Archive for the ‘Family Protection’ Category

How To Build A Nest Egg For Your Child’s Future

Friday, October 31st, 2014

Whatever your child wants to do when they’re older, preparing a nest egg for them can be a great help when the time comes for them to spread their wings and fly the nest. As an added bonus, showing your child how to manage the family finances in order to create personal wealth can be a valuable lesson in itself.

Start by making a financial plan

Securing your child’s future is so important that even the busiest people should strongly consider making time to get some high-quality financial advice from a professional financial adviser. There are many steps between birth and young adulthood and a number of decisions for parents to take along the way. In particular parents need to think about the benefits of spending money during their child’s younger years as opposed to investing it for their later ones.

Remember that time can turn pennies into pounds

Even if you can only put aside small amounts each month, it’s still worth doing so. Time will help those pennies grow into pounds. With this in mind, the earlier you start saving for your child, the longer time will have to work its magic. If, however, your child is already well on their way to growing up, then it’s still worth putting aside whatever you can for their future needs. Put quite simply, whatever savings and investments you can build for them, it’s going to be better than nothing.

Invest as much as you can afford

Roughly speaking most children will follow a similar path from birth to the end of compulsory education. During this period the key financial question is often whether a child will attend a private school or a state school. In either case the time the need to complete their core education is essentially the same. After core education is finished young people can choose to follow different paths depending on their interests and talents. These paths can broadly be defined as further education, professional training, employment or a gap year. Each of these paths has different financial implications. It’s worth considering, therefore, having as much money as possible available for them. Even if it is not needed, it may make a significant difference to their start in adult life. For example young people who find jobs may be able to get to them by public transport, but having their own transport can make life much easier.

Aim to invest regularly

Even when money is tight, try to look on investing for your child’s future as an integral part of managing the family finances. This may mean taking the decision to tighten other areas of spending in order to be able to plan ahead. Of course, it’s fine to top it up with extra funds from time to time. For example, family and friends could be encouraged to make donations at Christmas and birthdays instead of spending their full budget on presents. These should, however, ideally be extra funds rather than the bulk of them. Having said that, as always, even if you can only afford to set money aside from time to time, it’s still better than nothing.

Look out for the tax man

Children get the same personal income tax allowance as all people born after 5th April 1948. Under certain circumstances children can receive income from children’s savings accounts (which are different to Junior ISAs) without paying any tax on the interest. For this to happen, their parents need to fill in an R85 form. Junior ISAs, meanwhile, work in much the same way as their adult counterparts. It should however be noted that as soon as the child reaches 18, the full ISA will immediately become their legal property to use as they wish. Parents with concerns about how their child will react when suddenly handed a large sum of money may need to look for other ways to prepare for their future. This may be a good time to get some unbiased financial advice from a professional financial adviser.


Life Insurance – A Simple Way To Save An Inheritance

Friday, September 19th, 2014

Simple Inheritance Blog ImageWould you rather leave your worldly goods to your loved ones (or your favourite charity) or the tax man?

Inheritance tax has long been the subject of heated debate, but the chances of it being repealed any time soon, is very remote. So for most people, the choice of creating a financial plan to deal with it or leave your loved ones to foot the bill is pretty important.

Inheritance Tax Is A Growing Concern

Under current rules transfers of assets between spouses and civil partners are (usually) ignored for the purposes of any tax, including inheritance tax. Each individual can leave an estate of up to £325K to any other individual or organization before Inheritance Tax becomes payable.

Inheritance Tax is levied at a flat rate of 40% (with a reduction of 4% where the deceased has left at least 10% of their assets to charity).

Any unused portion of this allowance can be transferred to the surviving spouse/civil partner as a percentage. For example £162.5K would be transferred as an allowance of 50% extra. This means that the surviving spouse/partner would be able to leave a tax-free estate consisting of their own personal allowance plus an extra 50%.

Looking at these figures and comparing them with house prices, it’s easy to see that many home owners could find their estate subject to inheritance tax.

Inheritance Tax Must Be Paid Before The Estate Is Released

Upon a person’s death, their executor must inform the Inland Revenue of the value of that person’s estate. They will then receive a formal notification of how much tax is due. In general, this must be paid within 6 months of the deceased’s death. If it is not the Inland Revenue will charge interest on the outstanding balance. Although the payment can be made out of the deceased’s estate, it must be made before the bulk of the estate is released.

There is an exception for funeral expenses, although the bank or building society must agree to allow the executor access to the account. If they do not, these can be recouped from the estate and can be deducted from its value for tax purposes. Added together this can all mean that families who have worked hard at money management to put their family finances in good order can find themselves under tremendous financial pressure at a time when they are likely to be feeling highly emotional.

Planning ahead with the help of a financial adviser can help to minimize the stress of dealing with a bereavement.

Life Insurance Can Be A Lifeline

Life insurance can be a very efficient way to ensure that there are funds readily available to cover Inheritance Tax and funeral expenses.   Rather than naming an individual as a beneficiary of the policy, the holder can request that the eventual payout be made into a trust, held on behalf of your preferred beneficiaries.

In this way, the funds will be kept separate from your estate and can be released immediately (and relatively simply). This can also help to ensure that a surviving partner and/or children have sufficient funds to live comfortably while probate is being undertaken.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

New Parents Ignoring Life Insurance

Wednesday, September 10th, 2014

BRITAIN-ROYALS-BABY-RELIGIONHaving a first baby is a steep learning curve. One of the first things new parents may have to learn is how they can adapt to survive on minimal sleep. It’s also expensive. Cots, prams, car seats and other paraphernalia all need to be bought to keep the newborn safe and healthy. Putting these together means that new parents can often find themselves spending money and missing out on important purchases.

A Savings Account Versus Life Insurance

Parents may open some form of savings account for their new arrival. In itself this can be a sensible option. For example Junior ISA’s provide a tax-efficient way of saving for when your tiny baby becomes a full-size, 18-year-old. Few parents, however, give serious thought as to what would happen to their child if they were to die in the meantime. While it’s fair to say that we are far more likely to live to a ripe old age than, say 50 years ago, sadly there is no guarantee. Accidents happen and so do illnesses.   Younger people can and do die, and when they do, the consequences can be particularly severe. For new parents, who are caring for a child in the most physically demanding period of its life, the death of one or more parents can be catastrophic. Savings accounts may be a useful way of planning for the future, but life insurance will take care of financial issues in the here-and-now.

Life Insurance Needs To Change With Your Lifestyle

Parents who have bought a house prior to having a baby are likely to have life insurance already. It’s a condition of many mortgages. For some mortgages however, the only requirement is to be able to repay the outstanding balance. When a baby comes on the scene, the new parents have to think seriously about how to ensure their child’s welfare in the event of the unexpected death of one or both of them. This means thinking well ahead until the end of the child’s full-time education. It needs to cover everything from childcare fees in the early years to school trips in later childhood and university fees in early adulthood.

Peace Of Mind Can Cost Less Than Toys

New parents may find themselves buying baby items which are hardly or even used. The cost of these items could well cover the cost of life insurance for the first year of the baby’s life. For healthy, younger adults an acceptable level of cover could be priced as low as a few pounds a week. This is usually more than achievable for people who exercise good money management and keep a firm grip of the family finances. Of course, life insurance only pays out in the event of a death and since both parents will hopefully live to see their baby reach adulthood, it can help a lot to have a financial plan in place to ensure that there are funds available to them when they reach school-leaving age. Getting advice from a financial adviser can help put your child’s future life on a solid footing before they have even taken their first steps.

Planning for Long-Term Care with Your Children

Friday, July 4th, 2014

planningPeople are increasingly seeing their silver years as a time of opportunity. Getting sound financial advice so as to be sure of being able to pay for long-term care if need be is an increasingly important part of being prepared to make the most of the later years in life.

Long-term care will be necessary for many people
The term “long-term care” includes everything from light help with basic tasks to more significant levels of care. Regardless of their current state of health, the reality is, most people who are currently aged 65 or over are likely to need some level of long-term care at some point in their lives.

Long-term care is a matter for the whole family
Parents may be hesitant to discuss the matter of care in their future years with their children. After all, parents spend many years taking care of their children, from changing nappies to giving advice to hormonal teenagers, and may find it difficult to adjust to the idea that at some point in the future they may need care themselves. They may also feel concerned that they may make their children feel guilty about failing to provide for them.

In truth, discussing the issues around long-term care and having a plan in place to finance it is likely to be a relief for everyone. Children need to know that their parents are happy and safe and are likely to appreciate that having a plan in place to deal with the sorts of issues which are likely to arise in old age is vastly better than waiting until something happens and then having to deal with the issue of long-term care on top of the stress of the incident itself.

Long-term care is expensive
The cost of long-term care will vary depending on many factors including the level of care and where you live. When planning ahead, however, it’s better to be safe than sorry. At current time, the liability for care bills is essentially unlimited. There is a proposal to introduce a cap of £75,000 for individual liability, after which the government would pay, however even if this does become law, it is entirely possible that the rules will change again in the future. Part of the reason for this is that government subsidies are dependant on tax revenues. If these revenues are less than forecast, then action of some form has to be taken.

In addition to this, the fact that people are having children later means that today’s generation of current and near-future retirees often find themselves in a position where they are supporting both living parents and young-adult children.

Long-term care planning is an opportunity
While the practicalities of family life may have changed over the years, with family members often living at increasing distances from each other, the emotional aspect of family life is much the same as it has always been. Families work as a team. Their common goal is to make sure that all family members are happy, healthy and safe. Getting unbiased financial advice from recommended financial advisors with a view to planning for long-term care also offers the possibility to discuss your children’s future and make plans for that. UK financial advisers will ask questions about each person’s individual circumstances, their current financial situation and their hopes for the future and can make recommendations to help make those hopes a reality.

To learn more about long-term care, call us discuss your circumstances

Why Do A Third Of UK Families Lack Life Insurance?

Friday, June 20th, 2014


Blog Image 23 June 2014Life insurance can be the financial buffer which stops a painful bereavement becoming a financial catastrophe.  While there’s more to life than money, an effective financial plan recognises the fact that everyday actions have a financial value.  To put it another way, if we were left unable to carry out these activities, we’d have to pay someone else to do them for us.  Notwithstanding this, however, a third of families in the UK are without life insurance, which raises the question of why.

Lack Of Money

This is the single most obvious reason for people not having cover.  In one sense it’s completely understandable.  Most people are feeling the squeeze just now and for those who are struggling to make ends meet; it’s tempting to dismiss life insurance as a nice-to-have.  It’s all the more tempting for younger people who may think of it as something they can buy “in a few years”.  Unfortunately not even younger people are immune to death and when they die the effects can be particularly devastating.

Younger children are the most demanding in practical terms.  They effectively need 24/7 supervision, which can place a tremendous strain on a surviving partner.  While children require less direct supervision as they age, they have other, less tangible needs.  The most obvious of these is for a good education.  These needs can be much more challenging to satisfy with only the income of the surviving partner.

Lack Of Confidence

Some people feel deterred from sorting out their financial affairs because they think it will be too complicated.  These people are likely to get particular benefit from seeking help from a professional financial adviser.  Money can’t buy happiness but lack of money can lead to a lot of misery.  This means that most people will benefit hugely from having a financial plan to ensure that they can meet their financial goals over the years.  This is more than just exercising good money management on the family finances.

It’s about understanding what’s important in your life, which will vary depending on the life stage you have reached.  One constant however is the need to protect what really matters to you, be it your health, your children or your home.  While single people who are renting a home and have no dependents may be able to afford to ignore life insurance, for most people with children it’s a must.

Lack Of Clarity

All life insurance products ultimately belong to one of two types.  There are life policies, which are open-ended and term-assurance products which are for a fixed period.  Notwithstanding this, providers try to differentiate their products in the eyes of the public by customizing them to specific markets.  They may also offer special deals. All of this can easily confuse customers and put them off taking out life insurance at all.

Fortunately, a provider will be happy to explain exactly what their offerings do and do not provide to help you make an informed decision.

Source: 35% of British families have no financial safety net in place at all to cope with a sudden loss of income according to Legal & General research.


Understand How Your Health Is Linked To Your Wealth

Friday, May 30th, 2014

healthWhat would happen if you became too ill not only to go to work but to do basic everyday activities like shopping and cooking? What would happen if this wasn’t just for a few days to get over a bad cold but weeks or months? Hopefully this won’t happen, but you need a financial plan in place in case it does.

Peace Of Mind Is Beyond Price

Money can’t buy you health but effective money management can stop poor health from having devastating consequences. In today’s environment there is growing awareness of the importance of managing family finances so that not only do ends meet but that there is also a cash cushion to protect against the impact of redundancy and potential spells of unemployment.

It is, however, important to understand that the impact of critical illness is far more extensive than that of unemployment on its own. Not only do sufferers not have a job, they may realistically have no capacity to take up employment until their health improves. In fact, they may need to employ people to help with everyday tasks or to spend money adapting their home to adjust for their condition.

Stop Illness From Crippling Your Future

It’s dangerous to assume that benefits from an employer or from the state will be sufficient to tide you over a period of illness. If there is a shortfall then it is very easy to start getting into debt (or to be unable to repay existing debts). This can lead to issues such as a poor credit rating or even bankruptcy, either of which can have a brutal impact on your future employment prospects. It is therefor crucial to check exactly what level of cover you already have and to take action promptly if it becomes clear that this cover is likely to be insufficient. As this can be a challenging exercise and could be hugely important to your future, it may be best to get professional advice from a financial adviser.

Critical Illness Can Be Managed

Like many adverse situations, planning ahead can help head off the worst of the damage. The first step is to understand what your potential liability might be, i.e. how much money would you realistically be likely to need in a period of critical illness. This means not only looking at the current cost of your essential outgoings, but at the cost of employing someone to assist with essential tasks. It’s also useful to consider potential wants. For example employing a private nurse might be more palatable than spending extensive time in a hospital, but, of course, this comes at a price.

With this in mind, many people opt for critical illness insurance, which is a type of insurance which pays out in the event that the holder is diagnosed with one of an agreed range of serious illnesses. Unlike other types of insurance, the money may be used at the holder’s discretion rather than for a specific expense such as a mortgage repayment. Some critical illness policies offer additional benefits such as life assurance. As policies vary widely in their details, such as what illnesses they cover and the specific form of the pay out, it’s important to find the right one for your individual situation. Again, financial advisers can offer help with this.

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