It’s a subject that no one likes to think about, much less speak about with loved ones. But spending even just a few hours planning your finances for when you are gone can spare terrible heartache.

Where no financial plan is in place at death, families are frequently left with an administrative nightmare on their hands.

Savings can be lost, property can fall into the wrong hands and tax bills can swallow large parts of your estate.

Most of us know we should write a will and organise a lasting power of attorney for when we need help, but there are many other easy but crucial steps to get your affairs in order.

Ashley Jordan, of One Stop Organisers, says it will be a final parting ‘gift’ to your family if you sort out your finances before you die.

1. Get all of your pensions in order

Pensions are not covered by wills in the same way as other assets, as they are not considered part of your estate. This means you must separately decide who you want to receive your remaining retirement savings. You will need to nominate your beneficiaries in what is known as an expression of wishes form.

If you have a modern workplace pension called a ‘defined contribution’ pension, which is an invested pot of money, any remaining savings you have at the time of your death will be passed on to your beneficiary. However, if you have used your pension pot to buy an annuity, the regular income typically stops when you die and your loved ones are unlikely to receive any money.

This will depend on the type of annuity you have purchased – income continues to be paid to a spouse under a joint-life annuity.

If you have an old ‘defined benefit’ scheme, such as a final salary pension, your beneficiaries may receive death benefits instead.

This is typically a dependant’s pension for children up to age 23 or a death-in-service lump sum if you’re still working when you die.

Make a list of all of the places you have worked and find out which pension providers they used. You can do this by contacting your previous employers or checking old paperwork. Then contact the provider so it can locate your pension.

You’ll need your National Insurance (NI) number, previous names and addresses, and the details of when you worked for the company.

Ask all of your pension providers for their expression of wishes form. If you have an online account, you should be able to access the form by logging in.

From April next year, pension savings will be included in an estate for inheritance tax purposes. However, it is understood that you must still complete the expression of wishes form as pension beneficiaries will still not be determined by a will.

2. Create a folder to hold your vital paperwork

To ensure your pensions are easily found, you should set up a legacy folder. Print out copies of your expression of wishes and details of your pension pots – including the type, provider and its contact details, account number and whether the account was managed by a financial adviser.

This folder will include all the important documents that your loved ones and executors will need.

Andrew Zanelli, a financial planner at wealth manager Aberdeen, says: ‘A clear plan and good record keeping can make a significant difference to how straightforward things are for family members after someone dies. It is not just about passing on wealth. It is about reducing uncertainty, delays and stress at what is already a difficult time.’

You should also include details of your state pension in the folder. Payments can’t typically be inherited, but your family will need to contact the Department for Work and Pensions to cancel it.

3. Keep a list of Savings and investments

Create a comprehensive list of your accounts.

You should include documents for every type of financial account – this includes current accounts, savings accounts, Premium Bonds, investment portfolios and individual savings accounts (Isas).

For savings and current accounts, note key details such as the bank or building society’s name, sort code, account number and whether the account is jointly owned, says Zanelli.

For investments, list the type, the provider, account number, whether it is jointly owned and if the asset is managed by an adviser.

Sam Grice, founder of Octopus Legacy, says: ‘If you don’t document what you own, your executor will have to find that out on their own.’ There is a risk that an account could get lost or overlooked in the process.

4. Always consider your inheritance tax bill

You should weigh up whether your estate will trigger inheritance tax (IHT), and be aware that there are steps you can take to mitigate a potentially hefty bill.

Everyone has a £325,000 allowance – called the nil-rate band – that can be passed on free of IHT. But any wealth above this, including the value of your home, is subject to a 40 per cent rate.

However, there is an additional tax-free allowance of £175,000 for when the family home is left to ‘direct descendants’ such as children or grandchildren.

There is no tax to pay on assets that are passed to your spouse or civil partner.

5. Make good use of the gifting allowance

If you expect your estate will exceed the tax-free IHT allowance and will not go to your spouse, you can make gifts during your lifetime to cut the final tax bill.

You can give away up to £3,000 tax free each year. You can roll this forward for one year, which means that a couple can gift as much as £12,000 in a year free of IHT.

Plus, you can hand over an unlimited value – whether jewellery, property, cash or investments – to your loved ones without triggering a tax bill so long as you survive for seven years after making that gift.

So if you suspect your estate will be hit with death taxes and you have enough spare money in your saving or investment accounts to make gifts now, consider doing so – but keep good records.

Ian Dyall, head of estate planning at Evelyn Partners, says: ‘Your executors will need to know what gifts you made in the seven years before your death and potentially in the seven years before the earliest of those gifts – in other words, up to 14 years before death.

‘That is very difficult for an executor to answer, unless you have kept a record of the gifts you have made.’

Add these IHT records to your legacy folder. They should include the date the gifts were made, their value and nature, the name of the recipient as well as their relationship to you.

The rule for making gifts out of normal income allows you to give away as much as you want free of death duties so long as the gifts are regular, made from income and do not restrict your standard of living. It means you can’t use the exemption if you make cash gifts from existing capital, such as your savings.

If you use this gifting allowance, even tighter records must be kept as your executors will need to file a tax form called ‘IHT403’ with details of the payments you made.

Make note of the date you started making the gifts, the frequency, the name and address of the recipient, the value and the date the gifting stopped, Zanelli says.

If you open or close a current, savings or investment account, you should make this update to your legacy folder.

Andrew Neligan, of Neligan Financial, says to make a note in your diary to review it once a year to make sure any changes don’t slip through the net.

6. Create a clear plan for your property

Consider what you want to happen to your property when you die and reflect this in your will.

Add proof of ownership to your legacy folder.

David Lunn, a partner at Surrey-based TMW Solicitors, says: ‘For the vast majority of land in England and Wales, there are no longer formal title deeds. Most land is now registered, and so the Land Registry will, for a fee, produce copies of your title. If you happen to own any of the remaining unregistered land in England and Wales, I suggest that you keep the title documents in your solicitor’s safe storage facility.’

This is often a fireproof vault and free – so long as your solicitor drafted the documents.

Minimising the IHT bill on property is difficult if you are living in it, but easier in the case of buy-to-let properties or holiday homes.

To pass on your own home free of IHT you would need to either move out, or continue to live in it but pay market rent to the new owners, and survive for seven years. These options are at best risky and at worst inconvenient.

If you gift your home and continue to live in it without paying rent, the taxman will rule that the property has not been gifted at all because you are still getting use from it.

Remember, if you don’t give your home to children or grandchildren, your estate won’t be able to make use of the £175,000 allowance.

7. Think about writing a letter of wishes

You may want to consider a letter of wishes – a more personalised document – to be kept alongside your will. It can include funeral preferences (such as whether you want a burial or a cremation, or the songs you would like), explanations behind your will and advice about the upbringing of your children if they are young.

Unlike a will, it doesn’t have to be signed with a witness present, so you can change it as often as you like. It also means you can write it in a more personal style.

The letter can advise your executors on how to divvy up your personal assets, such as photographs, books, family heirlooms or anything else of sentimental value.

You may decide to leave personal items to your executors in your will and they can distribute them in accordance with your wishes.

Any monetary gifts should be set out in your will instead as this is legally binding – a letter of wishes is not.

8. Start conversations with your family 

It is also a good idea to talk to your loved ones now to explain why you have made the decisions you have.

You can set this out in the letter of wishes, but having conversations now can prevent disputes after you’re gone.

Grice says you can make this conversation easier by ‘talking about memories of your family and turn it more into a life talk, instead’.

He also suggests writing a note to young children or grandchildren for an important occasion such as their wedding day, which can be left in your legacy folder.

During this conversation tell two trusted family members – perhaps your executors – where your folder is kept. And let them know if you ever change this spot.

9. Consolidate your online accounts

It’s likely you’ll have several online accounts, such as government log ins, social media sites and utility providers.

You could use a password manager such as LastPass, which can list your log-in details and passwords, and give access to it to an emergency contact.

Other important documents to include in your legacy folder are details of any utility accounts, insurance policies and any ongoing subscriptions.

This makes it easier for your executors to speak to providers and close those accounts.

10. Don’t forget…

Zanelli says important contact details are commonly missed when compiling a legacy folder.

He adds: ‘People also often overlook the value of recording key contacts, such as advisers or solicitors.’

Also add copies of your birth and marriage certificates, passport details and your NI number.