CLIENT VIDEO TESTIMONIALSDemonstrating our value to individuals and businesses

TRUSTS DEMYSTIFIEDHelp protect your wealth and mitigate tax liabilities

MARKET REVIEWAfter nearly a decade of growth, where do we stand?

INSIGHTISSUE 9 n SUMMER 2018 A WEALTH OF ADVICE

PROTECTION FOR YOU AND YOUR FAMILYConsidering the factors involved

Armstrong Watson Accountants, Business & Financial Advisers is a trading style of Armstrong Watson LLP. Armstrong Watson LLP is regulated by the Institute of CharteredAccountants in England and Wales for a range of investment business activities. Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by theInstitute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales, number 8800970.

Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Armstrong Watson Financial Planning & Wealth Management is atrading style of Armstrong Watson Financial Planning. Firm reference number 542122. Registered as a limited company in England & Wales No. 7208672. Registered Office: 15 VictoriaPlace, Carlisle, Cumbria CA1 1EW.

The value of investments and the income from them can fall as well as rise. You may get back less than you originally invested. Past performance is not a reliable indicator of futureresults.

Time to bring your tax affairs, financial planning and wealth management together?

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INSIDE THIS ISSUE04 BEN DE LISI

05 PROTECTION FOR YOU AND YOUR FAMILY

06 FINANCIAL FREEDOM

08 MARKET REVIEW

10 TRUSTS DEMYSTIFIED

11 KEY PERSON PROTECTION

12 MAKING THE MOST OF YOUR PENSIONS

13 CLIENT VIDEO TESTIMONIALS

14 PROTECTING YOUR ESTATE FOR FUTURE GENERATIONS

04 BEN DE LISI

06

08

10

11

Welcome to the Summer 2018 issue of Insight. It may be the last thing you want to think about, but part of responsible family financial planning entails considering what would actually happen if you or your partner dies. How will they or you cope financially? What about your children? Can outstanding family debts be repaid? Can the children be brought up and educated the way in which you envisaged? Will it be possible to maintain the existing family home? We examine these questions on page 05.

If you struggle to navigate the UK’s Inheritance Tax regime, you are not alone. Whether you are setting up your estate planning or sorting out the estate of a departed family member, the system can be hard to follow. On page 14, we look at why getting your planning wrong could also mean your family is faced with an unexpectedly high Inheritance Tax bill.

By the time we have been working for a decade or two, it is not uncommon to have accumulated multiple pension plans. There’s no wrong time to start thinking about pension consolidation, but you might find yourself thinking about it if you’re starting a new job or nearing retirement. Find out more on page 12.

The full list of the articles featured in this issue appears opposite, and we hope you enjoy this Summer issue of our magazine. If you would prefer to download a digital copy or subscribe to new issues electronically, please visit www.armstrongwatsonfp.co.uk.

WELCOME

INSIGHT 03

ARMSTRONG WATSON FINANCIAL PLANNING

@AW_WEALTH

ARMSTRONGWATSON

in

Paul DicksonManaging Partner

LIFESTYLE FEATURE

BEN DE LISI, BORN AND RAISED IN LONG ISLAND, NEW YORK, STUDIED SCULPTURE AT THE PRATT INSTITUTE IN BROOKLYN AND FIRST SHOWED A FLAIR FOR FASHION DESIGN WHEN HIS GRANDMOTHER TAUGHT HIM TO SEW AT A YOUNG AGE.

04 INSIGHT

BEN DE LISIThe journey to a new exciting chapter

In 1982, Ben moved to London and made his debut at London Fashion Week in 1994, winning the British Glamour Designer of the Year award that year and the following. In 1998, Ben established

his couture brand and made evening dresses for the likes of Helena Bonham Carter, Anjelica Huston and notably Kate Winslet for the acceptance of her first Academy Award, for best actress in Titanic.

By 2009, Ben’s Debenhams collection, which started in 1992, had grown to be the most successful apparel brand in the store and was extending into homewares. Subsequent to this success, he was asked to redesign the Principles collection, newly acquired by Debenhams. Following Ben’s redesign, Principles had the most successful launch Debenhams ever made. In 2016, Ben and Debenhams parted company after 24 years of collaboration.

The next exciting chapter in Ben’s career sees him working on a full lifestyle brand exclusively for the shopping channel QVC. Under the Ben De Lisi brand, which goes on air in October, Ben has designed an extensive apparel collection, linking accessories and jewellery. The ethos of the collection is to offer women an opportunity to buy into a look that is versatile and easy to wear – and with Ben presenting directly to consumers, he will be able to exhibit to consumers how to get the most of the collection. n

What made you join the fashion industry?I studied sculpture and painting in university, but being ever the impatient man who wanted success, I learned to sew and started to create clothing for myself, friends and family. One thing led to another, and I found myself doing a small capsule range of 15 garments in a luxury wool jersey and sold it out in my first season.

 You moved to England from America some years ago. Does Britain’s style differ vastly to Americans?British style constantly bombards you with contradiction, and that in itself challenges me and makes me a more creative designer.

 How does designing a clothing range for the high street differ from how you design gowns or couture for the stars?The process is the same and the creative juices flow regardless. I get the same buzz from seeing a star on the red carpet as I do when I see a woman on the bus wearing my designs.

 How does designing home wear differ to fashion?They don’t. I implement the same theory: I look at a body or a room and accentuate the positive features and play down the problem areas.

 Autumn/Winter is fast approaching. Do you have any style tips for the new season?As a classicist, I would always say stick to a few beautiful pieces and mix them with current high street trends. For example, a butter coloured cashmere sweater with taupe trousers will always hold you in good stead.

 Are you a save or splurge kind of guy?I’m both, but certainly cautious. I rarely make fashion mistakes – I know what suits me.

 What’s your biggest fashion mistake?Oh too long ago to remember.

 What’s been your biggest challenge when it comes to running your own business?Trying not to be everything to your business and to learn to delegate.

 Tell us about your new project(s).I have just launched a women’s cashmere range called BEN, and I’ve also signed a deal with QVC to launch a 360 offer of Ben de Lisi clothes, accessories, home furnishings and home fragrance all beginning this July.

 What do you do to relax?Travel either to my beautiful villa in Ibiza, South America or to the Island of Mustique in the Caribbean.

PROTECTION

IT MAY BE THE LAST THING YOU WANT TO THINK ABOUT, BUT PART OF RESPONSIBLE FAMILY FINANCIAL PLANNING ENTAILS CONSIDERING WHAT WOULD ACTUALLY HAPPEN IF YOU OR YOUR PARTNER DIES. HOW WILL THEY OR YOU COPE FINANCIALLY? WHAT ABOUT YOUR CHILDREN? CAN OUTSTANDING FAMILY DEBTS BE REPAID? CAN THE CHILDREN BE BROUGHT UP AND EDUCATED THE WAY IN WHICH YOU ENVISAGED? WILL IT BE POSSIBLE TO MAINTAIN THE EXISTING FAMILY HOME?

INSIGHT 05

PROTECTION FOR YOU AND YOUR FAMILYConsidering the factors involved

It’s possible to ensure that all of these questions are answered positively for a relatively low cost, yet 8.5 million adults

in the UK have no life assurance, and 60% of women in the UK with dependent children have no life cover in place according to Scottish Widows.

MEANINGFUL DIFFERENCESetting up appropriate cover isn’t necessarily complicated, but there are a number of factors to consider.

You can take out cover for a specific period of time (Term Assurance) or for the whole of your life (Whole of Life cover). One or both of you can be insured, and the amount of cover can decrease, increase or remain level. Benefits can be paid as a lump sum or as a tax-free income (Family Income Benefit), and some plans can be renewed or converted into other arrangements in the future.

Most importantly, many types of cover can be set up into a trust which avoids delay in the payment of the benefit on death of the insured, or losing money in the form of tax.

These are serious decisions and will make a meaningful difference to your family when it counts, so taking advice on the best approach for you is likely to be more appropriate than using a comparison site in the hope of simply obtaining the cheapest product, which may not actually meet your needs.

IMPORTANT CHOICESYou are nearly five times more likely to suffer a serious illness before the age of 65 than you are to die, and everyone knows someone who has had a serious health issue and can see how frightening and debilitating it can be. In the event of a serious health issue, life can turn upside down, so the last thing you will want to be worrying about is money.

You can easily provide for yourself and your family, but the choices you make are important. What illnesses are covered under the contract? How serious does the illness have to be for the insurer to pay out? What happens if you’re not in the best health now? How does it fit in with your other financial priorities?

Many will think nothing of buying a car or home insurance, yet having health problems can have a much greater impact on your life than if you have problems with your car or home contents.

Whilst we’re on the subject of health, how well is your income protected? What if you’re unable to work but don’t have a major illness? If you’re employed, your company may pay you for a short while if you are off sick, but where are you going to get an income from when this stops?

OBTAINING PEACE OF MINDLiving off the State isn’t a realistic option for most people, plus there are many illnesses and accidents that can keep you off work for months or even years. When Scottish Widows asked how they’d cope should they or their partner be unable to work for six months, 29% of mothers said they would rely on State Benefits only, but how realistic is this? This is where Income Protection can help. n

David Squire, Financial Planning Director

Our Financial Planning Consultants can provide peace of mind for you and your family by ensuring that you have appropriate protection in place to cover the uncertainties that ill-health and death can throw at us. Contact them to discuss your needs at an office near you..

06 INSIGHT

RETIREMENT

FINANCIALFREEDOMDeciding what to do with pension savings – even if you’re still working

IT MIGHT SEEM LIKE A FAR-OFF PROSPECT, BUT KNOWING HOW YOU CAN ACCESS YOUR PENSION POT CAN HELP YOU UNDERSTAND HOW BEST TO BUILD FOR THE FUTURE YOU WANT WHEN YOU RETIRE. ON 6 APRIL 2015, THE GOVERNMENT INTRODUCED MAJOR CHANGES TO PEOPLE’S DEFINED CONTRIBUTION (DC) PRIVATE PENSIONS. ONCE YOU REACH THE AGE OF 55 YEARS, YOU NOW HAVE MUCH MORE FREEDOM TO ACCESS YOUR PENSION SAVINGS OR PENSION POT AND TO DECIDE WHAT TO DO WITH THIS MONEY – EVEN IF YOU’RE STILL WORKING.

RETIREMENT

INSIGHT 07

Depending on the scheme, you may be able to take cash lump sums, a variable income through drawdown

(known as ‘flexi-access drawdown’), a guaranteed income under an annuity or a combination of these options. This means being faced with the choice of deciding how much money to take out each year and setting an appropriate investment strategy. It goes without saying that your income won’t last as long if you take a lot of money out of the pension pot early on.

WHAT ARE YOUR RETIREMENT INCOME OPTIONS?There are many things to consider as you approach retirement. You need to review your finances to ensure your future income will allow you to enjoy the lifestyle you want. You’ll also be faced with a number of different options available for accessing your pension. Being faced with such an important decision, it’s essential you obtain professional financial advice and guidance. We’ve provided an overview of the main options.

KEEP YOUR PENSION POT WHERE IT ISYou can delay taking money from your pension pot to allow you to consider your options. Reaching age 55 or the age you agreed with your pension provider to retire is not a deadline to act. Delaying taking your money may give your pension pot a chance to grow, but it could go down in value too.

RECEIVE A GUARANTEED INCOME FOR LIFEA lifelong, regular income (also known as an ‘annuity’) provides you with a guarantee that the income will last as long as you live. A quarter of your pension pot can usually be taken tax-free, and all the annuity payments will be taxed.

RECEIVE A FLEXIBLE RETIREMENT INCOMEYou can leave your money in your pension pot and take an income from it. Any money

left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. A quarter of your pension pot can usually be taken tax-free, and any other withdrawals will be taxed whether you take them as income or as lump sums. You may need to move into a new pension plan to do this. You do not need to take an income.

TAKE YOUR WHOLE PENSION POT IN ONE GOYou can take the whole amount as a single lump sum. A quarter of your pension pot can usually be taken tax-free – the rest will be taxed. You will need to plan how you will provide an income for the rest of your retirement.

TAKE YOUR PENSION POT AS A NUMBER OF LUMP SUMSYou can leave your money in your pension pot and take lump sums from it as and when you need until your money runs out or you choose another option. You can decide when and how much to take out. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. Each time you take a lump sum, normally a quarter of it is tax-free and the rest will be taxed. You may need to move into a new pension plan to do this.

CHOOSE MORE THAN ONE OPTION AND COMBINE THEMYou can also choose to take your pension using a combination of some or all of the options over time or over your total pot. If you have more than one pot, you can use the different options for each pot. Even if you only have the one pot, it is possible to have a combination of guaranteed income for life with a flexible income.

SIGNIFICANT EFFECT ON THE AMOUNT OF INCOME AVAILABLEThe earlier you choose to access your pension pot, the smaller your potential

fund and income may be for later in life. This could have a significant effect on the amount of income available to you, meaning it may be less than it could have been, and it could run out much earlier than expected.

Taking an appropriate income or money from your pension is very complex. We’ll help you access your options. Remember: if you choose to only withdraw some of your money, what’s left will remain invested and could go down as well as up in value. You could also get back less than has been invested. Also, if you buy an income for life, you can’t generally change it or cash it in, even if your personal circumstances change. And the inheritance you can pass on depends on what you decide to do with your pension money. n

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION

INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE

YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON

YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE

SUBJECT TO CHANGE IN THE FUTURE.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME

AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND

YOUR OPTIONS AT RETIREMENT.

EXPERT AND PROFESSIONAL ADVICE IS THE KEYYou don’t have to do anything with your pension savings when you reach age 55. If you don’t need the money yet, you can leave it where it is. But whatever your future plans are, it’s essential to receive expert and professional advice. To review your situation and consider the ways we can to help you make the most of your retirement income, please contact us – we look forward to hearing from you.

MARKET REVIEW

MARKET REVIEWAfter nearly a decade of growth, where do we stand?

MARCH 2009 WAS THE LOW POINT IN MARKETS FOLLOWING THE GLOBAL FINANCIAL CRISIS. THOSE WERE DARK DAYS, BUT WE HAVE SINCE SEEN A LONG YET DRAWN-OUT RECOVERY, WITH ASSETS ACROSS MOST MARKET SECTORS DELIVERING STRONG RETURNS.

08 INSIGHT

MARKET REVIEW

Markets move in cycles; expansions mature and then slow into recessions. At close

to ten years old, the current expansion is no spring chicken. It therefore makes sense to assess the health of the global economy and to review the prospects of financial markets.

OVER THE HILL?Trade wars, Korean denuclearisation, Italian populists, reversal of Quantitative Easing and Brexit. There are plenty of topics to keep economists up at night, but looking at all the underlying data the global economy still appears to be in good health. Economic growth is positive across all major economies, businesses are well positioned for expansion, unemployment numbers are low and wages are increasing. These are the signs of a maturing economy, but to label it over the hill would be premature.

SLOW INCREASESExpansions don’t die of old age; it is events or policy responses which tend to be the factors that cause growth to slow or even recede. Overly high or rapidly rising interest rates are common culprits, as central banks attempt to rein in excessive

inflation. Interest rates are on the rise across the developed world, and the risk is that at some point this could choke off economic growth. However, at current levels, it appears unlikely we are yet at the tipping point. The USA is the most advanced in this tightening process, but with rates at 2%, this is still low historically, while the pace of tightening has been gradual across the developed world.

LOOK FOR VALUEEquity markets, in general, offer earnings ahead of inflation and therefore can often be favoured in times of growth, which is where we are now, but a selective approach is required. Stock prices are currently stretched in many parts of the US as well as in many of the leading global technology companies of recent years. Yet elsewhere, valuations are at more reasonable levels. Asian and Emerging Markets offer strong growth levels over the long term, while the UK market currently offers dividends at highly attractive levels.

BEWARE INFLATIONBonds and fixed income securities, on the other hand, can face significant challenges as rates increase. Yield, a measure of

future returns, is currently lower than inflation in many parts of the bond market, and therefore the sector does need to be viewed with some caution.

In the mid to late stage of an expansionary phase within a cycle, assets with the ability to beat inflation may be favoured, while those with sensitivity to rising interest rates should be carefully considered.

Therefore, what does this all mean for investors looking to achieve either long-rerm growth or long-term stable income generation? As this particular cycle approaches its tenth birthday, an actively managed portfolio which alters allocations over time could add significant value and comfort to investors and help position investments for the markets ahead.

IMPORTANT INFORMATION Past performance is not a reliable indicator of future performance. The value of investments and the income derived from them can fall as well as rise and investors may get back less than they invested. n

Issued by Richard ColeFund Manager, Future Money Ltd

www.futuremoney.co.uk

INSIGHT 09

10 INSIGHT

TRUSTS

Help protect your wealth and mitigate tax liabilities

TRUSTS DEMYSTIFIED

A trust is the transfer (or settlement) of assets by an individual (the Settlor) on trust to a small number

of people (the Trustees) to hold for the benefit of others (the Beneficiaries).

Assets can be cash, shares or property, and a trust means that the Settlor can give away their property with ‘strings attached’ as they can specify who can benefit, when they can benefit and by how much.

A trust can be created during a person’s lifetime or on death in their will, and there are various types of trusts, but they fall broadly into two main categories:

n Interest in possession – one or more specific beneficiaries has a fixed entitlement to the income of the trust

n Discretionary trust – any one of several beneficiaries can receive income, or

capital, of the trust; the amount and the timings of these distributions are at the trustees’ discretion

There are other types of trust (for example, Charitable Trusts, Vulnerable Person Trusts, etc.), but as with all trusts the main purpose is to provide flexibility, protection and control over assets for the beneficiaries.

There are, of course, tax implications when creating trusts, but they can also be used to mitigate liabilities.

n Inheritance Tax (IHT) – as the creation of a trust can reduce your wealth, IHT has to be considered not only at that time of creation but also when assets leave the trust and periodically during the lifetime of the trust

n Income Tax (IT) – is payable in respect

of income of the trust, within a Discretionary Trust at a higher Trust Rate, but beneficiaries can often claim a refund of the tax paid on any distribution they receive from the trust

n Capital Gains Tax (CGT) – has to be considered on transfers into and out of a trust and on the sale of chargeable assets within the trust

Trusts can be used to protect assets until younger people are older and wiser for a surviving spouse, to help with care in old age, in case of divorce and not least to reduce future Inheritance Tax liabilities

Trusts by their very nature are complex, and it is essential that professional advice is sought, not least because trusts are usually evidenced by a legal document. That said, this should not deter you from considering creating a trust to protect your wealth and possibly to mitigate your tax liabilities. You can read more about IHT in our article on page 14. n

Graham Poles, Tax Partner

THE WORDS ‘TRUST’ OR ‘SETTLEMENT’ CAN SEND SHIVERS DOWN THE SPINES OF MANY PROFESSIONALS, AND IT IS THEREFORE UNDERSTANDABLE THAT THE LAYMAN VIEWS THEM WITH HORROR. BUT TRUSTS HAVE BEEN USED FOR CENTURIES TO PROTECT WEALTH, AND NOT EXCLUSIVELY BY THE RICH.

INSIGHT 11

PROTECTION

A potential threat to a successful business?

KEY PERSON PROTECTION

Success in a business can be measured in many ways and will often be dependent on who runs the business,

but it can perhaps present itself in one or more of the following ways:

n Creating something that isn’t currently offered on the market

n Increased profitabilityn Customer satisfactionn Growing the size and reach of the businessn Providing employment to more staffn Longevity

Within the Armstrong Watson group, we work closely with owners of many types of business in order to help them develop and become more successful, whatever their definition of success may be.

Whilst striving to achieve these ambitions, it is important to acknowledge that threats exist which could prevent these objectives being realised, and one which is often overlooked is serious illness, or worse still, death of a key person within the business.

The definition of a Key Person varies, but typically could be:

n A director or partnern A top sales personn A highly regarded employee with

significant contacts within an industryn The creative mind behind the business

Most business owners are working in their business rather than on it, but how many ask themselves what would happen if somebody playing a key role were to die? Would your clients and customers look elsewhere? Would confidence in your company be impacted? Would your sales fall? And what about your profits?

Any of these scenarios could result in a significant impact, and the remaining staff in your firm may be required to take on more work in order to compensate for the loss of such a key individual.

Protecting your business against such an event makes sound financial sense, but according to data from Legal & General in their annual guide to business protection, many businesses aren’t protected at all, and:

n 40% of businesses would cease trading within 12 months if a business lost a key person

n 63% of sole traders would cease to trade immediately, and;

n 46% of new businesses would cease to trade immediately

Taking out Key Person Protection is an effective solution, whereby an insurance policy is taken out by the business on the life of the key individual, and this pays out a lump sum in the event that the key person insured dies during the term of the policy. The lump sum payment (the sum assured) can be used to compensate the business and insure against the impact on sales and/or profit. It could also be used to the costs incurred in replacing the person concerned, such as recruitment.

Plans can be tailored to meet the needs of each business in order to create a bespoke solution. n

If you are concerned about the impact a Key Person’s death may have on your business, please contact one of our Financial Planning Consultants at any of our offices across Cumbria, Northumberland, Yorkshire and Scotland.

12 INSIGHT

RETIREMENT

Have you accumulated multiple plans that need reviewing?

MAKING THE MOST OF YOUR PENSIONS

Consolidating your pensions means bringing them together into a new plan, so you can manage your

retirement savings in one place. It can be a complex decision to work out whether you would be better or worse off combining your pensions, but making the most of your pensions now could have a significant impact on your retirement.

RETIREMENT SAVINGS IN ONE PLACEWhenever you decide to do it, when you retire it could be easier having a single view of all of your retirement savings in one place. However, not all pension types can or should be transferred. It’s important that you obtain professional advice to compare the features and benefits of the plan(s) you are thinking of transferring.

Some alternative pension options may offer the potential for a better investment return than existing pensions – giving the opportunity to boost savings in retirement without saving any more. In addition, some people might benefit from moving their money to a pension that offers funds with less risk – which may not have been available before. This could be particularly important

as someone moves towards retirement, when they might not want to take as much risk with their money they’ve saved throughout their working life.

KEEPING TRACK OF THE CHARGES If you have several different pensions, it can be difficult to keep track of the charges you’re paying to existing pension providers. By combining pensions into a new plan, lower charges could be available – providing the opportunity to boost retirement savings further. However, it’s important to fully understand the charges on existing plans before considering consolidating pensions.

Combining pensions into one pot also reduces paperwork and makes it easier to estimate the income you can expect to receive in retirement. However, before you make the decision to consolidate pensions, it’s essential to make sure there is no loss of benefits attributable to an existing pension.

REVIEW YOUR PENSION SITUATION REGULARLYIt’s essential that you review your pension situation regularly. If appropriate to your particular situation and only after receiving

professional financial advice, pension consolidation could enable existing policies to be brought together in one place, ensuring they are managed correctly in line with your wider objectives.

Gone are the days of a job for life. So many of us may have several pensions accumulated over the years – some of which we may have left with former employers and forgotten about! Your pension can and should work for you to provide a better quality of life when you retire. Looked after correctly, it can enable you to do more in retirement, or even start your retirement early. n

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY

FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF

PENSION BENEFITS AVAILABLE.

THERE IS NO GURANTEE EQUAL OF HIGHER INCOME/RETURNS WILL BE

ACHIEVED WHEN COMPARED TO YOUR EXISTING ARRANGEMENT.

BY THE TIME WE HAVE BEEN WORKING FOR A DECADE OR TWO, IT IS NOT UNCOMMON TO HAVE ACCUMULATED MULTIPLE PENSION PLANS. THERE’S NO WRONG TIME TO START THINKING ABOUT PENSION CONSOLIDATION, BUT YOU MIGHT FIND YOURSELF THINKING ABOUT IT IF YOU’RE STARTING A NEW JOB OR NEARING RETIREMENT.

PLANNING FOR LIFE AFTER WORKPlanning for retirement can leave many of us adrift. Getting to a position where you are able to make the most of life today, as well as life after work, requires a clear, realistic plan and expert execution. To find out more about how we can help you achieve the retirement you deserve, please contact us – we look forward to hearing from you.

CLIENT VIDEO TESTIMONIALS

INSIGHT 13

LIFESTYLE FEATURE

You can watch the full interview with Barry Maxey here https://www.armstrongwatsonfp.co.uk/barry-maxey-carlisle. If you’d like to get in touch or find out more about our financial planning and wealth management service, you can visit our website: www.armstrongwatsonfp.co.uk or send us an email: help@awfinancialplanning.co.uk

Demonstrating our value to individuals and businesses

The challenge, then, is: how do we demonstrate the value that we add? We didn’t feel that our words would be enough,

and so over the last few months we have been undertaking a project with some of our clients, and we are grateful that they’ve agreed to be involved.

In Issue 8, we featured Ben Peters, Managing Director based in Harrogate and we will continue to share other stories with you in this quarterly magazine. You can revisit Ben’s interview here:http://www.armstrongwatsonfp.co.uk/ben-peters-harrogate

AN INTERVIEW WITH… BARRY MAXEY, DIRECTOR AND LOCAL FUNDRAISER, CARLISLEBarry is a local business man and fundraiser for a local charity in Carlisle.

BACKGROUNDBarry had been using a separate accountancy firm and separate financial advisory firm before seeking advice from Armstrong Watson in Carlisle.

He found the ability to use just the one firm and obtain advice on all his corporate interests, personal finances and accountancy services under the one roof was beneficial to him. He was introduced to Steve Shovlin, Armstrong Watson Financial Planning Consultant from Andrew Kennon in Armstrong Watson’s Carlisle office.

WHY DID YOU CHOOSE ARMSTRONG WATSON FINANCIAL PLANNING & WEALTH MANAGEMENT? It was a big relief to me when I could come into one meeting and have all the experts in one room, and it was the best use of my time.

One of the key reasons for choosing Armstrong Watson was the confidence knowing that they were going to be proactive and we were going to have regular meetings and discussions about my portfolio.

The strength and depth within the financial planning team also means that someone is available to support me if Steve is not available.

WHAT THREE WORDS WOULD YOU USE TO DESCRIBE YOUR FINANCIAL PLANNING CONSULTANT?Knowledgeable, professional and reliable.

HOW HAS THE ADVICE HELPED YOU?Steve looked at my current arrangements and came back with a number of recommendations to streamline my arrangements. He put an attractive plan in place to meet my objectives for my long-term future.

For me, it isn’t all about cost. It’s the value which Armstrong Watson Financial Planning team put into the plans to enable me to achieve my financial goals for the long term.

The advice I have received is exceptional, and they were a very good fit for me. n

David Squire – Financial Planning Director

WE HAVE BEEN PROVIDING INDEPENDENT FINANCIAL PLANNING ADVICE TO CLIENTS ACROSS THE NORTH OF ENGLAND AND SCOTLAND FOR MANY YEARS, AND OUR AIM IS TO ALWAYS ENSURE THAT WE PROVIDE REAL VALUE TO THE INDIVIDUALS AND BUSINESSES WE WORK WITH. IN TRUTH, VALUE IS VERY PERSONAL AND DIFFICULT TO DEFINE. ADVICE ITSELF IS SOMEWHAT INTANGIBLE – IT’S NOT SOMETHING YOU CAN TOUCH OR SEE, AND YET WHAT YOU RECEIVE AND, MORE IMPORTANTLY, HOW YOU BENEFIT FROM THE ADVICE CAN BE VERY POWERFUL AND AT TIMES LIFE-CHANGING.

14 INSIGHT

INHERITANCE TAX

Many individuals find the Inheritance Tax rules too complicated

PROTECTING YOUR ESTATE FOR FUTURE GENERATIONS

RELUCTANT TO SEEK PROFESSIONAL ADVICE Findings from a recent survey[1] revealed that over three quarters (77%) think the UK’s Inheritance tax rules are too complicated. Yet despite this, only a third (33%) have sought professional advice on Inheritance Tax planning.

We understand that ensuring your Inheritance Tax planning is tax-efficient is a sensitive subject, and as a result planning opportunities can be missed. Early preparation is the key to success. Taking advantage of alternative methods to secure wealth and to shelter your estate will ensure that more wealth can be passed onto the next generation.

EXEMPT FROM INHERITANCE TAX Every individual in the UK, regardless of marital status, is entitled to leave an estate worth up to £325,000. This is known as the ‘nil-rate band’. Anything above that amount is taxed at a rate of 40%. If you are married or in a registered civil partnership, then you can leave your entire estate to your spouse or partner. The

estate will be exempt from Inheritance Tax and will not use up the nil-rate band.

Instead, the unused nil-rate band is transferred to your spouse or registered civil partner on their death. This means that should you and your spouse pass away, the value of your combined estate has to be valued at more than £650,000 before the estate would face an Inheritance Tax liability.

Here’s our snapshot of the main Inheritance Tax areas you may wish to consider and discuss further with us.

STEPS TO MITIGATE AGAINST INHERITANCE TAX

MAKE A WILLDying intestate (without a Will) means that you may not be making the most of the Inheritance Tax exemption which exists if you wish your estate to pass to your spouse or registered civil partner. For example, if you don’t make a Will, then relatives other than your spouse or registered civil partner may be entitled to a share of your estate, and this might trigger an Inheritance Tax liability.

RESIDENCE NIL-RATE BAND (RNRB)If you’re worried that rising house prices might have pushed the value of your estate into exceeding the nil-rate band, then the new ‘residence nil-rate band’ could be significant. Introduced in 2017, it can be claimed on top of the existing nil-rate band. It is £125,000 (2018/19) and will increase annually by £25,000 every April until 2020, when the £175,000 maximum is reached.

The RNRB is only available where a property that is (or was) used as the deceased’s main residence is passed to a direct descendant. From 6 April 2021, the RNRB will then increase each tax year in line with CPI. The RNRB is also transferable between married couples and civil partners to the extent that it is not used on first death. The RNRB is tapered by £1 for every £2 when a total estate is worth over £2 million.

MAKE LIFETIME GIFTSGifts made more than seven years before the donor dies, to an individual or to a bare trust (see types of trust), are free of IHT. So it might be wise to pass on some of your wealth while you are still alive. This will reduce the value of your estate when it is assessed for IHT purposes, and there is no limit on the sums you can pass on. You can gift as much as you wish – this is known as a ‘Potentially Exempt Transfer’ (PET).

IF YOU STRUGGLE TO NAVIGATE THE UK’S INHERITANCE TAX REGIME, YOU ARE NOT ALONE. WHETHER YOU ARE SETTING UP YOUR ESTATE PLANNING OR SORTING OUT THE ESTATE OF A DEPARTED FAMILY MEMBER, THE SYSTEM CAN BE HARD TO FOLLOW. GETTING YOUR PLANNING WRONG COULD ALSO MEAN YOUR FAMILY IS FACED WITH AN UNEXPECTEDLY HIGH INHERITANCE TAX BILL.

INHERITANCE TAX

INSIGHT 15

If you live for seven years after making such a gift, then it will be exempt from Inheritance Tax. However, should you be unfortunate enough to die within seven years, then it will still be counted as part of your estate if it is above the annual gift allowance. You need to be particularly careful if you are giving away your home to your children with conditions attached to it, or if you give it away but continue to benefit from it. This is known as a ‘Gift with Reservation of Benefit’.

LEAVE A PROPORTION TO CHARITYBeing generous to your favourite charity can reduce your Inheritance Tax bill. If you leave at least 10% of your estate to a charity or number of charities, then your Inheritance Tax liability on the taxable portion of the estate is reduced to 36% rather than 40%.

SET UP A TRUSTFamily trusts can be useful as a way of reducing Inheritance Tax, making provision for your children and spouse, and potentially protecting family businesses. Trusts enable the donor to control who benefits (the beneficiaries) and under what circumstances, sometimes long after the donor’s death. Compare this with making a direct gift (for example, to a child) which offers no control to the donor once given. When you set up a trust, it is a legal arrangement, and you will need to appoint ‘trustees’ who are responsible for holding and managing the assets. Trustees have a responsibility to manage the trust on behalf of and in the best interest of the beneficiaries, in accordance with the trust

terms. The terms will be set out in a legal document called ‘the trust deed’.

TYPES OF TRUST YOU MIGHT CONSIDER

BARE (ABSOLUTE) TRUSTSThe beneficiaries are entitled to a specific share of the trust, which can’t be changed once the trust has been established. The settlor (person who puts the assets in trust) decides on the beneficiaries and shares at outset. This is a simple and straightforward trust – the trustees invest the trust fund for the beneficiaries but don’t have the power to change the beneficiaries’ interests decided on by the settlor at outset. This trust offers potential Income Tax and Capital Gains Tax benefits, particularly for minor beneficiaries. However, it should be borne in mind that if a parent creates a bare trust for their minor unmarried child – and the gross income is more than £100 a year – under the ‘parental settlement’ rules, all the income will be taxed on the parent.

LIFE INTEREST TRUSTSTypically, one beneficiary will be entitled to the income from the trust fund whilst alive, with capital going to another (or other beneficiaries) on that beneficiary’s death. This is often used in Will planning to provide security for a surviving spouse, with the capital preserved for children. It can also be used to pass income from an asset on to a beneficiary without losing control of the capital. This can be particularly attractive in second marriage situations when the children are from an earlier marriage.

DISCRETIONARY (FLEXIBLE) TRUSTS The settlor decides who can potentially benefit from the trust, but the trustees are then able to use their discretion to determine who, when and in what amounts beneficiaries do actually benefit. This provides maximum flexibility compared to the other trust types, and for this reason is often referred to as a ‘Flexible Trust’. In Graham Poles’ article on page 10, he looks at demystifying trusts. n

Source data:[1] Canada Life’s annual Inheritance Tax monitor

survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual

Inheritance Tax threshold (nil-rate band) of £325,000. Carried out in October 2017.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION

LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM,

TAXATION ARE SUBJECT TO CHANGE.

TIME TO EVALUATE WHETHER OR NOT INHERITANCE TAX COULD BECOME PAYABLE?When someone dies, Inheritance Tax needs to be considered. Without the right professional advice and careful financial planning, HM Revenue & Customs can become the single largest beneficiary of your estate following your death. To evaluate whether or not Inheritance Tax could become payable, all of your assets you hold at the date of death need to be valued, and reliefs and exemptions determined. Don’t leave it to chance – contact us for a review of your situation.

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