Financial tips/savings for my friend's wife
Discussion
Hi,
My dear friend of 38 years sadly passed away from the big C a few months back (I couldn't even attend service due to the lockdown
). He has passed almost all his assets ( in excess of £1.0 mio excluding pension payments so IHT comes into play if she goes now) to his wife. They have no kids, but his wife has 2 girls from a previous marriage. Apparently, before he passed away, he informed his wife to contact me for any financial assistance (no pressure then!). She already in contact with the various pension providers and some have paid out, and I am helping to verify and explain the various DB / DC pension components. His wife has a basic knowledge of finance, but she does know she has a lot of cash right now! Based on the current financial shared with me, she could effectively retire in my view. However, she wants to return to work later this year, but I did warn her that she will be a HRT payer with the DB pension payments in effect. Given her healthy position, there are a number of obvious financial options open to her:
1- Maximise her £20k annual ISA allowance including JISA/SIPP for her 2 daughters if she wish. (She's going to need a good number of years to shelter her cash into ISA).
2- See if salary sacrifice is possible to avoid been a HRT, and/or use SIPP for remaining annual allowance including prior year c/f allowance. Her current public sector job has a decent pension, so need confirmation on her annual allowance balance. She already accrued 25 years of public pension, so LTA need to be considered too.
3- Outstanding £160k mortgage on her house (yes, they lived separately but only for her daughter schooling purpose). I asked her to consider clearing her mortgage so she can sleep a little better at night. She's keen on this idea as it's a large chunk of her current salary, plus she's never been debt free before.
4- I estimate my friend's house is valued at £500k. She regularly use his house to visit her nearby parents, and I know she hasn't begin the clearing out process for obvious reasons. I won't touch this topic until she raises it as I know there are strong emotional attachment and memories with the house. She state she had a bad experience as a landlord, so she won't be going down this route. She states she will probably sell, but it's non-committal so far, if so, that's £500k to invest if/when she does make her decision.
5- Her current house is valued 360k. She may or may not meet someone new, but I raise the point that she could preserve her property for her daughters with a Life Interest Trust will.
Have I missed out any glaring tax/saving tips?
I know I can help with most financial advice up to a point, but if her mandate increases, I am incline to recommend my financial planner to help her out.
She's pretty cash rich at present, and more so if she sell his house, and she wants to protect her assets for her family and keeping an eye on IHT too. Apart from actually giving the cash to her daughter (she's reluctant at this stage), are there any other trust she should consider e.g. Bare/Investment Trust? If anyone can recommend any trust specialist, please drop me a PM?
Thanks
My dear friend of 38 years sadly passed away from the big C a few months back (I couldn't even attend service due to the lockdown
). He has passed almost all his assets ( in excess of £1.0 mio excluding pension payments so IHT comes into play if she goes now) to his wife. They have no kids, but his wife has 2 girls from a previous marriage. Apparently, before he passed away, he informed his wife to contact me for any financial assistance (no pressure then!). She already in contact with the various pension providers and some have paid out, and I am helping to verify and explain the various DB / DC pension components. His wife has a basic knowledge of finance, but she does know she has a lot of cash right now! Based on the current financial shared with me, she could effectively retire in my view. However, she wants to return to work later this year, but I did warn her that she will be a HRT payer with the DB pension payments in effect. Given her healthy position, there are a number of obvious financial options open to her:1- Maximise her £20k annual ISA allowance including JISA/SIPP for her 2 daughters if she wish. (She's going to need a good number of years to shelter her cash into ISA).
2- See if salary sacrifice is possible to avoid been a HRT, and/or use SIPP for remaining annual allowance including prior year c/f allowance. Her current public sector job has a decent pension, so need confirmation on her annual allowance balance. She already accrued 25 years of public pension, so LTA need to be considered too.
3- Outstanding £160k mortgage on her house (yes, they lived separately but only for her daughter schooling purpose). I asked her to consider clearing her mortgage so she can sleep a little better at night. She's keen on this idea as it's a large chunk of her current salary, plus she's never been debt free before.
4- I estimate my friend's house is valued at £500k. She regularly use his house to visit her nearby parents, and I know she hasn't begin the clearing out process for obvious reasons. I won't touch this topic until she raises it as I know there are strong emotional attachment and memories with the house. She state she had a bad experience as a landlord, so she won't be going down this route. She states she will probably sell, but it's non-committal so far, if so, that's £500k to invest if/when she does make her decision.
5- Her current house is valued 360k. She may or may not meet someone new, but I raise the point that she could preserve her property for her daughters with a Life Interest Trust will.
Have I missed out any glaring tax/saving tips?
I know I can help with most financial advice up to a point, but if her mandate increases, I am incline to recommend my financial planner to help her out.
She's pretty cash rich at present, and more so if she sell his house, and she wants to protect her assets for her family and keeping an eye on IHT too. Apart from actually giving the cash to her daughter (she's reluctant at this stage), are there any other trust she should consider e.g. Bare/Investment Trust? If anyone can recommend any trust specialist, please drop me a PM?
Thanks
I would keep it simple first. Paying off debt, includung mortgage can surely never be a bad thing.
Beyond that I would say she shouldn't rush. Get the big ideas about what she wants to do with the money. She may find various Dave Ramsey videos on YouTube helpful. Lots of calls where he has helped people who have come into money
Beyond that I would say she shouldn't rush. Get the big ideas about what she wants to do with the money. She may find various Dave Ramsey videos on YouTube helpful. Lots of calls where he has helped people who have come into money
Mr Pointy said:
Given the complexity this has to be a case for specialist advice. Maybe speak to JulianPH (see the IM sticky) for a steer first, although he may suggest talking to Nik.
That's where I'd be.Oddly I can think of no end of ways to live off the money and never need to lift a finger again but once you get beyond the basics (ISAs and SIPPs etc.) I expect paying a for financial planning rather than ongoing advice could be money well spent.
covmutley said:
I would keep it simple first. Paying off debt, includung mortgage can surely never be a bad thing.
Beyond that I would say she shouldn't rush. Get the big ideas about what she wants to do with the money. She may find various Dave Ramsey videos on YouTube helpful. Lots of calls where he has helped people who have come into money
She was receptive to repaying the mortgage as she feel it'll lift a big burden off her household expense.Beyond that I would say she shouldn't rush. Get the big ideas about what she wants to do with the money. She may find various Dave Ramsey videos on YouTube helpful. Lots of calls where he has helped people who have come into money
Yep, no rush with any firm plan yet, but I have floated the idea that she should consider her lifestyle i.e. maybe work part-time, enjoy more time on her hobbies and see her family and friends. Based on the financials she shared with me, she's set for life, but I sense she's still unaware of the significance of her wealth except to say "it's a lot of money!"
.Once we complete the fact finding stage (full pension income and lifestyle aspirations), I wouldn't hesitate to recommend my excellent financial planner who specialise in retirement planning , but it's still useful to identify any tax / saving tips upfront now so I can walk through the basic with her (she's a complete newbie with financial planning/investment/tax planning etc..).
Just as a side note, it may be worthwhile doing the maths on paying off the mortgage. It may to more benificial to overpay the maximum amount until the end of the term. Then to pay it off at that point when out of contract. But like I say it all depends on how long the term has to run, and what the early repayment charges are.
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