Even wealthy people can be “financially vulnerable”. Here’s why, and what you can do to protect your wealth

In 2020, ITV presenter Kate Garraway endured an unthinkable event: her husband, Derek Draper, was rushed to hospital after contracting Covid-19. Derek sadly passed away in January 2024, after nearly four years of receiving constant care from health professionals.

As a wealthy family, Kate and Derek never imagined that they might be “financially vulnerable”. But in fact, after Derek lost mental capacity due to being placed in an induced coma, Kate was unable to access key financial documents that could help them fund the care he needed. And, with Derek needing care for several years, his family had to find a way to cover all the associated costs.

In a report published by the BBC, Kate said, “I am in debt.” Derek’s care cost £16,000 a month, “More than my ITV salary, and that’s before you pay a mortgage, bills, or buy anything for the kids. We’re at a crunch point.”

While cases like Derek’s are rare, it goes to show that even if you have accumulated substantial wealth, your earnings could be made vulnerable by life events outside of your control.

Keep reading to discover tools that could help shield your family from financial vulnerability.

Lasting Powers of Attorney could mean you’re empowered to look after a loved one’s wealth, and vice versa

If a family member becomes ill and loses mental capacity – the ability to make and understand the consequences of their own decisions – they could suddenly become financially vulnerable, needing a trusted individual to manage their funds on their behalf. Sadly, even if you’re somebody’s next of kin, this doesn’t entitle you to access their bank accounts under these circumstances.

Fortunately, a few simple documents can enable you to entrust an individual, or several people, with managing your estate: Lasting Powers of Attorney (LPA).

There are two types of LPA, available to register in England and Wales:

• Health and wellbeing, which allows a nominated loved one to make decisions about your healthcare, including the types of medication you take and where you live, if you lose mental capacity.
• Property and financial affairs, which empowers an attorney to manage your money, properties, and insurance, either if you lose capacity or if you give them access to your finances at any time.

With an LPA in place, you (the “donor”) know that a trusted person (your “attorney”) will make decisions in your best interests. What’s more, they could continue to manage your wealth if you’re unable, including maintaining mortgage repayments, paying carers, and making insurance claims on your behalf.

These documents could offer your family immense peace of mind – and they’re available through the government website for £82 each.

If you want to protect your family’s wealth in the event that you become gravely ill, and have a loved one make health decisions on your behalf, registering both types of LPA is paramount.

Critical illness and income protection cover may offer a safety net in the event of an illness

Even if you’re part of a wealthy family, you could be at risk of falling into debt or depleting your savings if you’re tasked with paying for your own care, or the care of a loved one.

While this is not always avoidable, protective measures could help you to shield your wealth (at least in part) from health-related costs if you become ill or injured.

Critical illness cover

Critical illness insurance pays a lump sum to successful claimants, enabling them to use the funds to cover essential bills while they’re too ill or injured to work.

The Association of British Insurers (ABI) says that in 2023, the average critical illness payout was more than £68,000 – a substantial sum for any family looking to cover costs for a sustained period.

Income protection

Rather than offering a one-off lump sum, income protection insurance pays a portion of your salary – usually up to 60% – for a predetermined period.

If you’re ill for several years, or perhaps are permanently disabled following an illness or injury, this form of cover could help your family to pay for essential costs.

Continuing healthcare (CHC) under the NHS

While most continuing health and social care is means-tested, some people are eligible for CHC, which means you could receive round-the-clock NHS care without paying anything at all. This care is not means-tested.

There are stringent criteria for receiving CHC, but if you or a loved one became ill, it’s always prudent to check if you’re eligible for these payments.

Private medical insurance (PMI)

Although it’s relatively uncommon for people in the UK to need PMI, some individuals are looking to protect themselves against expensive private care bills. While not all PMI covers ongoing care, you could look into this protective option.

Bespoke financial advice could offer the unwavering support your family needs after a life-altering event

Remember that working with a financial planner is about more than just building wealth; we’re here to support you and your family throughout life’s twists and turns.

If you or a loved one became very ill, your Kellands financial planner can help you to establish your financial circumstances, ensuring that you’re supported while making arrangements and paying for care if needed.

To discuss anything you have read in this article, email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate Lasting Powers of Attorney.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

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