Case Studies

Case Study 1 - Joyce

Using cash flow modeling techniques to develop financial strategies is a prerequisite for estate planning. It is essential to know your assets and liabilities and your income and expenditure, and the effect of any changes, or lump sums may be required throughout life. It is also essential when calculating the ongoing cost of lifetime care.

A good cashflow model will assist you to take the relevant decisions based on your assumptions. Gifts of assets or out of income will show up in the financial plan, and assist you to decide how you should structure your plan.

Estate Planning is about reducing the potential Inheritance Tax Liability, but, more importantly, it is about planning you do not give away assets you may need to rely on at some stage in the future.

Joyce had retired from teaching three years ago, her husband died last year. Joyce went to see an adviser who recommended she take up an Equity Release Scheme after her husband died to provide funds to meet her desired lifestyle.

Joyce wanted to help her daughter out with education costs for her two grandchildren , Katy ( 9 ) and Jonathon (4 ), estimated to be some £ 10,000 per annum. Joyce wanted to visit her sister in America and to spend more time once a year, with her. She wanted to preserve the estate, whilst remaining in the family home, because of the size, location, close proximity of friends and the memories it held.

Joyce had provided some financial assistance to her daughter and wanted to ensure her son was not left out.

The advice provided was (i) downsize to a smaller house in another location or (ii) take equity out of the family home by way of an Equity Release Mortgage. Otherwise it would mean completely restricting her lifestyle.

We were able to show Joyce how she could achieve her objectives simply and without purchasing a substantial Equity Release Mortgage – whilst making provision for financial assistance toward her grandchildren’s education – and provide some financial assistance for her daughter through the use of Trusts and rearranging her affairs – without the unnecessary expense and high cost of Equity Release. Furthermore by cashflow modeling we were able to demonstrate how the income and expenditure would be affected using various “what if”, scenarios.