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Monthly Archives :

June 2019

Lasting Power Of Attorney

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Making decisions on your behalf during your lifetime

A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint one or more people to make decisions on your behalf during your lifetime. The people you appoint to manage your affairs are called the ‘attorneys’. An LPA is a completely separate legal document to your Will, although many people put them in place at the same time as getting their will written, as part of wanting to plan for the future.

During your lifetime 

Once you have an LPA in place, you can have peace of mind that there is someone you trust to look after your affairs if you became unable to do so yourself during your lifetime. This may occur, for example, because of an illness, old age or an accident. 

Having an LPA in place can allow your attorney to have authority to deal with your finances and property, as well as make decisions about your health and welfare. Your LPA can include binding instructions together with general preferences for your attorney to consider. Your LPA should reflect your particular wishes so you know that the things that matter most would be taken care of.

Required legal capacity 

You can only put an LPA in place whilst you are capable of understanding the nature and effect of the document (for example, you have the required legal capacity). After this point, you cannot enter into an LPA, and no one can do so on your behalf. 

Many people don’t know that their next of kin has no automatic legal right to manage their spouse’s affairs without an LPA in place, so having to make decisions on their behalf can become prolonged and significantly more expensive.

A Lasting Power of Attorney for health and welfare can generally make decisions about matters including: 

  • Where you should live 
  •  Your medical care and what you should eat 
  •  Who you should have contact with 
  •  What kind of social activities you should take part in 

You can also give special permission for your attorney to make decisions about life-saving treatment.

Lasting Power of Attorney for property and financial affairs decisions can cover:   

  • Buying and selling property 
  •  Paying the mortgage 
  •  Paying bills 
  •  Arranging repairs to property

Manage your affairs 

Without an LPA in place, there is no one with the legal authority to manage your affairs, for example, to access bank accounts or investments in your name or sell your property on your behalf. Unfortunately, many people assume that their spouse, partner or children will just be able to take care of things, but the reality is that simply isn’t the case. 

In these circumstances, in order for someone to obtain legal authority over your affairs, that person would need to apply to the Court of Protection, and the Court will decide on the person to be appointed to manage your affairs. The person chosen is appointed your ‘deputy’. This is a very different type of appointment, which is significantly more involved and costly than being appointed attorney under an LPA.

 If you wish to have peace of mind that a particular person will have the legal authority to look after your affairs, and you want to make matters easier for them and less expensive, then you should obtain professional advice about putting in place an LPA.

Health and Welfare Lasting Power of Attorney 

This allows you to name attorneys to make decisions about your healthcare, treatments and living arrangements if you lose the ability to make those decisions yourself. Unlike the Property and Financial Affairs LPA, this document will only ever become effective if you lack the mental capacity to make decisions for yourself. 

If you can’t communicate your wishes, you could end up in a care home when you may have preferred to stay in your own home. You may also receive medical treatments or be put into a nursing home that you would have refused, if only you had the opportunity to express yourself – and this is when your attorney, appointed by the LPA, can speak for you.

Property and Financial Affairs Lasting Power of Attorney 

This allows you to name attorneys to deal with all your property and financial assets in England and Wales. The LPA document can be restricted, so it can only be used if you were to lose mental capacity, or it can be used more widely, such as if you suffer from illness, have mobility issues or if you spend time outside the UK.

If you wish to have peace of mind that a particular person will have the legal authority to look after your affairs, and you want to make matters easier for them and less expensive, then you should obtain professional advice about putting in place an LPA.

Why do you want to Invest?

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Reaching Specific Life Goals Requires Planning

If you don’t know where you want to go, you’ll find it tricky getting there! Investment goals cover everything from the old adage of saving for a rainy day to planning for a comfortable retirement.

Goal-based investing emphasises investing with the objective of reaching specific life goals – such as buying a house, saving for your child’s education or building a nest egg for retirement – instead of comparing returns to a benchmark. Whatever your personal investment goals may be, it is important to consider the time horizon at the outset, as this will impact the type of investments you should consider to help achieve your goals. It also makes sense to revisit your goals at regular intervals to account for any changes to your personal circumstances, for example, the arrival of a new member to the family or salary increases. Investment strategies should often include a combination of various fund types in order to obtain a balanced approach to investment risk. And maintaining a balanced approach is usually key to the chances of achieving your investment goals, while bearing in mind that at some point you will want access to your money.

Short Term Lifestyle Planning

 Knowing you’re prepared for life’s surprises can take a burden of your mind – and your bank balance. An emergency fund is a pot of money set aside to help you cover the financial surprises that life throws at you – surprises such as losing your job, needing to make unexpected home repairs, replacing your car or unplanned emergency travel. These events can be stressful and costly, but preparing in advance can be a big help.

Medium Term School And University Fees Planning 

School and university fees planning may involve the same idea of buying a mix of equities, bonds and other investments in order to build enough capital to pay for future fees. Most are geared to begin paying out after a fixed-term horizon, usually ten years, with withdrawals allowed incrementally after that to meet the fees. In this way, they need to be more flexible than pension plans that pay out on retirement. For this reason, many parents and grandparents often start planning when a baby is born, which provides a better way to pay fees in monthly payments, making the cost of an independent education or university education more manageable.

Long Term Retirement Planning

The importance of shifting goals can be seen in pension plans, where it is quite common for funds to be more geared towards equities in their early stages to try to build capital growth. As the individual grows closer to retirement age, the pension plan will tend to lean more towards bonds to reduce volatility. Exposure to other riskier sectors may also be gradually reduced as the individual ages.

Factors To Help You Develop Your Investment Goals Your Goal 

What are you investing for, and how much are you hoping to get back?

Your Attitude To Risk

How comfortable are you with taking risk with your money, as you may get back less than you invested? 

Your Time Horizon

How long are you prepared to put your money away for?

 Income, Growth Or Both 

Do you want to look at funds that aim to make regular payments through dividends or interest (like an income), or at those that aim to increase in value over time?

The Important Thing Is To Do Something 

Setting goals makes it more likely that you’ll save for – and achieve – every goal. You’ll also be more motivated to reach a goal since you can gauge its progress. To discuss your future plans and discover how to achieve them, please speak to us.

Trusts

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Protecting, preserving or ultimately distributing wealth

As part of your Inheritance Tax planning, you may want to consider putting assets in trust – either during your lifetime or under the terms of your Will. Putting assets in trust – rather than making a direct gift to a beneficiary – can be a more flexible way of achieving your objectives.

For example:

  • You might want assets that will pass to a child to be held on trust until they are older
  • You might want assets to eventually pass to your children, but to ensure that your spouse can benefit from them for the rest of his or her life

The tax treatment of trusts is complex and depends on such factors as the kind of trust, the value of the assets put into it, and who the beneficiaries are. Recent changes to the rules mean that the tax treatment of some trusts is no longer as favourable as it used to be, but there are still circumstances in which they can help to reduce the overall level of tax payable.

The structures into which you can transfer your assets can have lasting consequences for you and your family, and it is crucial that you choose the right ones. The right structures can protect assets and give your family lasting benefits. A trust can be used to reduce how much Inheritance Tax your estate will have to pay on your death.

Legal arrangement

A trust, in principle, is a very simple concept. It is a legal arrangement where the ownership of someone’s assets (such as property, shares or cash) is transferred to someone else (usually a small group of people or a trust company) to manage and use to benefit a third person (or group of people). An appropriate trust can be used to reduce how much Inheritance Tax your estate will have to pay on your death.

The main types of trust

Bare (Absolute) Trusts: The beneficiaries are entitled to a specific share of the trust, which can’t be changed once the trust has been established. The settlor (person who puts the assets in trust) decides on the beneficiaries and shares at outset. A simple and straightforward trust – the trustees invest the trust fund for the beneficiaries but don’t have the power to change the beneficiaries’ interests decided on by the settlor at outset. Offers the potential Income Tax and Capital Gains Tax benefits, particularly for minor beneficiaries. The assets, both income and capital, are immediately owned and can be taken by the beneficiary at age 18 (16 in Scotland).

Interest In Possession Trusts

With this type of trust, the beneficiaries have a right to all the income from the trust, but not necessarily the capital. Sometimes a different beneficiary will get the capital – say, on the death of the income beneficiary. They’re often set up under the terms of a Will to allow a spouse to benefit from the income during their lifetime, but with the capital being owned by their children. The capital is distributed on the remaining parent’s death.

Discretionary (Flexible) Trusts

The settlor decides who can potentially benefit from the trust, but the trustees are then able to use their discretion to determine who, when and in what amounts beneficiaries do actually benefit. Provides maximum flexibility compared to the other trust types, and for this reason is often referred to as a ‘Flexible Trust’.

A few trusts will now have to pay an Inheritance Tax charge when they are set up, at ten-yearly intervals and even when assets are distributed. You should always obtain professional advice on whether trusts could be of benefit for your particular circumstances and requirements.

Tax treatment depends on individual circumstances and may be subject to change in the future. The information given is not intended to provide legal, tax or financial advice. With this type of trust, the beneficiaries have a right to all the income from the trust, but not necessarily the capital. Sometimes a different beneficiary will get the capital – say, on the death of the income beneficiary.

Bank of Mum and Dad

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Innovative Products To Be Created For Would Be Homeowners

The Building Societies Association (BSA) have recently published a raft of recommendations as to how the mortgage industry can support the Bank of Mum and Dad in their endeavours to help first-time buyers onto the property ladder.

They have called for more innovative products to be created to enable parents and grandparents to loan or gift money to family members who are would-be home owners. The BSA also wants building societies to provide clearer communication to help explain all the options, and it wants regulatory and tax barriers to be broken down.

Helping Younger Homebuyers Climb Onto The Housing Ladder

The BSA’s report recognises the contributions of the Bank of Mum and Dad to date, highlighting the billions of pounds that have been gifted and lent to help younger homebuyers climb onto the housing ladder.

They also confirmed that 90% of all building societies expect this form of financing to play an increasing role in helping first-time buyers over the next five to ten years. Their priority now is to help create an environment whereby the financial well-being of the older generation is not put at jeopardy due to their generosity in helping younger family members achieve their housing objectives.

  • 86% of people surveyed wanted to own their own home, but the financial challenges facing first-time buyers meant many thought they would never achieve this aspiration
  • In 2017, there were 360,000 first-time buyers – but the minimum should be nearer 450,000. The ability to buy was increasingly concentrated on dual-earning households and those with higher incomes
  • More than half of aspiring first-time buyers expected the Bank of Mum and Dad to support them onto the housing ladder.

Support Between Generations Remains A Fundamental Ambition

The report also highlighted how the Bank of Mum and Dad wasn’t just about family members handing over cash in the form of gifts and loans – many customers wanted support between generations through guarantees or using their property or savings as security. Indeed, it also identified equity release or downsizing from larger properties as ways to support the younger generation. Robin Fieth, Chief Executive of the BSA said: ‘Home ownership remains a fundamental ambition for the majority of people…against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential. Family help – the so-called “Bank of Mum and Dad” – is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.

Mums And Dads – Are You Planning To Lend Money To Your Children?

It goes without saying that lending money to your loved ones shouldn’t endanger your own financial status. But if this is your plan, then it requires professional financial advice to assess all of your options. If you would like to discuss this subject with us, please contact us.

Reasons For Making a Will

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Continuing your support long into the future

We spend our lives working to provide for ourselves and our loved ones. You may have a house or flat (in the UK or overseas), shares, savings, and investments, as well as your personal possessions. All of these assets are your ‘estate’. Making a Will ensures that when you die, your estate is shared according to your wishes.

Everyone should have a Will, but it is even more important if you have children, you own property or have savings, investments, insurance policies, or you own a business. Your Will lets you decide what happens to your money, property and possessions after your death.

Law will decide

If you die with no valid Will in England or Wales, the law will decide who gets what. If you have no living family members, all your property and possessions will go to the Crown.

If you make a Will, you can also make sure you don’t pay more Inheritance Tax than you legally need to. It’s an essential part of your financial planning. Not only does it set out your wishes, but die without a Will, and your estate will generally be divided according to the rules of intestacy, which may not reflect your wishes. Without one, the state directs who inherits, so your loved ones, relatives, friends and favourite charities may get nothing

Same-sex partners

It is particularly important to make a Will if you are not married or are not in a registered civil partnership (a legal arrangement that gives same-sex partners the same status as a married couple). This is because the law does not automatically recognise cohabitants (partners who live together) as having the same rights as husbands, wives and registered civil partners. As a result, even if you’ve lived together for many years, your cohabitant may be left with nothing if you have not made a Will.

A Will is also vital if you have children or dependants who may not be able to care for themselves. Without a Will, there could be uncertainty about who will look after or provide for them if you die.

Peace of mind

No one likes to think about it, but death is the one certainty that we all face. Planning ahead can give you the peace of mind that your loved ones can cope financially without you, and at a difficult time helps remove the stress that monetary worries can bring. Planning your finances in advance should help you to ensure that when you die, everything you own goes where you want it to. Making a Will is the first step in ensuring that your estate is shared out exactly as you want it to be.

If you leave everything to your spouse or registered civil partner, there’ll be no Inheritance Tax to pay, because they are classed as an exempt beneficiary. Or you may decide to use your tax-free allowance to give some of your estate to someone else or to a family trust. Scottish law on inheritance differs from English law.

Good reasons to make a Will

A Will sets out who is to benefit from your property and possessions (your estate) after your death. There are many reasons why you need to make a Will:

  • You can decide how your assets are shared – if you don’t have a Will, the law says who gets what n If you’re an unmarried couple (whether or not it’s a same-sex relationship), you can make sure your partner is provided for
  • If you’re divorced, you can decide whether to leave anything to your former partner
  • You can make sure you don’t pay more Inheritance Tax than necessary
  • Several people could make a claim on your estate when you die because they depend on you financially
  • You want to include a trust in your Will (perhaps to provide for young children or a disabled person, save tax, or simply protect your assets in some way after you die)
  • Your permanent home is not in the UK or you are not a British citizen n You live here but you have overseas property
  • You own all or part of a business

Before you write a Will, it’s a good idea to think about what you want included in it.

You should consider:

  • How much money and what property and possessions you have
  • Who you want to benefit from your Will
  • Who should look after any children under 18 years of age
  • Who is going to sort out your estate and carry out your wishes after your death (your executor)

Passing on your estate

Executors are the people you name in your Will to carry out your wishes after you die. They will be responsible for all aspects of winding up your affairs after you’ve passed away, such as arranging your funeral, notifying people and organisations that you’ve died, collating information about your assets and liabilities, dealing with any tax bills, paying debts, and distributing your estate to your chosen beneficiaries.

You can make all types of different gifts in your Will – these are called ‘legacies’. For example, you may want to give an item of sentimental value to a particular person, or perhaps a fixed cash amount to a friend or favourite charity. You can then decide who you would like to receive the rest of your estate and in what proportions. Once you’ve made your Will, it is important to keep it in a safe place and tell your executor, close friend or relative where it is.

Review your Will

It is advisable to review your Will every five years and after any major change in your life, such as getting separated, married or divorced, having a child, or moving house. Any change must be by Codicil (an addition, amendment or supplement to a Will) or by making a new Will.

If you’re looking into making a Will, please contact us for our Will writing service

Tracing a Lost Pension

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Nearly £20 Billion Unclaimed Money And Growing

The scale of the UK’s lost Pensions Mountain has been exposed by the largest study yet on the subject. The Pensions Policy Institute surveyed firms representing about 50% of the private defined contribution pensions market.

From this, the Pensions Policy Institute found 800,000 lost pensions worth an estimated £9.7 billion. It estimates that, if scaled up to the whole market, there are collectively around 1.6 million pots worth £19.4 billion unclaimed – the equivalent of nearly £13,000 per pot.

Findings Highlight The Scale Of The Problem

This figure is likely to be even higher as the research did not look into lost pensions held in the public sector, or with trust-based schemes typically run by employers. These findings highlight the scale of the lost pension’s problem. Unclaimed pensions can make a real difference to millions of savers who have simply lost touch with their pension providers.

Providers make considerable efforts and spend millions every year trying to reunite people with lost or forgotten pensions. In 2017, more than 375,000 attempts were made to contact clients, leading to £1 billion in assets being reunited with them. However, firms are unable to keep pace with a mobile workforce that moves jobs and homes more often than ever before. Prevention is better than cure, so be sure to keep all your pensions paperwork in one place. You should also tell your previous pension scheme administrator about any changes of address.

Number Of People With Multiple Pensions To Increase

Nearly two thirds of UK savers have more than one pension, and changing work patterns means that the number of people with multiple pensions will increase. People typically lose track of their pensions when changing jobs or moving home. The average person will have around 11 different jobs over their lifetime, and move home eight times. The Government predicts that there could be as many as 50 million dormant and lost pensions by 2050.

Nearly two thirds of UK savers have more than one pension, and changing work patterns means that the number of people with multiple pensions will increase.

Tracking Down Unclaimed Personal Or Workplace Pensions

If you have lost track of a pension, it’s important to write down the dates and contact details of the companies you had pensions with. If you have all the information, then you can contact the pension provider directly to find how much there is in your pension pot. Alternatively, you can contact the Pension Tracing Service. They will help you find the addresses and details you need and can help you locate or trace any pensions that you may have lost or misplaced. You can also contact them to track down unclaimed personal or workplace pensions for deceased relatives. It’s possible that their estate or a surviving partner or relative could be eligible to claim a percentage. The Pension Tracing Service telephone number is: 0800 731 0193 (from outside the UK: +44 (0)191 215 4491; text phone: 0800 731 0176).

The Sooner You Trace A Lost Pension, The Better

It’s not always easy to keep track of a pension, especially if you’ve been in more than one scheme or have changed employer throughout your career. But it’s important that you do claim your pension, so the sooner you trace a lost pension, the better. If you would like to discuss any concerns you may have, please contact us.

Findings Highlight The Scale Of The Problem

This figure is likely to be even higher as the research did not look into lost pensions held in the public sector, or with trust-based schemes typically run by employers. These findings highlight the scale of the lost pension’s problem. Unclaimed pensions can make a real difference to millions of savers who have simply lost touch with their pension providers. Providers make considerable efforts and spend millions every year trying to reunite people with lost or forgotten pensions. In 2017, more than 375,000 attempts were made to contact clients, leading to £1 billion in assets being reunited with them. However, firms are unable to keep pace with a mobile workforce that moves jobs and homes more often than ever before. Prevention is better than cure, so be sure to keep all your pensions paperwork in one place. You should also tell your previous pension scheme administrator about any changes of address.

Number Of People With Multiple Pensions To Increase

Nearly two thirds of UK savers have more than one pension, and changing work patterns means that the number of people with multiple pensions will increase. People typically lose track of their pensions when changing jobs or moving home. The average person will have around 11 different jobs over their lifetime, and move home eight times. The Government predicts that there could be as many as 50 million dormant and lost pensions by 2050.

Source data: The Association of British Insurers is the voice of the UK’s world-leading insurance and long-term savings industry.
The Lost Pensions Survey includes data from 12 large insurers, covering around half of the defined contribution pensions market.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. Pensions are not normally accessible until age 55. Your pension income could also be affected by interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.