The bereavement support payment has now replaced the previous bereavement payment, bereavement allowance and widowed parent’s allowance benefits.
The initial lump sum payable is higher, but the monthly benefit is lower. For those without dependent children the bereavement support payment is a lump sum of £2,500 and 18 months of £100. For those with dependent children the lump sum is £3,500 and a monthly payment of £350, again for 18 months.
The new benefit is not means-tested; tax free; disregarded for universal credit and for the benefit cap; marrying, cohabiting or entering into a civil partnership does not affect payments; and, the claimant’s age does not affect the amount received, where previously it did. For the full payments to be made the deceased must have paid sufficient national insurance contributions in any one year before their death.
Obviously the above does not protect the financial security of a family of the deceased; however, it is frequently the case that any mortgage is protected by life insurance and if the deceased was employed it could be that “death in service” benefits are paid. Even so, it is unlikely that these additional provisions will replace the lost income of the deceased. It is generally accepted that the country as a whole is woefully underinsured; however, perversely, the cost of life insurance has never been lower with significant cover available at just pence per day.
It is sensible to arrange additional life assurance subject to a simple trust, with a specimen trust deed supplied by the insurer at no cost. This ensures that a grant of probate is not required for the policy to pay out and delays in obtaining the same (and therefore the benefits of life assurance), which can be lengthy, avoided. Such an arrangement is also an effective means to pay inheritance tax or other debts or the recently mooted increase in probate fees (should these be introduced at a later date), leaving the deceased’s estate for the benefit of the family.
It is a difficult and emotional part of financial planning to imagine the loss of a loved one, but planning for such an eventuality brings peace of mind that your family will not endure financial hardship and distress which such a sad event could easily bring.
Other related matters to consider when formulating a family security plan includes: making (or updating) a will and considering putting in place a power of attorney; ensuring pension and death in service plans are subject to appropriately completed nomination forms; reviewing existing policies and associated trust arrangements; inheritance tax is minimised, if not insured for, and assets are in appropriate ownership, or maybe even subject to an appropriate trust.
The last thing any family needs to deal with are financial difficulties at what will be an emotionally distressing time. Prudent forward planning provides certainty, peace of mind and a loving legacy.
Author: Paul Newton FPFS, Certs PFS (DM & Securities), Certs CII (MP & ER), STEP Affiliate, Cert PMI is a Chartered Financial Planner for Castlegate Financial Management Limited, a firm of Independent Financial Advisers, authorised and regulated by the Financial Conduct Authority. 8 Castlegate Grantham Lincolnshire. 01780 591022. This article is for information purposes only and does not constitute financial advice which should be sought before any action taken. Please note tax advice is not regulated.