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The following Case Studies give some useful worked examples to help give a greater understanding of how different products and services can be used. It should of course be noted that each strategy has been tailored specifically for individual client circumstances and requirements and therefore these should not be taken as a recommendation and you should seek advice before making any decisions or action regarding your own finances. Obviously names have been changed to protect client confidentiality.

Long-Term Care

Although there are many ways by which the costs of care can be met the following example gives one route used successfully for one of our clients. Mrs Brown had reached the age of 93 in 2004 and although quite alert was becoming increasingly frail and she felt that it was time she moved into more appropriate residential care accommodation. Mrs Brown was concerned that as she only had a small pension income her savings might not be enough to fund the cost of care and she expressed a preference to advance some money to her relatives so she could see them using the money rather than leaving a bequest to them on her eventual death, added to which Mrs Brown was concerned that her savings could potentially be exhausted by the cost of care and consequently this might mean no funds would ultimately be left to her family.

Our solution involved the purchase of a long-term care immediate payment annuity with the sum of £29,700 to provide a guaranteed income of £8,700 per annum for the remainder of Mrs Brown’s life. This income was sufficient to cover the shortfall between the cost of care and Mrs Brown’s pension and left savings in excess of £70,000. This enabled Mrs Brown to make substantial immediate gifts to her family and still retain funds for herself personally to meet any increases in care costs over and above her pension income as well as ad-hoc expenses she might experience. Mrs Brown is soon to celebrate her 97th birthday and aside from the fact that she has now received payments in excess of the original premium paid, the certainty of the continuing income provided by the annuity enabled her to make gifts to her family and plan for a comfortable standard of living in her chosen care home.

Investment

In 2006 Mr and Mrs White were clients of the Private Banking arm of a major High Street Bank but were somewhat disillusioned by the relatively high level of charges, particularly now the ‘portfolio’ of some £800,000 was now primarily held across a range of internal bank funds, rather than the former allocation that was primarily spread across individual company shares, which Mr White in particular enjoyed following. Mr and Mrs White felt detached from their investments and frequent staff changes, a centralised call centre and an income that fluctuated wildly and did not match their actual requirements compounded their impression of an impersonal and ‘standardised’ service.

We took the time to get to know Mr and Mrs White in some detail and to establish exactly their requirements from frequency and style of investment reporting to an income and expenditure analysis to enable us to match withdrawals from the portfolio to their own needs. We also held a useful discussion regarding their investment experience and investment return aspirations as well as their tolerance to the potential for potential capital fluctuations or loss.

From this in depth understanding we were able to appoint a specialist Discretionary Fund Manager who would administer the day-to-day investment decisions for the portfolio in conjunction with Mr White. This appointment gave Mr White direct contact with the person actually placing investment deals and allowed for more bespoke management and client involvement than the former portfolio of collectives. An emergency reserve was established with a high interest paying cheque account and income from the portfolio was managed via a ‘cash account’ with the Fund Manager to create a smooth regular income of £2,500 per month, sufficient to meet the identified regular expenditure.

Whilst reviewing the portfolio for Tax planning purposes our proposals involved the establishment of a Discretionary Trust that enabled a percentage of the ‘gift’ to be outside of the estate immediately for Inheritance Tax purposes whilst allowing a tax-efficient income to continue to be paid; growth on the gift remained outside of the estate, thus avoiding any further compounding of the Inheritance Tax position in respect of the investments. Our proposals included insuring the balance of the Inheritance Tax liability identified by way of a single premium payment to a whole of life policy where Mr and Mrs White retained access to the surrender value of the policy and thereby not significantly affecting their access to capital, but allowing funds to meet the Inheritance Tax identified to be outside of their respective estates.

The proposed solution included the establishment of Nil Rate Band Will Trusts that, combined with the Lifetime Gift above, reduced the current taxable estate substantially and, allowing for future increases in the Inheritance Tax Nil Rate Band, it was expected that Mr and Mrs White’s beneficiaries would not face an ever increasing Inheritance Tax problem.

This solution gave a known cost to the Inheritance Tax funding, substantially reduced the tax payable by the beneficiaries and also gave sufficient capital to the beneficiaries to meet any such tax arising on the eventual second death of either Mr or Mrs White. A bespoke programme for periodic reporting and reviews was established and our service included all liaison with Mr and Mrs White’s Legal, Accountancy and Fund Management teams to ensure that the most appropriate steps were taken in all areas as successive legislation or changing circumstances dictated. Mr and Mrs White were somewhat surprised and more than a little delighted when they discovered that all of these steps and the improved personal relationship with dedicated specialists acting in each area in fact cost less than the existing charges with the Private Banking service.