Monday, 13 February 2012

Loss of Child Benefits hides a more frightening truth.

The latest government spat over the reduction of child benefits for high earning families has created a massive amount of heat in the press, but whilst the argument highlights the need that many people have for that income, it masks the real story which is the worrying lack of planning that most families have in place for their finances.

Most people take good health for granted. But how would your family manage financially if you lost your income through accident or illness unexpectedly? A government source recently revealed that the average person in the UK has savings of only around £400 (BBC radio 4 12/1/2012). It's a sad fact of life that accidents, illness and death can happen to anyone, at any age. If the unexpected occurs, the last thing your family wants to worry about is money.

On average a family needs £455 each week to cover its costs meaning that most people would be in trouble very quickly if the worst happened yet very few ever address this possibility (source NFU mutual).

You can give yourself and your family financial peace of mind, with a range of protection plans but the choice can be bewildering and the cost can vary massively. The best way to cut through all the options is to seek a review with an Independent Financial Advisor who will help you get the right amount of cover for your needs, review your circumstances on a regular basis, and ensure that you and your family are protected if the worst happens. Call us today to book you review.

Cross Options & Shareholder Agreements Every Business should have them.

But most don’t ……

When you set up a business, there are a million and one things to do and inevitably some things get pushed to the back burner. Shareholders and Cross Option agreements are prime examples of the things we all should have, but never get round to.

I was sitting with an accountant the other day and asked one of my favourite questions – ‘What happens to the business if something happens to you?’ He turned and tapped the desk of his office manager and said ‘He gets it’ my second question threw him off balance ‘How will that happen because your shares will go to your wife?’

Cross Options

It may not be a comfortable thought, but at some point a business may be confronted by the critical illness or death of one of its founders. A cross option agreement gives surviving shareholders the right (but not the obligation) to require the deceased shareholder’s personal representatives to sell the shares to them. It also gives the personal representatives the right (but not the obligation) to require the surviving shareholders to buy the deceased shareholder’s shares. By combining these options in a single agreement each side has the option of ‘forcing’ a sale of the shares. Cross option agreements should also oblige each party to insure their lives under a life insurance policy for a value which reflects the value of their shares. The proceeds of the policy should be held on a trust for the other shareholders who will be the beneficiaries. These proceeds provide the remaining shareholders with the cash to buy the shares of the deceased shareholder.
The structure of the cross option is vitally important for taxation planning purposes.  Important tax reliefs for both inheritance tax and capital gains tax can be lost if the documentation is not properly structured.

Shareholders Agreements

These often get missed but are critical to the running of a business if a dispute ever arises A shareholder's agreement is a contract between the shareholders of a company in which they agree how the company will be run. They all agree that they will use their voting power in the company to ensure that the terms of the agreement are complied with for as long as they are all shareholders. A shareholders' agreement should always be considered when there are between two and twenty shareholders in a company.

Shareholder agreements vary widely, but the typical agreement is designed to protect all the parties against a majority using their voting power to the detriment of the others. Without such an agreement, a company is under the control of those who hold a majority of the votes at a directors' or shareholders' meeting. Majority decisions are all very well for day to day matters, but where something goes to the heart of running the company, most shareholders want to have their say or be able to block a major change. A shareholders' agreement will specify decisions which require unanimity.

If you need any advice on your cross option and shareholder agreements call us on 01778 341490.

The Real Value of Advice.

It sometimes amazes me when I talk to businessmen about their ‘planning’ just how polarised the views are. Broadly speaking they fall into four camps –

I don’t need advice I just need to get on with the day job – These are the people who are doing the same thing again and again, often making mistakes that they don’t learn from. These guys aren’t necessarily unsuccessful but the long term planning they need for sustained success is usually missing from their armoury.

Advice? Just an unnecessary expense – A bit of an old school attitude these days but these guys will have an accountant, bank manager, financial advisor, solicitor, and web designer, doing what they are told for a fee, never offering input or opinions just standing on the sidelines looking in.

I’m too small for anyone to be bothered with me – This is probably the attitude I see most often, people with successful businesses but who lack the confidence to ask for help and guidance. This is often because they are scared to ask a silly question or because they feel their business lacks clout. These are the people who could benefit most from trusting in good quality advice.

Advice – Yes please – I can’t know everything – Always a refreshing attitude, these businesses embrace the need for outside expertise and view their advisors as part of the team. This view is becoming more prevalent among businessmen who are battling their way through difficult times.

Hopefully you will recognise yourself in one of the camps, but whichever you fall into you should bear the following in mind.

Good advice should be an investment, it should make or save you more than it costs, if you can’t measure it then think twice.

Surround yourself with a circle of people you trust and get them to talk to each other. If you are unhappy with the thought of your bank manager talking to your financial advisor or your accountant to your lawyer then you have the wrong people working with you. Advice works best when everyone is pulling in the same direction.

If you take your time and choose wisely you and your advisors will successfully chart your way through these interesting times.   

Who Should Write a Will

Who should make a Will?

Wills and Lasting Powers of Attorney are the cornerstones of Estate Planning so the short answer to the question is everyone. However there are certain people who have a greater need than others and if you fall into one of the following categories and don’t have a Will you should take action now.

Single Parents – Single parents are amongst the least likely to have a will in place, but arguably they are the people who need one most. The reason is simple, if you die who will look after your children? This is not something that can be left to chance and a Will is the document that allows you to appoint the guardians that you want for your children. Whilst appointing the children’s guardians you will also make other important decisions like who will look after their money, what age they will receive their inheritance and what can be released to them and their guardians to fund their lifestyle. These are all questions with consequences and it is best to talk them through with a specialist professional advisor before making any decisions.

Cohabiting Couples – Think your other half will get what’s yours if you die? Think again, whilst there is talk about changing the law around co-habitation, as we go to press co-habiting partners have no rights of inheritance unless there is a valid will which leaves what’s yours to your partner. When making your Will you might want to consider guaranteeing provision for you children (especially if they don’t all share the same parents) through the use of trusts or specific gifts. If you don’t take action your partner could end up in the courts trying to get back what could have been theirs if valid wills were in place. 

Second Marriage/ Relationship – A second marriage or relationship can be complicated, especially if someone else’s kids are involved. A carefully constructed will can make sure that everyone involved is provided for in a fair and equitable way. This is essential if you want to avoid a great deal of bad feeling and heartache after you have gone.

Over 55’s – As we get older a properly executed will becomes more and more powerful, depending on your circumstances your Will can help you save on inheritance tax, help to minimise your exposure to care fees, and together with Lasting Powers of Attorney ensure that control of your assets and choice over your lifestyle stay within the family.

Business Owners – Your Will can ensure the continuity of your business and is potentially the most important tax planning vehicle for your family at your death. My favourite question is ‘Who would run your business if you were not around?’ without a valid Will there is often no answer to the question, with a Will your business can continue to thrive long after you have departed.

The Will and Probate Services Difference – Will and Probate Services are not solicitors and as such are not traditional 9 to 5 office workers. We are run by a Fellow of the Institute of Paralegals who has specialises in Will Writing and Estate Planning. By having a narrow focus we can offer a huge range of services from simple advice to full probate and estate administration, but the three things that our clients like most about us are – Home Visits, Weekday Evening Visits and our Competitive Pricing.

Call us today 01778 341490 for a free initial conversation about your needs.