Put it in your trust...

QUANTITATIVE easing is coming to an end, Ion Tsakalis warned London Freelance Branch at its July meeting, and the result is that anyone who has any form of debt - mortgage or otherwise - will find it getting more expensive. Ion is a Chartered Financial Planner and Independent Financial Adviser. Then he got gloomier.

Ion Tsakalis © Hazel Dunlop

Ion Tsakalis: do prepare for those events you'd rather not think about!

"What happens if you get sick? Unless you plan to exist on poverty-line benefits, or unless you have assets, it'd be good to plan for the worst... some form of insurance? Twenty years ago I'd have been talking about pension plans... now I just hope people can make some kind of plan." Ask: when would you like to stop working? What would you need to live on?

Financial advisers used to do product-led advice - "you want this pension?" Now the field is more varied, with clients relying on second properties, downsizing, other investments and so on. Ion gets asked a lot whether he thinks personal pensions - without employer contributions - are in people's interest. True, if you pay in £80 in you get £20 tax credit. But when you draw on it, though, 75 per cent will come to you as taxable income. On the other hand a couple can pay £23,000 a year into Individual Savings Accounts (ISAs)... and although there is no tax relief the proceeds come back free of capital or income tax. That may be preferable.

One thing that upsets Ion is "how deficient people's estate planning is. Who has a will?" Many hands went up. "And who has a trust alongside it?" No-one owned up.

"I have a wife and two children: whatever I build up should go to them. If I die before my wife, and my will simply says my estate goes to my wife, and if she is not around to pass it to my children, there's no guarantee the children get anything." Ion outlined a possible scenario after his death: his wife remarries and then they divorce. The new husband "walks off with... half my estate." In another "thoroughly miserable picture," Ion's future widow "ends her days in a care home - and the local authority will be taking the assets she inherited from me to pay for it. But if the money were in a family trust, they'd have difficulty doing that... a trust is a good plan. She can benefit during her lifetime, and the remainder will pass to my children."

We also heard in the same meeting from accountant Eric Longley on paying just as much tax as we have to: for a report see here.

Last modified: 07 Aug 2013 - © 2013 contributors
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