Topic: News

For some time now I have been a keen runner, typically covering 5-6 miles at a time, 3-4 times a week. Hardly marathon distances, but enough to pose a challenge to those like me who enjoy moderate fitness. Around 18 months ago when we moved home, I had to find a new running route, which was quite enjoyable given the surroundings of the Suffolk countryside. I settled on my route and continued to increase my distance along said route sightly each day until I came to a t-junction.

Now this T-junction seemed like a sensible place to stop and turn around whenI first reached it, so that is exactly what I did. I then proceeded to run this same route (and stop at the same t-junction) for the next 12 months. While I always set out with good intentions to go further, by the time I reached the t-junction, my mind would say “right, we have made it, time to go home”.

You see the human brain is designed to find solutions to problems. When it finds a solution to a problem, it remembers this solution and this information can be re-called whenever the same problem is encountered. Before too long, this solution has become a habit. It is this same function that makes it very difficult to push past our ‘comfort zone’, whether in business, sport or life. The problem is that while the solution you came up with before might have solved the problem, it may not have done so in the best or most efficient way. For this reason it is important to push past these mental barriers and carry on.

I did just that this morning. After weeks of trying, I finally turned right at the t-junction, and carried on my run for another 1/2 mile. It turns out, it wasn’t so bad after all!

As some of you may already know, I have committed to completing a masters degree in Financial Planning and Business Management with Manchester Metropolitan University this year. Given that it has been several years since my last true academic endeavors (numerous professional qualifications aside), I have been pleasantly surprised by how much I am enjoying the process.

Having viewed the financial planning world through the lens of an adviser on the ‘front line’ it has amazed me how much academic research is going on behind the scenes in the financial planning profession.

What is amazing about this research is that is it completely independent and unbiased and in may cases, is reviewed by academic peers to ensure its quality.

I have chosen to base my masters dissertation on the value of the intangible benefits of taking financial advice, which clients often inform me are far more valuable than the significant financial gains made as a result of our advice process. I will be trying to establish exactly what intangible benefits of the advice process that clients value and then to determine what monetary value might be placed on those benefits.

All of this is quite an undertaking, however I am looking forward to conducting my research with access to a whole new world of academic information.

I am sure I will have some further updates for you as my dissertation progresses throughout the year, but for now – I’m off to hit the books!

I was attending a presentation on Estate Planning for clients the other day and the presenter had a rather interesting little wrist watch called the Tikker (http://mytikker.com). It is essentially a wrist watch that counts down your life. So for example, it might say that you have 44 years, 213 days, 12 hours and 23 minutes left to live (based on average life expectancy of course). While the idea of having a wrist watch to constantly remind you of your impending mortality might be a little too depressing, it probably wouldn’t hurt for most of us to consider the time we have left a little more often.

A good point that Tikker make on their website, is that if we were told we have only 1 year left to live, it would probably change the way we live our lives. The one resource that we have no power or control over is time. The rest of our lives can be shaped to be the way we want them to be, but time will always be limited.

While a wrist watch might be just one step too far for me – It would probably be wise to consider how you wish to use the time you have left, before it’s too late!

With the new year already in full swing, the statistics tell us that around 25% of those people who made a new years resolution will have already broken it. By the end of January this figure increases to nearly 35%, and by the end of the year a whopping 90% of people admit to letting their new years resolutions go out of the window.

What I have found works for me in maintaining these commitments that we make to ourselves is trying to make a commitment to the commitment (that’s a lot of commitments!). What I mean by this is doing something that means that you can’t turn back. This could mean actually writing the cheque for that course you have been meaning to take, sign up to run the London marathon rather than just saying that you will, set up the standing order to make your regular savings, rather than promising yourself that you will at the end of the month.

These are all small actions that can prevent us from getting off track when we commit to making changes in our lives. I know that this philosophy works for me. In fact, in the past 2 days I have bitten one of the biggest bullets of my life and committed to taking a masters degree in Financial Planning & Business Management this year at Manchester Metropolitan University. This is something that I have been wanting to do for the past year or so, but I must admit I have been procrastinating slightly. Having now sent back the acceptance form, I am well and truly IN. I have made a commitment to others and not just to myself, and all of a sudden, my motivation to complete the task at hand (no matter how daunting) is far higher than before I completed that little one page form.

I will end this post with a quote on commitment by William Hutchinson Murray. Happy new year!

“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth that ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it. Begin it now.”

October has seen the Inheritance and Trustees’ Powers Act 2014 come into force, and while this legislation covered matters such as the definition of personal chattels, extending the number of people who can make a claim on a deceased’s estate and how Trustees can distribute income and capital from a Trust, the main thrust of this legislation is to make substantial changes to the law of intestacy.

While these changes are designed to make the distribution of an estate simpler and fairer, the changes will see some beneficiaries losing out.

What is intestacy?

When a person dies without leaving a will, they are defined in a legal sense as being “intestate”. In the absence of any instructions from the deceased, the value of the estate is distributed amongst family members by a set of legal rules (and in the absence of any bloodline relatives, the estate is claimed by the Crown!!!).

The new rules focus on the scenario where the deceased has a spouse, and whether the deceased had children or not.

Spouse with no children, but other family members

Old rules : Spouse receives the first £450,000 of the estate absolutely plus half of anything above that – the other half is passed onto other relatives in the order of parents, brothers and sisters (or nephews and nieces if their parents have already passed away).

New rules : Spouse inherits the entire estate absolutely.

Spouse with children

Old rules : Spouse inherits first £250,000 of the estate, with half of the remainder placed in a life interest trust ; the other half is split equally between all children of the deceased as long as they have reached 18 years of age (a trust must be put in place to hold assets for children under 18).

The life interest trust appoints the spouse as being entitled to income only from the trust during their lifetime; the capital is held for the children of the deceased, but this can only be distributed when the spouse subsequently passes away.

New rules : Spouse receives half of the estate absolutely, and the other half is passed onto children of the deceased in equal measures.

Impact of these changes

The changes clearly benefit any surviving spouse, which is in keeping with the wishes of most people who die without a will that “on my death, everything will go to the wife/husband”. However, for larger estates, these changes will see less going directly to any surviving children – while this will be ultimately passed on to children from their relationship, what about children of the deceased from a previous relationship?

What happens if the spouse remarries, falls out with the children and decides to leave everything to their new partner? Would this be what the deceased would have wanted?

If any doubt, make a Will

Unlike many other countries, the law in the United Kingdom allows an individual to leave their assets on death to whomever they chose, and the easiest way to make their intentions known is by making a Will. As part of the research into this new legislation, The Law Commission estimated that over half of the adult population in the UK do not have a will, and that those who need it most are in fact the least likely to have one.

Effecting a Will should be something that is considered as part of basic financial planning in the same way as saving money for a rainy day, or starting a pension to prepare for retirement – for those with children from multiple relationships, or who are unmarried and have a family with a common law partner, a Will is almost essential.

Many people are put off by the perceived costs of legal fees from high street solicitors, but the reality is that creating a Will is a lot cheaper than most people think, and doesn’t require a solicitor.

In Trusts we trust

The simplest way to ensure that a person’s wishes for the distribution of their assets are adhered to when they have passed away is to set up a Trust. As with Wills, many people perceive Trusts to be the domain of the mega rich, but the reality is that the use of Trusts should be seen as commonplace for effective estate planning.

A Trust is the most effective way of ensuring that assets remain within the bloodline, and are protected from attack from third parties in the event of divorce and bankruptcy – the use of Trusts will be something that is likely to feature in subsequent blogs.

Summary

While many people who don’t have a Will are not aware of the intestacy rules (new or old), they will have a significant impact on many, and are likely to see a substantial increase in disputes between children and surviving spouse’s ending up in the courtroom.

At Buckingham Gate, we recognise the importance of effective estate planning and are able to provide a great deal of assistance in setting up Wills and Trusts for clients to ensure that their estates are distributed in the most efficient manner in accordance to their wishes.

If you would like further information on our estate planning solutions, please contact us on 0203 478 2160, or email me on kevin.herron@buckinghamgate.co.uk.