The Harry Potter books and films might seem like an unlikely inspiration for an article about financial planning, but while watching Harry Potter and the Sorcerer’s Stone recently, Adon Beddoes realised that Harry’s life could have been a lot less stressful if his parents had taken some decent financial advice. Here’s why!
Unless you’ve been living under a rock you will know that Harry Potter is the staple of children’s fiction, an orphan. Harry lost his parents as a baby in the most dramatic of circumstances: they were killed by Voldemort, the Dark Lord, the most dangerous wizard of all time and, Harry’s nemesis throughout his time at Hogwarts School of Witchcraft and Wizardry.
Baby Harry is packed off to live with his uncharitable aunt and uncle, the Dursleys, who force him to live in a cupboard under the stairs and generally make his life a misery.
Life could have been so different for Harry if his parents, James and Lily, had put in place a financial plan to protect against all scenarios, although granted, it wouldn’t have made for such an epic story!
Here are the three things Harry’s parents should have done to protect Harry while they were still alive:
1. Nominate guardians
Given the non-existent relationship between Harry’s mum, Lily Potter, and his aunt Petunia, it’s hard to believe that his parents would have chosen for Harry to live with her in the event of their death. The most likely candidate is their reliable friend, Harry’s godfather, Sirius Black.
Lesson one to all parents: nominate a trusted guardian for your child in the event of your death.
If you don’t specify who should be the legal guardian of your children if you die, it falls to a court to decide. They may or may not choose the same person as you but why leave it to chance? And even if there is an obvious candidate who you would choose, why put your loved ones through a stressful court procedure at what will already be a difficult time for your child? Make it easier by nominating guardians in your will.
2. Write a will
Your will not only nominates guardians for your children but also specify precisely who you want to inherit your assets. When he finds out he is a wizard at 11 years of age, Harry also discovers he has inherited a small fortune, stashed at Gringotts Bank. Imagine how much better his early childhood would have been if he had access to this as soon as they died. Lily and James should have written a will and appointed a trusted executor to ensure the financial wellbeing of their son during his childhood.
Don’t make the same mistake as the Potters: prioritise writing a will. Find the answers to all your questions about will writing here or contact us to discuss your estate planning and will writing requirements.
3. Take out life insurance
James and Lily Potter made another grave error by not taking out life insurance. Harry’s life would have panned out very differently if he had received a death benefit from a life insurance policy managed by a custodian who had his best interests at heart, like Sirius.
When it comes to minors, it is usual to set up life insurance in a trust. This enables you to pass assets to your chosen beneficiary in a tax-efficient manner which is managed by a named trustee and used for the purposes that you specify.
The Potters were only 20. At that time of life, many of us feel immortal and life insurance can seem irrelevant. Maybe you are young and feel the same? However young you are, as soon as you have dependents, life insurance becomes non-negotiable. Hopefully, you won’t need it but like many types of insurance, it’s far better to have it and not need it than need it and not have it. The good news if you are young is that insurers are less likely to have to pay out, so life insurance is more affordable.
So, there you have it – three life lessons for parents taken from Harry Potter!
It’s doubtful that there is a Dark Lord out there on a mission to kill you, and most children thankfully make it to adulthood with their parents alive and well, but in the absence of a crystal ball to tell you what is going to happen in the future, I strongly advise you to prepare for unlikely worst-case scenarios.
If you are an expat in Vietnam and you’d like to protect your children by nominating guardians, writing a will, and taking out life insurance, I offer financial planning advice and can help you put a plan in place to ensure that your loved ones are looked after in the event of your death. Unlikely as that may be.
Please contact me to discuss all your financial planning requirements.
Chartered Financial Planner
It is my fundamental belief that financial planning makes life better. I enjoy helping my clients work towards their financial goals to give them freedom and choice.