INHERITANCE TAX

Inheritance tax – once known as Estate Duty  used to be something that only troubled the seriously rich. Now, with house prices rising in line with a recovering economy, many more people are starting to find that the taxman will take a share of their legacy before their loved ones. But there are steps you can take to help ensure your wealth goes where you want.

The Inheritance tax (IHT) net is catching out more and more people, thanks to recovering house prices meaning that many more of us have estates worth above the threshold value of £325,000 – or £650,000 for married couples and civil partners. According to official figures, IHT receipts have climbed for the third year in a row.

With assets beyond the IHT threshold taxed at 40% it can mean a substantial loss. However, inheritance tax liabilities can be reduced or even avoided altogether – if you make estate planning part of a long term financial strategy. Your financial adviser should be able to suggest some effective solutions. The most obvious way to reduce potential IHT is to give money away before you die.

You can give £3,000 away every year. You can give an unlimited number of small gifts of up to £250 per person and larger gifts to a couple on their marriage. It may seem a simple solution – but you may need to start your generosity early. Beyond these allowances (or ‘regular payments made from income without affecting your standard of living’), money given away in the seven years before you die may be counted as part of your estate and therefore subject to IHT.

However, although gifting cash is easy enough, for most of us, property is our main asset, and the reason why our estates fall into the scope of inheritance tax in the first place. Obviously, you can’t gift small parts of your home – but there are some measures which can take your property outside the IHT threshold. Downsizing is one answer, but there are some financial measures your financial adviser could discuss with you.

Other alternatives include whole of life insurance policies with enough cover to take care of the IHT liabilities. There are also certain classes of investments which can provide some measure of exemption for your heirs – while still providing you with the potential for income while you can still enjoy it.

KEY FACTS

You can give an unlimited number of small gifts of up to £250 per person.

Certain classes of investments can provide some measure of exemption for your heirs

Who Cares?

Nursing care - We are all living longer. According to current research, 50% of babies born now could live to see the grand age of 100. Unfortunately, longer life does not always mean longer independent living. More of us could need to fund long term care, for ourselves, parents or spouses.

Nursing care may be free under the NHS – but social care, the provision of homes for old people who are frail or no longer capable of looking after themselves is not, and the bills can be frightening. Even a local authority home can easily mean bills of £1,500 a month and the costs of private care can be much higher. Care fees usually increase annually, making planning ahead difficult when it is impossible to know how long someone will live.

The state makes a contribution, but anyone with assets over a certain level currently receives no local authority funding (which varies across the UK). If you are theoretically eligible to be fully funded by the council but want to choose a care home which charges more than the council’s ‘usual rate’ you may have to make up the difference. These sometimes bear no relationship to local market prices so there may be no places in an area at the council’s usual rate. In these instances councils will ask for third party top-ups – which can be paid for by relatives or charities.

Some authorities may contribute to care fees through a secured loan and the NHS may assist with nursing care costs – but every year, thousands of people are forced to sell their homes to pay for their care. This is set to change. The 2013 Budget set out plans for a cap on lifetime care fees and a higher permitted level of assets before requiring personal contribution. The national lifetime care costs cap will be £72,000 and the assets threshold £118,000, but these will not come in until 2016. Even when the limits are in place, it may be necessary for family to cover a shortfall. Planning is difficult – but there are solutions available. One possible answer is a lump-sum purchase of an immediate care annuity to cover fees for the rest of their life. This can be costly, and the sooner you talk to your financial adviser about the possibilities the more affordable it may be.

www.sterlingnorth.co.uk www.sterlingnorth.co.uk/nursing-care/

MORTGAGE UPDATES

  

Mortgage Updates - The housing market seems to be on the road to recovery, with greater consumer confidence helping push up turnover and prices. This is excellent news for anyone on the housing ladder and, with more mortgages around, first time buyers can celebrate too. In a fast-moving marketplace, expert help with finding the right mortgage is crucial.

The UK housing market, in the doldrums during the recession, is on the rise again. Key sources disagree on the exact figures; the Nationwide sees property prices up by 3.5% compared with a year ago, the Halifax suggests 4.6 % and the Land Registry just 1.3%. Nationwide chief economist Robert Gardner sets out the background: “Demand for homes has been supported by further modest gains in employment, as well as an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures.”

The emergence of different figures from lenders and the Land Registry is unsurprising. This is a complex market and difficult to measure nationally, as homes are about as far from being a homogeneous product as you can get, but the trend is clear. Your home, depending where you live as there are regional variations, could be an appreciating asset again, so if you are not already climbing the housing ladder, it could be time to start.

Fortunately, the mortgage market is coming back to life too – a situation with something of the chicken and the egg about it, as a healthy property market is clearly dependent on a healthy mortgage market, and vice versa. The Council of Mortgage Lenders (CML) reported that loans to first-time buyers, frozen out of the market in recent years, hit 68,200 in the second quarter of 2013, the highest level since the financial crisis began in 2007.

Government initiatives, Funding for Lending and Help to Buy, are playing their part; and, with entry-level borrowing up, the rest of the market is starting to discover it is possible to move onwards and upwards once more. This new demand, which the government says will not inflate a price bubble, has brought mortgage providers back to the market, and some current deals look very attractive.

The brighter picture was reaffirmed by CML chief executive Paul Smee after a meeting with Chancellor George Osborne. Mr Smee said: “The mortgage market is open for business, and it is clear that government support has helped to create more favourable market conditions for home-buyers. Lenders, whether they choose to participate in the Help to Buy guarantee scheme or stay outside, will continue to do their utmost to meet households’ needs for mortgages, but always in a way that is responsible.”

Interest rates on home loans have recently seen all-time lows and forward guidance from the Bank of England suggests its 0.5% base rate will be around for a while yet, unless rampant inflation or financial instability loom. With an abundance of fixed rate, tracker and other variable rate products to choose from and government schemes to navigate, it pays to have an expert to guide you.

For any Mortgage related questions, please feel free to email me at: nm@sterlingnorth.co.uk

Who Needs Life Insurance?

Life Insurance - www.sterlingnorth.co.uk 

The idea of life insurance goes back to at least as far as the ancient Romans. You may never live to enjoy the benefits (unless you opt for a policy with a savings element) but for those you leave behind the financial security is essential. So why are as many as 30% of Britons not using life insurance to protect their loved ones?

People give plenty of reasons why they don’t need, or can’t afford life insurance. We look at some of the most common – and why those reasons don’t make much sense.

I can’t afford Life Insurance

We are just coming out of recession – and with budgets still tight some of us are putting off buying life insurance. It’s a false economy – those we leave behind will still need financial security, whether the economy is up or down. Life insurance is not as expensive as you might think. To put it in context, insuring your mobile phone, or buying a fancy coffee once a week could well cost more than some types of cover.

I don’t need cover

Even those who are single with no dependants may need life insurance to cover funeral costs. These are soaring. The average funeral cost in the UK is now around £3,000 while Londoners pay an average £4,600. That’s quite a burden for those you leave behind. But there is another reason. If you are single now, this might not always be the case. The sooner you start a life insurance policy, the less it can cost. Should a family come along, you’ll be able to provide financial protection for less.

Getting cover won’t do me any good

Of course, you will never see any return on a standard life insurance policy, although you can arrange life cover with a combined savings policy, which could mean a useful payout for you while you can still enjoy it. However, none of us knows what the future holds – and if we were to become ill, we might spend our valuable time worrying about how our dependants would manage.

My employer gives me life insurance

Your employer might have some cover in place, but it’s probably not as much as you would want for a partner or children who depend on you and when you leave your job, you’ll leave your cover behind.

My partner is the breadwinner

The main breadwinner may need to replace the family income. But even a partner who does not go out to work still makes an economic contribution. How much would it cost to replace a homemaker, and cover costs for childcare? Both partners need cover, to protect each other and their dependants.

It can wait

Actually it can’t. None of us know what’s round the corner – and the younger we are when we buy a policy the less it can cost.

But I don’t know the best way to buy life Insurance

Buying life insurance could not be easier. Your financial adviser will have a full understanding of what’s on the market and can help you find the policy that fits your needs and your budget.

Pension advice

Pension advice

Request your Free Pension Consultation today! 

      CLICK HERE

 Pension advice

Welcome to Sterling North, the home of good Pension advice. When it comes to pension planning the most important factor is knowing where your money is invested.  If you don’t carry out regular reviews on the performance of your pension you could be losing out. You could even find that your pension will not be enough to provide you with the comfortable retirement you had planned. At Sterling North we can provide you with quality impartial pension advice. We also offer a full review of your current pensions and advise you in plain English, on how your current arrangements are performing. For those who are interested in making the most of their pension, get in touch today and book your free consultation.

   

 For more pension and Independent financial advice go to www.sterlingnorth.co.uk

                                    Nicola Mayers Dip PFS Managing Director / Advisor Sterling North 

Pension advice

When was the last time you reviewed your pensions? 

Do you know where they are invested?

How are they performing?

Request a Free Pension Consultation today! 

Contact us here or goto www.sterlingnorth.co.uk

Sterling North - Raising money for Child Bereavement UK

Sterling North - Raising Money for Child Bereavement UK 

In January Next Year Nicola Mayers of Sterling North will be attempting to raise a minimum sponsorship of £450.00 for Child Bereavment UK. She will be taking part in the tough Guy challenge, which has been described as the Safest Most Dangerous Event in the World – It is the original event of it’s kind. It is the only event in the world to boast over 100 man made assaults for an individual challenge. Located in Perton the 12km assault course is said to require every ounce of mental and physical strength you have! Your fears of heights, tight spaces, fire, water and electricity will be tested to the max. If you would like to sponsor Nicola for this event then please go to her just Giving page here: http://www.justgiving.com/Nicola-Mayers1

Carl on the other hand claims to have spent enough time doing assault courses and crawling through mud and water, therefore will be running 13.1 miles on 6th October 2013 through four Royal Parks instead. The route will be through Hyde Park, Kensington Gardens, St James’s Park and The Green Park. He will attempt to raise a minimum £350 for Child Bereavement UK. If you would like to sponsor Carl for this event then please go to his just Giving page here: http://www.justgiving.com/Carl-Millington1


For more information visit www.sterlingnorth.co.uk

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