HEARTS, MINDS AND EQUITY RELEASE

TODAY’S BLOG

EQUITY RELEASE SURGE

A surge in homeowners looking to free up cash from their properties propelled the figure for equity release to £1.05bn in the three months to the end of September, driven by high house prices, gifts to family members and uncertainty induced by the coronavirus pandemic. The value of equity released jumped by nearly one-fifth from £884m in the third quarter of 2020.

While the number of loans taken out was slightly down year on year, the average amount of housing wealth freed up was 23% higher, at £101,593 per borrower. Data published this month by one of the main equity release providers (Key) suggested many borrowers were taking advantage of recent house price gains to help family members climb the housing ladder. “Big-ticket items” such as debt management and gifting were behind nearly two-thirds of the equity released in the third quarter. More than two-fifths (42%) of the cash given to family and friends was used for house deposits.

For homeowners over the age of 55, equity release offers a way of unlocking the value of their properties, whether for home improvements, paying off other debts or to help family members. Interest on the loan is paid through the sale of the house at the end of the term, so unlike a conventional mortgage a borrower is not required to demonstrate a minimum level of income to qualify. Interest rates are higher for these “lifetime mortgages” than for most mainstream mortgages. Interest rates are low by historic terms, but equity release is a not straight-forward.

Hearts, Minds and Equity Release

THE POWER OF COMPOUNDING INTEREST

Equity release is not like a normal mortgage, repaid over a set time. It is generally a loan which is only repaid when the property is sold. Overall, no payments are made, the interest merely compounds. By now you know the miracle of compounding interest – which works wonderfully for your investments and does precisely the opposite for your debt.

The risks you need to consider are future interest rates, the future value of your home and how long you will live or anyone else that you share it with. The earlier you release equity, the bigger your total debt in the end. Admittedly this helps reduce the value of an estate for inheritance tax, but in practice it can simply mean that there is nothing to inherit.

Some of you may remember the significant property crash in the late 1980s. At the time equity release was very popular and many people got caught out by the reduced value in their home and the increasing interest rates. All conspired to create genuine stress and financial hardship for some. There have been reforms, but I would urge caution – a lot of it. This should always be considered in the context of your total financial planning, not simply a desire to help a family member.

We do not provide advice about equity release but can refer you to a specialist. However, you should exercise great caution and have a clear plan and reason about why you want the funds. Interest rates are normally higher than a typical mortgage. The fact that around half of those using equity release are between 65 and 74 does not bode well for those that may live for 2 or 3 decades.

As ever, good financial management starts with good budgeting and a proper plan.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

HEARTS, MINDS AND EQUITY RELEASE2023-12-01T12:12:59+00:00

INHERITANCE – THE KNIVES ARE OUT

TODAY’S BLOG

INHERITANCE – DISPUTES AT ALL TIME HIGH

Perhaps you have heard the saying “Where there’s a Will there’s a crowd” the idea being that when money is on the table, people gather. Of course, there may be very good legitimate reasons for doing so – perhaps during lockdown you have watched “Knives Out” a comedic story about family dysfunction and the quest to understand what happened.

Whilst I am not suggesting murder is on the cards for most families, though I imagine that lockdown has provided more moments of stress, clearly one of the current terms of the hour is “entitled”. To my mind such a word is particularly relevant here. The Ministry of Justice published figures showing a record 188 cases went to the High Court in 2019, by individuals claiming to be entitled to a share or larger share of a deceased’s estate.

KNIVES OUT

EVERYONE HAS A STORY

There are a variety of reasons for this of course, behind each is at least one story (much like the film). Family structures are certainly more complex, with multiple marriages, children from different relationships and so on. Whilst this is obviously more commonplace since divorce law evolved from 1857, 1937, 1969 (Divorce Reform Act) and 1973 (Matrimonial Causes Act), the context is nothing new as many of Shakespeare’s play will attest.

“BETTER THREE HOURS TOO SOON THAN A MINUTE TOO LATE”

The motivation may be more encouraged by the sums involved which has made the prospect of costly legal representation more appealing. Having your Will properly written is also important. Those making “last minute” homemade Wills are more obviously subject to challenge, being invariably poorly prepared and badly thought through. I don’t think anyone likes preparing their Will, it’s a fairly morbid task, but there is a huge sense of peace of mind once you have done so properly. It is part of what our Ten Minute Challenge has been leading towards – getting the difficult, uncomfortable and perhaps “boring” stuff done. There may be many gifts you wish to leave your loved ones upon your demise, but I can assure you that clarity is one of the best.

So – if your Will has not been reviewed since 2015 when the rules about property changed, now is the time to do so. We can put you in touch with a specialist. Please attempt our 10 Minute Challenge, it could be the most helpful set of final documents you provide.

As for the film, staring Daniel Craig, Ana de Armas, Chris Evans, Don Johnson, Jamie Lee Curtis, Michael Shannon, Toni Collette and Christopher Plummer (a cast to die for!) well, its available on all the usual platforms, here is the trailer.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

INHERITANCE – THE KNIVES ARE OUT2023-12-01T12:13:15+00:00

FUNERAL COSTS RISE

TODAY’S BLOG

FUNERAL COSTS RISE

I get the pleasure of talking and writing about all manner of morbid events, however the one I try to avoid is this one. The price of a funeral. It seems so utterly morbid. Yet it is my job to draw these sort of things to your attention, so here is something to think about.

The cost of dying has reached record highs of almost £10,000, fuelled by an increase in elaborate send-offs. Disney-themed funerals where everyone dresses up as their favourite character, all-pink wedding-style ceremonies in a rejection of the traditional black, and a motor-cycle and sidecar in place of a hearse, are just some of the ways that families today are commemorating the lives of lost loved ones. It means funeral costs are now higher than they have ever been, having increased year on year for more than a decade.

When somone dies, it is the case that the cost of the funeral can be offset against the value of the estate, so that’s helpful in reducing the value of the estate and therefore the tax liability (if there is one). However its still money that leaves the estate. Importantly, if there is a surviving spouse, such a cost can be very unhelpful indeed.

It is possible to take our insurance (but if you do, please do so with care) the alternative is to simply ensure that there are sufficient funds set aside. Talk to me about this if it is of concern.

funeral

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

FUNERAL COSTS RISE2023-12-01T12:13:24+00:00

THE LEGACY CONVERSATION

TODAY’S BLOG

THE LEGACY CONVERSATION

As we age many of us wonder what our legacy will be. There will of course be a huge number of different responses, but perhaps in essence it might boil down to how our story is retold and therefore how we are remembered.

Over the years we have been encouraging clients to think about their legacy and to create a storybook of photographs that is nicely printed as a keepsake. These days due to the continued advancement of printing technology, the cost of printing one-off books (or more likely less than ten) is very inexpensive, yet it provides something of great worth to those you leave behind.

If your interest is at all peaked, it will likely be thwarted by the voice inside your head screaming that you simply do not have time to get such a project done properly, it will have to be done later. You are going to have to trust me on this…. Do it anyway. Even if the finished item isn’t quite as Photoshop perfect as you would wish, it is better to have something assembled that perhaps could be improved later.

None of us know how long we have, we all hope for a long, healthy life with the time to do the things that we deem to be valuable. The reality is often different. Here is a little video which promotes the same idea. There are lots of solutions, but just make a start. If you want a basic template of ideas, get in touch – email me for a template.

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

THE LEGACY CONVERSATION2023-12-01T12:17:34+00:00

Delusion and Florence Foster Jenkins

Delusion and Florence Foster Jenkins

How we respond to money is explored in the new film by Stephen Frears “Florence Foster Jenkins”. The film recounts the true story of the wealthy musical benefactor played by Meryl Streep. Sadly she does not possess the singing talent that she so desperately craves, yet a doting and financially dependent husband (Bayfield) played by Hugh Grant, contrives to protect her in a bubble of innocence, a charming modern day PR man. In practice, this protected them both.

The delusion is maintained through some creative and tender manipulation of a largely uniformed social circle, who pass the entrance test of wealth, yet clearly have a lack of knowledge about music. In reality this exposes their own hunger for social standing and are caught by the inability to speak the truth for fear of being outcast. There is no malice in the contrivance, but reminds us again of the impact of crowds and fear of being different, something more like the Emperor’s new clothes.

Collusion in delusion

I was surprised how much I enjoyed the film, it is warm, funny and moving. This, despite essentially being a story about the ultra-rich, living in denial of any form of reality and for whom success is bought. The strong character performances carried the suggestion that denial and delusion are arguably just as important as the truth, a sentiment that Shakespeare frequently conveyed. Perhaps in relationships denial of some realities (we all have flaws) is even a necessity.

I won’t spoil the film for you, do go and see it. As a financial planner, I would draw your attention to the briefcase and the lengths that people go to avoid the harsh confrontation with reality. The Q&A at the BFI last night with Hugh Grant, Stephen Frears and writer Nicholas Martin was also illuminating, ironically employing similar delusionary tactics to protect Florence, the audience and probably the box office. This is of course is the skill in great story-telling, how to edit and reassemble a story that shapes opinion, of course the political interpretation is ever present.

FFJ preview Q&A BFI 2016-05-04

So the question is, what are we in denial about? Some denials are probably healthy and serve our own interests, other – such as the truth about your own finances is rather more vitally exposed, not harshly, but so that reality can bring about a healthy perspective.

If you would like a financial reality check, you now simply need to get in touch – contact details all over the site. Here is the trailer for the new film.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Delusion and Florence Foster Jenkins2023-12-01T12:19:16+00:00

Where there’s a Will – part 2

Where there’s a Will – part 2

I asked Alex Truesdale for her thoughts on the ruling by the Court of Appeal and am thankful for her very valuable insight, here are her thoughts and observations.

The Court of Appeal’s judgment in this long-running dispute confirms that disinherited children are permitted by a 1975 statute to challenge their parents’ Wills if reasonable provision for their maintenance is not made. “Maintenance” means the child’s cost of daily living at whatever level is appropriate to them. The question of what is “reasonable” is dealt with by the court exercising its discretion to consider a number of factors laid down by statute, including the child’s needs and circumstances, the needs and circumstances of the beneficiary who has inherited instead, and the parent’s conduct. Here, Arden LJ endorses the lower court’s description of Melita Jackson’s conduct towards her daughter Heather Illot, since their 1978 estrangement, as “unreasonable, capricious and harsh”, before replacing the lower court’s £50,000 award with a sum of £163,000. This, Arden LJ reasoned, would allow Mrs Illot to purchase her house, receive a modest income, and potentially arrange a pension through equity release, all without compromising her state benefits.

This is not new Law

None of this is new law. But it is inevitable that this high profile victory for Heather Ilott – albeit one which sees her receiving just over 1/3 of her late mother’s estate – will encourage further challenges to Wills which seek to disinherit family members, particularly if there is no connection between a testator and the charity which has benefited from a windfall legacy. A costs order has yet to be made but will be considerable: Melita Jackson’s insistence that her executors defend to the hilt any attempt by her daughter to contest the Will will already have eroded the value of her estate, and so now the charities themselves face a smaller residual legacy and their own costs bill. There may be a further appeal to the Supreme Court, but I would suspect that the charities will take a view on the reputational as well as financial damage they risk in prolonging a dispute which has run since 2004 and, arguably, since the estrangement in 1978.

Where does this leave testamentary capacity? Much as it was before – the award made in this case turns on its own facts, and does not represent any further curtailment of one’s freedom to leave one’s estate as one pleases, so we should all still be making Wills.

Think ahead and think carefully

However, I would encourage those who do wish to exclude family members from their Wills to leave contemporaneous evidence of their reasoning not only to exclude a particular beneficiary, but also to favour other beneficiaries. This is particularly important if, in the case of charities, the testator has no connection with, or history of donations to, charity during their lifetime. I have been instructed on a number of cases where we have done just that by way of a side letter, to try to avoid the washing of too much dirty linen during probate, a process which makes Wills public. And those asked to act as executors should always check whether they are risking accepting a poisoned chalice that may compel their involvement in a protracted legal battle. As in this case, that may, sadly, become the testator’s most enduring legacy.

Alexandra Truesdale MIPW

Alex Truesdale Wills Limited | Registered in England and Wales no 7275445 | Registered office: 27 Mizen Close Cobham Surrey KT11 2RJ

Alex Truesdale Wills Limited is a member of the Institute of Professional Willwriters and complies with its Code of Practice

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Where there’s a Will – part 22023-12-01T12:20:06+00:00

Where there’s a Will…

Where there’s a Will…

Perhaps you know the saying.. “where there’s a Will, there’s a crowd”, well it seems that there may have been a landmark ruling in the Court of Appeal. This could impact anyone wishing to disinherit their own children.

The potential landmark ruling was handed down by Lady Justice Arden at the Court of Appeal on 27 July 2015 throws into question the “security” of a number of Wills.

Long story short – Heather Ilott challenged her late mother’s Will of 2002. The original Will made by her mother Melita Jackson, expressly prohibited her only daughter from any inheritance from her estate, leaving the entire estate to animal charities. This all stemmed from a family event in 1978 when Heather then 17, eloped with her boyfriend, who she later married. Mrs Jackson died in 2004 and the Will was initially challenged by her daughter and she was awarded £50,000 of the £486,000 estate. An appeal was initially denied, but this week was upheld by Lady Justice Arden. Heather Ilott was awarded £164,000 about a third of the estate.

“Unreasonable, capricious and harsh”

Lady Justice Arden, ruled that the exclusion of her daughter from an inheritance was unreasonable, capricious and harsh. Ruling that she should have a greater share of the estate.

Needless to say this prompts a few concerns and questions. Firstly it has taken 11 years to agree the terms of Probate and settle the Will. Secondly the original Will, despite being “crystal clear” was overturned, not completely, but essentially opening the way for more legal challenges to Executors. Of course, the animal charities have also lost a reasonable amount too – presumably having an impact on their planning somewhere.

The number of Wills challenged each year continues to rise which rather affirms the statement that where there’s a Will, there’s a crowd. Most people do not understand what is involved when someone dies, having little or no grasp of the lengthy delays that can occur. This case has been rolling on for 11 years!

You can see the ruling by clicking here.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Where there’s a Will…2023-12-01T12:20:07+00:00

A Matter of Life and Death

A matter of life and death

It is one of the strangest aspects of conversations that I have with clients. It gets stranger and perhaps more difficult the older they become. We have to talk about a matter of life and death.

In essence, when all is said and done, financial planning is about trying to ensure that your money does not run out before you die. So we need to have a conversation about when that might be. We don’t know the answer. Death is a daily part of life, yet something that most of us manage to avoid talking about.

The motivation behind the question is obviously to attempt to make money last long enough, however it is also designed to prompt thoughts about what is life about, what do you want from it during this brief sojourn on this wonderful planet?

Thoughts may turn too quickly to estate planning and reducing inheritance tax, rather than considering the true inheritance that is being left…. the memory and impact of .. well…you!

I might (will) point to the financial impact of your loss to those dependant upon you, be they family or your business, but we all know that its much bigger and deeper than that don’t we. So good financial planning can take care of financial loss, but great financial planning will hopefully remind and inspire you to ensure that you make the most of the life you have now.

Another way to view death – acceptance

A dear friend of mine, who has had more than her fair share of grief drew my attention to this short video about death (and life). It combines images from various films and words of Alan Watts. It is worth taking the 3 minutes to watch it.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

A Matter of Life and Death2023-12-01T12:20:07+00:00
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