Our ...May 2017 Newsletter
The general election is only 2 weeks away and if, as predicted, Theresa May wins with a clear majority, a post-election budget is likely as many of the previous proposals were put on hold following the Brexit vote. We will cover any implications and changes in future newsletters.
If you are a grandparent you may be interested in our article this month on ways to help fund school and university fees for your grandchildren. Our other articles include why everyone should have a Lasting Power of Attorney, a reminder about having sufficient mortgage payment protection in place and a note about our JJFS Sporting Stars.
We hope you enjoy the articles and find them useful.
In this issue:-
- 5 ways to help fund your Grandchildren’s education
- Lasting Power of Attorney – it’s not just for the elderly
- Could you still pay your mortgage if you were unable to work?
- Who are the Jackson Jeffrey Joggers?
5 Ways to help fund your Grandchildren’s education
The rising costs of private and university education can be a huge strain on the budget and research indicates that 19% of parents will be relying on financial help from grandparents to help fund the cost of their children’s education. If you are a grandparent with sufficient means to assist – whilst still ensuring you have enough to sustain you through retirement and pay for any long term care you may need – then here are some tax efficient ways in which you can help.
Make an outright gift in cash
Cash gifts are liable for IHT if they are made within 7 years of your death, which at current levels is 40% if within 3 years, or a sliding scale of ‘taper relief’ if gifted between 3- 5 years of your death. However gifts of up to £3,000 in any tax year are exempt, even if made within the 7 years.
Make a regular payment out of income
The “Regular Gifts out of Income” exemption means that financial gifts are free of IHT – even if you don’t live for 7 years afterwards – so long as you make a commitment to pay fees on a regular basis. If the child has not yet reached school or university age you can make regular payments to a savings or investment plan for them instead but the key is ‘regular payments’ and ensuring you document this properly by setting out your intentions in writing.
Contribute to a Junior ISA
As a grandparent you won’t be able to set up a Junior ISA for your grandchild but you can make contributions. Junior ISAs are available to any child under 18 and the current annual allowance is £4,128. As with an adult ISA, it is free of income tax and can be invested in cash or stocks and shares.
Use the child’s tax allowance
Parents may be liable for tax if their child’s savings or investments generate more than £100 in a tax year but this doesn’t apply to grandparents. So if there are several years before your child reaches school or university age, you could invest a sum in your own name but earmarked for the child and once the child reaches 18 simply transfer the assets into their name. Any investment growth that is subject to capital gains tax can be offset by the child’s tax allowances.
Don’t pay off their debt
Graduates leaving university with student loan debts of £50,000 or more are a daunting reality and it can be tempting to offer to pay off some or all of this debt. However graduates only have to pay off their loan once they earn at least £21,000 a year at which point they’ll pay interest and/or repay capital at 9% of their income above £21,000. The loan is written off after 30 years so if your grandchild ends up working in a lower paid job or takes time off to raise a family the debt may never be fully paid off. It may be better to contribute towards the cost of accommodation or pay down your grandchild’s credit card or overdraft instead.
If you have any queries or would like further information on the above, please get in touch with your usual JJFS contact or email: email@example.com
Lasting Power of Attorney – it’s not just for the elderly
Many people consider a Lasting Power of Attorney (LPA) as something that is needed later in life but the sad reality is that any of us can suffer serious illness or accident without warning, leaving us incapacitated and unable to deal with our own affairs.
An LPA is a legal document in which you appoint members of your family or friends to step in and make decisions for you in the event you are unable to make decisions for yourself. There are two types of LPA, one for financial affairs and one covering health and welfare matters.
Without a financial LPA in place, nobody would be able to access your bank account, pay your bills, deal with your property, pensions or tax matters or take care of your business interests. Instead, the family must apply to the Court of Protection to appoint a ‘deputy’ to manage your affairs but this process is not only very expensive but it can also take several months.
The health and welfare LPA becomes effective once you lose mental capacity and enables your attorneys to make decisions regarding your personal welfare such as where you should live, any day to day care you may need and consent to your medical treatment.
Although it’s not a subject most people want to dwell on, planning ahead and putting a valid LPA in place will ensure that should the unthinkable happen, you can rest assured that your affairs will be properly taken care of by those you trust.
If you would like to discuss setting up an LPA, please contact your usual JJFS contact or email: firstname.lastname@example.org and we will put you in touch with a professional who will be able to assist you.
Could you still pay your mortgage if you were unable to work?
Insurance isn’t the most exciting of topics yet it’s surprising how many people take out various insurances to cover their phones, pets, cars and other possessions but are woefully uninsured against losing the most expensive of all – the family home.
Your monthly mortgage payment is probably your biggest single outgoing so if you were unable to work because you became seriously ill or had an accident, you need to ensure you could you still afford to make those payments.
Mortgage protection insurance or ‘Term Assurance’ is designed to clear the outstanding balance of your mortgage if you die but you can also include Critical Illness Cover which would pay out a lump sum to pay off your outstanding mortgage if you were diagnosed with a serious, life threathening or life changing condition. The cover can be tailored to suit your needs and your monthly affordability with different levels of life insurance and/or critical illness cover available.
A little financial protection can go a long way so it is worth considering mortgage payment protection or indeed reviewing your existing protection to ensure you are still fully covered. Click here to read our short factsheet on protecting your mortgage or if you concerned about the level of your existing cover and would like to set up a policy please contact us on 01789 263257.
Who are the Jackson Jeffrey Joggers?
Clearly a glutton for punishment, Simon Jackson is once again competing in the 2 Castles Run, a competitive 10k race from Warwick Castle to Kenilworth Castle on Sunday 11th June, and has even persuaded fellow colleague, Jane Wakeling, to join him.
Simon is hoping to smash his previous time of 57 minutes and 43 seconds and has been training hard with fitness professional Phil Sims. Jane, who last ran the Two Castles 10K 10 years ago, is hoping to finish in less than 60 minutes, but listening to the banter in the office there is a distinct competitiveness in the air so please stay tuned for the outcome of Jackson vs Wakeling in our next edition.
In the meantime, they are raising funds for The Shakespeare Hospice which is just up the road from our offices and a JustGiving Page has been set up for those who would like to donate to this hugely important local facility.
Please join us in wishing them all the best and do spare them a thought at 9am on 11th June. The Jackson Jeffrey Race Report will appear in our next newsletter.
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