Let’s talk article may 2012

By John Riddett – Blocks Solicitors

One of the difficulties that insurance companies face when trying to encourage those who have just started to work to save for their retirement is how to answer the question – ‘why should I worry about that now – it is an awfully long way ahead. I can’t afford to enjoy my life now, so how can I face up to the financial challenges of my retirement and anyway the world may be quite different then’

From the legal standpoint, there are several key moments in life that have profound consequences. If you are lucky enough to have parents or perhaps grandparents who have made some special financial arrangements for you, you will find that attaining the age of (for example 18) means that you suddenly become entitled to what might in your mind be a substantial amount of money. Many parents worry about the effect that inheriting large sums of money might have on their children. They imagine that this money will not be spent wisely and to a certain extent it will have been wasted. Perhaps they would agree that money like youth is wasted on the young!

Similarly buying your first house, getting married,becoming a parent or gaining promotion at work can also be momentous events. Apart from the emotional reaction, there are legal steps that we should all consider taking at such times.

Retirement is also one of those life changing moments and unless it is handled carefully it can cause worry and stress. It gives us all time to review the plans we have made both financial and personal. Perhaps we should think about moving house. Somewhere smaller, easier to maintain, nearer the services we may well need to call on. Perhaps our concern is making sure that we leave our money and property to our children and how that can be reconciled with the possibility that we will need nursing or residential care. For the really rich and the genuinely poor, these are not issues that will trouble us. The rich will be able to sail through these stormy seas whilst the poor will have to accept the provisions that the state is able to make for them. It is after all one of the signs of a civilised society that there is a system of support for the elderly poor just like there should be a system of support for the legally poor. This used to be the Legal Aid Scheme which the Government seems very keen to completely dismantle.

One of the quotes that we often hear from managers of football clubs is ‘Fail to Prepare means Prepare to Fail’ This is also true of retirement. It is very important that we take steps to prepare for our retirement. This includes financial planning and legal planning.

How can your solicitor help you with this pre-retirement planing? Well, he or she (there are now almost as many female solicitors as male) will be able to advise you about steps you might want to take in three distinct areas.

The first if these is your Will. It is important that you have an up to date Will in place. Although the provisions which apply if you do not ( this is called being intestate) have been improved recently, there will still be cases where the statutory rules are very rigid and impractical. It is a simple matter to contact your solicitor and let him or her prepare a Will that meets your wishes.

The second is a Lasting Power of Attorney. These documents were introduced in 2007 to replace Enduring Powers of Attorney that had been available since 1985. They have been very popular with over 250,000 having been created. They deal with the situation that many of us sadly may have to face of a close relative becoming mentally unwell to such an extent that they are unable to carry out even simple tasks. At home they might need a carer. For dealings with the outside world they will need someone who can make financial decisions in their best interets, involving them so far as possible in the making of those decisions. As more and more of us are living longer than our parents, this problem of the incapable elderly is bound to become more and more common. Here again your solicitor will be able to explain the form and content of the lasting Power of Attorney and arrange for it to be completed and registered.

Taken together a Will and a Lasting Power of Attorney are a powerful combination and will save you and your children a lot of time and trouble. They are to coin a phrase a no-brainer.

The third area is what steps to take if the payment of nursing or residential home fees causes you concern. The general principle is that if you are reasonably well off, with savings of over £23,500 you will be expected to pay those fees yourself. The difficult decision is do I try to ring fence my assets so I can leave them to my children or do I retain those assets so I can have the care that I might need. There is no easy answer to that question and for some of us the wish to support our children has greater weight. For others, the wish to have the best care we can afford is more important. Having said that there are steps you can take but they do need to be taken in time. If you attempt to transfer your assets just before you approach the Local Authority for financial help, there is a real risk that the Local Authority will decide that you are deliberately depriving yourself of those assets to avoid having to pay for your care.

The issues here are complicated and each person’s situation will differ. Your solicitor will be able to discuss your wishes and needs with you and advise you on the choices you have. One of the simplest ways to protect your house from having to be sold to pay for your care is to create a Life Interest trust. This will give you the right to live in the house for as long as you want. When it is sold, you will be entitled to the income which the money from the sale generates. When you die, the money will pass to your children or others as you have decided. There are advantages and disadvantages of schemes like this and you should seek independent legal advice before making a final decision.

Here at Blocks we can offer you a free ‘retirement MOT’ which covers all these points. If you feel that this is something you could benefit from, please give me a call.

My number is 01473 343901.