almost goes without saying that your will should make provision for the care of your children, as well as any financial support.

2. LOOK AFTER YOUR PETS

You need to think about dependants of the furry, feathered or scaly variety, too. Who would look after them if you weren't around anymore? Again, choose someone and ask them if they would be prepared to do it. If you don't have anyone who could help, the RSPCA can. You can sign up to its free Home for Life service, which means it will take in any animals you leave behind after your death and endeavour to find a new home for them.

Simply sign up then make a note of your decision in your will. Alternatively, you could leave all your money to your pet with details of how they are to be looked after. That is what Carlotta Liebenstein did before her death in 1992. She left her entire estate to her German Shepherd dog Gunther III, and his son has since inherited it. Gunther IV is worth £90 million and owns several villas including a Miami mansion that used to belong to Madonna.

3. CREATE A FINANCIAL FACT FILE

Does your partner or family have details of all your accounts? This seems like such an insignificant thing but trying to hunt down savings accounts, or work out how to pay the gas bill can cause great heartache for grieving family members. This is easy to avoid.

Simply set up a spreadsheet that lists all your bank and savings account details (account numbers and sort codes will do), credit cards, and any household accounts such as the gas or telephone provider.

4. DETAIL YOUR DIGITAL ESTATE

When you are making a note of all your accounts, don't forget about your digital assets. Over the past decade, many of us have built up substantial online estates. For example, in 2011 it was estimated that the average iTunes library contained 7,160 songs. At a typical cost of 79p per song, that means most of us have more than £5,500 of music sitting in our iTunes accounts.

Digital assets, such as music and e-books, cannot form part of your estate and be formally handed down when you die. But make sure your partner or family member knows your log-in details if you've shared your music or e-book libraries, so they can continue to enjoy them.

Also, include details of your social media accounts so these can be closed down.

5. DON'T FORGET YOUR PENSION

"Many people don't realise that you can pass on your pension pot as well as your savings," says Colin Lawson, managing partner of Equilibrium Asset Management. "The new pension freedoms allow even more flexibility with pension pots, so be sure to review what you've got."

The rules on pensions have changed a lot this year.

One of the big differences is that you can now pass your pension savings down to your beneficiaries after your death without the taxman taking the bulk of it.

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"When it comes to pensions, the new rules mean people can treat their pension as a tax-efficient family pot," says Roger Weatherby, chief executive of Weatherbys Private Banking.

If you die before you are 75, your family can inherit your pension pot as a tax-free lump sum or income. If you are 75 or over, tax only becomes liable once your beneficiaries start taking an income.

These changes mean it is important you stipulate in your will who you want to inherit your pension, and include details of where they can find it.

6. THINK ABOUT INHERITANCE TAX

If your estate is worth more than £325,000 when you die (including the value of any part of your home that you own), then 40% of your estate above that will be taken by the taxman.

To reduce that, you need to start inheritance tax (IHT) planning. This can mean giving away money within the IHT gifting rules – you can give away up to £3,000 a year, wedding gifts and small amounts without being liable for IHT. But anything you give away outside of the gift rules will be liable if you die within seven years of making the gift.

"The Capital Taxes Office work on the basis of 'guilty until proven innocent' when it comes to gifts.In other words, if challenged, if the executor cannot prove a gift should be exempt, IHT will be charged on the value of the gift," says Danny Cox, a chartered financial planner at Hargreaves Lansdown. "Therefore, it's important to keep good records of all gifts and the IHT Form 400 - the form used by executors to claim gifts that have been made – is a good starting point."

7. POWER OF ATTORNEY

Beyond thinking about what would happen when you die, it also makes sense to consider what you would want to happen if you could no longer make decisions for yourself.

Trying to cope with a situation where someone can't make the big decisions anymore because they have been badly hurt in an accident, had a stroke or are suffering from dementia can be incredibly hard. Make it simpler by setting up a Lasting Power of Attorney while you still have all your marbles. This is a legal document that nominates someone of your choosing to handle your affairs if you lose the mental capacity to do so.

A solicitor can help you with this or you can do it at gov.uk/power-of-attorney/overview. A great idea is to set it up at the same time as getting your will drawn up.

To reduce that, you need to start inheritance tax (IHT) planning. This can mean giving away money within the IHT gifting rules – you can give away up to £3,000 a year, wedding gifts and small amounts without being liable for IHT. But anything you give away outside of the gift rules will be liable if you die within seven years of making the gift.

"The Capital Taxes Office work on the basis of 'guilty until proven innocent' when it comes to gifts. In other words, if challenged, if the executor cannot prove a gift should be exempt, IHT will be charged on the value of the gift," says Danny Cox, a chartered financial planner at Hargreaves Lansdown. "Therefore, it's important to keep good records of all gifts and the IHT Form 400 – the form used by executors to claim gifts that have been made – is a good starting point."

8. CONSIDER LIFE INSURANCE

If you have financial dependants such as young children or an elderly relative, you should consider life insurance. Taking out a policy while you are relatively young can be inexpensive and provide invaluable assistance if the worst happens.

Level-term life assurance guarantees a lump sum payout if you die within a set period of time. So you could arrange for a £150,000 payout if you die within 15 years. This can be a great choice if you have children, as you can take it out to last the length of time until your children would be financially independent.

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Also, think about putting your policy into a trust as the proceeds will not form part of your estate so won't be subject to IHT, and there'll be no need to wait for probate to be granted before your loved ones can receive a payout.

9. PLAN YOUR FUNERAL

Set aside some money to cover your big send-off. Funerals are the fourth biggest expense of your lifetime – well, just beyond your lifetime – so it is well worth thinking about. The average cost is £3,590, according to Sun Life Direct.

Making a note of what you would want in terms of flowers, songs and ceremony types can really help your family. But you can also cut costs, too. If you leave no clue as to your wishes, your loved ones could end up overspending in an effort to show how missed you are – leaving instructions that you don't mind having a cheap coffin, or arriving in a hearse rather than a horse-drawn carriage, can make a big difference. Make a note of your wishes and keep it with your will.

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