John Kelly was our first accountant and then financial advisor and has been very helpful and pro-active in management of both aspects of our business and personal finanaces.We could thoroughly recommend him to other businesses and private individuals.
Elderly Client Services
Our fee-only services for elderly clients support both the individual elderly clients and their attorneys if they have lost capacity. Whether you are planning to simplify your finances, need advice about long term care, inheritance tax or gift trusts, Square One Financial can give you professional advice and find a unique solution for your needs.
1. Simplifying Your Finances
For many elderly clients, who may find themselves widowed, financial products can seem daunting. Plans taken out years ago may no longer make sense and the constant stream of paperwork from providers is often very upsetting. In these cases, simplifying their affairs is essential.
Case study: Mrs H, recently widowed, was referred to us by her solicitor who knew we specialised in the elderly. She dragged a heavy suitcase of papers into her lounge at a first meeting. After two hours, three quarters of it had been identified as redundant and was taken away for secure shredding. The reduction in the weight of the suitcase matched the weight taken off her shoulders. We went on to dispose of 8 unnecessary plans and create one new portfolio.
2. Care Costs
As you get older, you might develop some health problems, and it is possible that you'll find it necessary to leave your own home and go into long-term care. While the state may contribute to care costs, depending on your circumstances, you might also have to find other ways to cover the cost of care. This is often a very stressful time for families who may feel guilty and who are unsure how to meet ongoing care costs. The latter problem applies equally to attorneys who may be the client's solicitor who faces the possibility of being answerable to beneficiaries of the client's estate. Many may not be aware of the solutions on offer. There are various possibilities, such as using your savings and investments, getting a care annuity, or taking out a long-term care insurance. We can help our clients and attorneys by exploring a range of alternative solutions and by providing a clear report and audit trail to back up any decision.
Case study: Miss B had almost £400,000 and had gone into care with dementia but no other health issues. We explored the options and obtained prices for an immediate care annuity, a type of annuity that is written specifically for the client taking into account all the personal medical history and which pays the care home tax-free. To buy a plan that would pay her net care costs, allowing for indexation and some capital protection (to cover the risks of early death) would cost £175,000. The attorneys could then make an informed judgement whether to spend less than half of the estate to protect the other half.
3. Inheritance Tax
The issue of Inheritance Tax is often foremost in the minds of the elderly. Many resent the idea of their after tax assets being taxed at 40% again, but worry that they might regret making outright gifts in case they need their money later for example if they later have to go into care. Fortunately there are legal ways to avoid inheritance tax and a small number of perfectly legitimate plans available that allow the clients to put money into a trust, but to get it back later should things change.
Case study: Miss E, aged 72, had an estate of £500,000 and cash on deposit of £220,000. Her pension paid her bills and although she did not need her capital, she felt unsafe giving it away to relatives in case her circumstances changed. A plan was set up where she put £180,000 in trust but had the right (but not the obligation) to get back at least £25,000 a year. The trust placed the money on deposit so that her position was effectively unchanged. After survival by seven years this will save the estate at least £72,000 of IHT.
4. Gift Trusts & Investment Bonds
Finally, many elderly clients end up being sold discounted gift trusts or gift and loan schemes that can generate huge commissions for greedy salesmen, and these are rarely the best solution for Inheritance Tax. Indeed they can make a situation much worse, particularly if markets fall. Others may be sold investment bonds which since April 2008 are almost never the best solution, but they do offer the most commission. If you find yourself in this position, or if you are the attorney or executor, we may be able to help you seek redress against the adviser.
Case study: Mrs H aged 88 was sold a gift and loan trust, and sadly died a week later. In the meantime markets had fallen and after allowing for this, and for surrender penalties, the plan had lost £30,000. The trustees of the plan found that they were personally liable to the estate for £30,000. Had they also been the beneficiaries this might not have mattered so much but they were not. This case could easily been avoided by a competent adviser.
What next?
- For more help, contact our Chartered Accountant partner, John Kelly. or call us on 01273 921990.
- Want to find out more about your financial options? Read our guide to equity release and our introduction to inheritance tax.
For more help, contact our Chartered Accountant partner, John Kelly. or call us on 01273 921990
