Case study: Combining property assets

Nicola Watts CFP™ Chartered FCSI, director of Jane Smith Financial Planning, explains how the firm helped a couple purchase a property and maintain their hobbies and interests during retirement

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The brief

Nicola Watts CFP™ Chartered FCSI

Nicola has been qualified to provide financial advice since 2001 and has been a director of Jane Smith Financial Planning Ltd since 2006. Since the retirement of her mother (Jane Smith), Nicola now bears sole responsibility for the management of the firm, and the advice provided to clients.

As well as holding the CFP licence, Nicola holds the ISO22222 quality standard. Although Nicola’s advanced level qualifications and expertise mainly lie in the areas of pensions, investments and inheritance tax planning, her focus is on financial planning and helping her clients to achieve their goals in life.

Martin and Vanessa (names changed to protect identities) came to us in 2014, having attended a seminar we held. They had been married to each other for several years and had both been married before. They had been living in Vanessa’s property, while Martin rented out his former home. However, with Vanessa planning on retiring, their aim was to move away from the area. They had reached the decision to sell both of their properties, combine assets and finally purchase a property together.

They wanted to take this opportunity to retire and wondered how they would be able to maintain their busy lifestyles, including lots of hobbies and interests, and regular holidays both in the UK and abroad. They were keen to receive advice as to how to proceed.

They were concerned that they simply couldn’t create the income they needed for their lifestyle, while also keen to pay off their existing outstanding mortgages and own their new home together outright.

The plan

At our initial meeting, it became clear that not only did Martin and Vanessa wish to buy a new property together and formulate a retirement strategy, they had other important areas they wanted to address:

  • Inheritance was also a concern for them. They had their respective children and grandchildren’s inheritances to consider and protect. How could they ensure that in the event that one of them should die, that person’s share of assets should be left to that person’s family, while also ensuring each other’s continued financial security?
  • The potential impact of long-term care in the future for Vanessa, who was several years older than Martin, was a further concern they wished to address. They hoped that she would be able to remain in their own home but were worried about the financial impact of this expense.

With Vanessa retiring imminently, Martin hoping to work just part-time until age 60 and a planned house move away from the local area, they needed a detailed plan. They hoped this move and change in lifestyle would give them more time to pursue their hobbies and interests, plus have more time to travel and visit family abroad.

However, as is often the case, they each had slightly different views on spending money. Vanessa was more cautious in nature and wanted to keep money for the future, just in case, but Martin wanted to avoid regrets and live life to the full while they were both fit, healthy and able to do so.

Our first step in the creation of their financial plan was to produce what we call their Life Roadmap Report. The initial part of this process is to help the clients define their priorities – what really is important to them and how do we balance their different ideas? Using cashflow modelling we were able to help Martin and Vanessa visualise the impact of their financial decisions and our planning recommendations.

We produced a Life Roadmap Report to help them define what is important to them and to balance their different ideasOur approach to financial planning gave them confidence that they could afford to purchase the house they wanted, while providing for their current income needs. We were able to balance Martin’s desire that they continue with their current lifestyle with Vanessa’s concerns regarding possible future care needs.

With financial security at the forefront of their minds, our plan consisted of:

  • Selling both of their existing properties, fully repaying both mortgages, and purchasing a new property together in Shrewsbury outright. They were able to complete all the improvements that they planned, making this a home that would meet their needs both now and in the future.
  • Forming a cohesive investment strategy, in line with the clients’ attitude to risk and investment objectives. Although we deal with them jointly, it was agreed that accounts should be held separately. Martin and Vanessa are aware that this may slightly reduce tax efficiency overall, but meets with their objective that they are able to leave inheritances to their respective families. We’re happy that should either of them die, in coordination with other planning, the survivor would maintain enough assets in their own name to remain financially secure.
  • Ensuring their investments, along with their defined benefit pensions (some already in payment and some due to start later), provide them with the income that they need in retirement, plus lump sums as needed, for example, for future car purchases or improvements to the property.
  • Ensuring there are enough funds available from when Vanessa turns 85 to provide care in her own home.
  • Recommending they update their wills following the house move, despite inheritance tax not being an issue for them. Working in collaboration with their solicitor, it was agreed that they should include life interest trusts in relation to their property.
  • Encouraging them to draft Lasting Power of Attorney documents to ensure that people they choose are able to make decisions regarding property and financial affairs, and health and welfare, in the event of incapacity.
What happened next

They purchased their new home outright in the area they love. Living in Shrewsbury, they are now spending their retirement enjoying the theatre, culture and social scene this has to offer. Vanessa volunteers with Dementia Friends, using her skills gained in her career as a counsellor, while Martin has found a part time job that fits around their lifestyle, hobbies and regular holidays. I love hearing the stories of their travels whenever we speak!

We have not only helped them plan their financial affairs, but also their retirement – they’re clear on what they can achieve.

This article was originally published in the February 2020 print edition of The Review.

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Published: 16 Mar 2020
  • Financial Planning
  • long-term care
  • retirement
  • Pension
  • Case study

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