Estate Planning Guide

Advice overlap There are numerous areas where there is ’crossover’ of the work of solicitors, accountants and financial advisers for their clients. The following explores some of these: 96 PROFESSIONAL CONNECTIONS Cross Option Agreements Formal legal arrangements concerning the sale of shares in a company, either as succession planning or simply when an owner wants to sell will involve an agreement. But in order to protect any potential BR available on the shares, a financial adviser’s input is prudent because, if the agreement is binding, the death of the shareholder will oblige the buyer to acquire the shares. As a result, at the date of death, the deceased is deemed to have the cash proceeds in their estate rather than the shares, and cash is fully subject to IHT. BR isn’t available. Had the agreement given an option, rather than an obligation to buy the shares, BR would have been available. Long term care In September 2017, the FCA stated, “there is poor consumer awareness about the need to save for long term care. Without access to clear care-related information, including regulated financial advice, poor decision making and failure to plan ahead for long term care may translate into poor consumer outcomes and risk of harm.” As the population ages, this issue is becoming more important and more costly for both individuals and government. This means that there is a push for good regulated advice, not only to improve consumer outcomes but also to mitigate the financial impact of poor planning. But, in spite of the statutory requirement for Local Authorities in England to guide self-funders to regulated financial advice, the Competition and Markets Authority has found that, “the provision of information can be variable. Public perceptions are that the availability of personalised advice and support is often limited.” The inference is that discussions about and referrals to financial advisers in relation to provisions for potential long- term care requirements are too infrequent. This suggests an advice gap that might well become obvious when solicitors and accountants are transacting with their clients. Lasting Power of Attorney Another consideration connected to strong demographic drivers, is LPAs. Although there is no requirement to use a solicitor to set one up, they are, of course, well-placed to give advice on the process, the chosen attorneys and general benefits and effects of an LPA. Around 650,000 applications for LPAs were made last year and research shows that just 12% of over-55s have set up a lasting power of attorney, despite 43% being extremely concerned about the financial impact of suffering dementia in later life. Yet, this is the way to avoid a potentially costly and time-consuming court process in the event of loss of mental capacity. And those who are using pension freedoms or have a drawdown equity release scheme risk having their money frozen if they do not have LPAs until the Court of Protection appoints attorneys. For equity release this means that access to any drawdown facility will be suspended while waiting on the court. 4.2 SOLICITORS ACCOUNTANTS FINANCIAL ADVISERS LEGEND: 97 PROFESSIONAL CONNECTIONS Accountants & Financial Advisers Solicitors & Financial Advisers Accountants, Solicitors & Financial Advisers Pensions Trusts General estate planning needs Income tax and CGT mitigation Personal injury Wills Business exits & replacement assets recommendations Redundancy Expats Reducing surviving spouse estate value Bereaved widow Reducing surviving spouse estate value Professional Deputies or Attorneys OTHER AREAS OF CROSSOVER Divorce The Solicitors Journal has referred to “a growing need for specialist financial advisers in what is a relatively untapped £500m divorce and separation market, according to those already working in the field.” In fact, a June 2017 report stated that there were, “only 42 financial adviser specialists accredited in family law, which is just one for every 5,000 people that divorce each year.” As a result, those solicitors and accountants who identify financial advisers and planners specialising in this area and form working relationships with them may put themselves in an advantageous position when consumers are looking for services in this area. Financial Planning An accountancy firm with a Designated Body Licence* (DBL) can evaluate a financial plan put together by an IFA. The DBL allows a Chartered Accountancy practice to undertake investment business activities, and for that practice to work collaboratively with a financial adviser. This allows the accountants to undertake some FCA regulated activities, but still leaves specific FCA regulated activities for the IFA to carry out. For pensions accumulation, for example, the accountant can also implement investment planning with an appropriately authorised financial advisory firm, but it cannot recommend a specific personal pension contract, which is part of the remit of an authorised IFA. Estate Planning Even without a DBL, an accountant can have a general conversation with a client about different types of investments that provide IHT mitigation, but not discussions on the merits of a specific investment. But only an IFA can discuss the relative merits of the purchase of whole of life insurance or insurance bonds with clients or recommend that they purchase them. *Designated Body Licence: A Designated Body (DBL) licence allows an accountancy practice to explain and evaluate the advice a client has received from a financial adviser – including warning against bad advice and endorsing good. It will also allow the practice to arrange to implement a financial adviser’s advice and take part in an integrated financial planning solution for its clients. Working alongside a financial adviser like this can achieve the goal of providing a holistic service for their clients, without going through the full FCA authorisation process and dealing with an additional regulator.