Estate Planning with a Terminal Illness: Urgent Steps to Take
A terminal diagnosis makes time the most critical factor in estate planning. Act while you have capacity — because once it is lost, the options become expensive, slow, and uncertain.
Urgent Action Checklist
Capacity may deteriorate. A will made now is valid even if you die soon after.
Property & Financial Affairs AND Health & Welfare. Registration takes 8–20 weeks — start immediately.
Pension passes outside your estate — the nomination form controls who receives it. Takes effect on submission.
Removes policy proceeds from your estate, avoiding IHT and probate delay.
Joint tenancy passes by survivorship — does this match your wishes? Consider severing if not.
PETs require survival for 7 years for full exemption; taper relief after 3 years.
Document online accounts, passwords, and digital assets so your executor can access them.
Frequently Asked Questions
What is the most urgent priority for estate planning after a terminal diagnosis?
Mental capacity is the first priority — because without it, none of the other steps can be taken freely. The most urgent action is to make or update your will and to grant a lasting power of attorney (LPA) while you still have capacity to do so. Capacity can deteriorate quickly with some conditions (brain tumours, some cancers with brain metastases, advanced dementia). Once capacity is lost: a will cannot be made (though a Court of Protection statutory will may be available, at cost and delay); and an LPA cannot be granted — your family would need a Deputyship order from the Court of Protection instead (which takes much longer and is more expensive). Do not wait to see a solicitor. Contact one within days of diagnosis.
How urgent is making a lasting power of attorney — and how long does it take?
A lasting power of attorney (LPA) for property and financial affairs must be registered with the Office of the Public Guardian (OPG) before it can be used. The OPG's current registration time is approximately 8–20 weeks. This means: if you are diagnosed and immediately instruct a solicitor, the LPA may not be registered for 2–5 months. If your condition deteriorates during registration, you cannot use the LPA to manage your affairs until it is registered — but you can make it and submit it immediately. Make the LPA the same week as (or even before) making your will. Both a Property and Financial Affairs LPA and a Health and Welfare LPA are recommended. If you already have both and they remain valid, review the attorney appointments to confirm they are still appropriate.
Should I make gifts to reduce my IHT estate if I am terminally ill?
The answer depends on your prognosis. Gifts made as potentially exempt transfers (PETs) only become fully IHT-exempt if you survive 7 years after the gift. If you are likely to die within 7 years, the PET will be a 'failed PET' and become chargeable to IHT. However, taper relief reduces the IHT charge if you survive more than 3 years from the date of the gift: (3–4 years: 20% reduction; 4–5 years: 40%; 5–6 years: 60%; 6–7 years: 80%). So: (1) If your prognosis is 6+ months but 3+ years is possible, modest gifts may still save some IHT; (2) If your prognosis is under 3 years, gifts will not be taper-relieved and the IHT saving is unlikely to justify the loss of control over the assets; (3) Gifts out of normal income (s21 IHTA 1984) remain fully exempt regardless of survival period — these are immediately exempt if part of a regular pattern of giving from surplus income. Life insurance policies written into trust before death are not gifts and are not PETs — they pass outside the estate entirely.
How do I write life insurance into trust urgently?
A life insurance policy that is not written in trust forms part of your estate on death — potentially subject to IHT at 40% and requiring probate before the proceeds are paid. Writing the policy into an appropriate trust removes it from your estate. The trust deed is provided by the insurance company (most major insurers offer simple forms) and is signed separately from the policy. There is no IHT charge on writing an existing policy into trust provided the trust is a bare trust or flexible trust (not a discretionary trust with a chargeable entry charge). Act immediately: the trust deed takes effect from signing. If you are unwell, the insurance company may need to verify capacity at the time of signing — contact them without delay. If the policy has already been assigned to another party or is a joint policy, the process may be different.
What happens to my pension if I die with a terminal illness?
Most defined contribution (DC) pensions (SIPPs, workplace pensions) are held in trust and do not form part of your estate on death — they pass outside probate according to your expression of wishes (nomination form). This means: (1) The pension fund is generally not subject to IHT (though this is changing from April 2027 under the Autumn Budget 2024 reforms); (2) The trustees of the scheme have discretion to pay death benefits to any nominated beneficiary; (3) Your nomination form should name the people you want to receive the pension benefits — update it now if circumstances have changed (divorce, new children, change of relationship); (4) If you die before age 75, the pension can often be inherited tax-free by the beneficiary; (5) If you die after age 75, the beneficiary pays income tax on any withdrawal. Check your pension provider's process for a nominee change and do it immediately — the nomination form takes effect immediately on submission and does not require registration.
Act Now — While You Have Capacity
The WillSafe kit lets you make or update your will today without waiting for a solicitor appointment. From £19.97 for England and Wales.