Written by Heledd Wyn, private client partner, at law firm Shakespeare Martineau
With reports suggesting that the Government is investigating whether it can boost the economy by channeling investments from pension funds into ‘homegrown’ investments, some are arguing that this risks treating hard-earned retirement pots like a ‘piggy bank’.
With continuing economic uncertainty and no sign of a clear end, many independent financial advisors may be finding more people than ever before are asking how to estate plan using tools other than pensions– but what are the best ways to do this?
Those individuals who might be worried about how their hard-earned savings might be used in future by the Government may be looking to other forms of investment and protection, a common option of which is a lifetime trust. Although many financial advisors will be familiar with lifetime trusts, they may not be aware that only a solicitor can draw one up for it to be legal. With these trusts commonly mistaken as being reserved for high-wealth individuals, many might not be aware of them as a viable option. With the only potential barrier to accessing a trust being that of legal fees, it is important that financial advisors discuss all the different planning options available with their clients, as it may uncover alternative routes that have not yet been considered.
Although lifetime trusts can be used for estate planning purposes, they can also be used as a method of protecting assets due to unforeseen personal circumstances as, unlike pensions, assets put in trust are also protected against third party claims such as bankruptcy or divorce.
Lifetime trusts provide a level of control without being rigid or restrictive, as the client can make stipulations or conditions that need to be met in order for the trusts to be passed on. For example, when planning to pass the trust to a future generation, controls can be put in place to ensure that they are only able to access the money once they reach a certain age. These trusts provide additional flexibility as the settlor, in other words the person setting up the trust, can access them at any time, meaning if circumstances change, there is the option of re-evaluating the division of assets and even removing individuals from the trust if necessary.
Another consideration when securing finances and assets for the future is to make sure that clients create a Lasting Power of Attorney (LPA) appointing an attorney who would become the decision maker should the client become incapacitated. Whilst it’s not particularly common, financial advisors should proactively develop a relationship with the appointee and facilitate conversations about the future. This way both the financial advisor and attorney are aware of the client’s wishes, smoothing the decision making process for all parties when the time comes.
Estate planning can often involve a few different parties, including lawyers or accountants, each with their own specialist areas of advice and contribution. Bringing these parties together and encouraging collaboration from the start of planning will provide both the experts and the client the right amount of time to work out a tailored plan, resulting in the best outcome. Whilst there will be many perspectives on the table, collaborating in this way will ultimately be more time-efficient for everyone involved, as well as providing cost-efficiencies for the client.
In times of economic and political instability, it’s only natural that individuals will seek to put in measures that will protect their futures and that of their families. With this feeling of unease further exacerbated by the Government weighing up the risk to accessing public pensions, financial advisors will need to prepare for an influx of queries around alternatives to ensure their clients are safeguarded as much as possible.
