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The NO Wedding Planner

Recent figures show a significant decrease in the marriage rate. From a peak in 1940 when, spurred on by an impending war, 426,1000 young couples married, in total just 228,204 marriages took place during 2008 in England and Wales.

The falling marriage rate is partly attributable to a rise in the number of people choosing to remain single but is mostly down to the fact that more and more couples are choosing not to marry and this has ramifications for their financial planning.

Let us consider the example of Paul and Sarah. They own a property valued at £600,000. The property is owned 60% by Paul and 40% by Sarah, reflecting their differing initial deposits. They have an outstanding mortgage of £100,000. The mortgage is covered by a life assurance policy which will pay out on the first death. They also have a joint savings account with a balance of £50,000. They have wills which leave assets to each other on the first death.

Sadly Paul suffers a fatal heart attack. His estate is valued as follows:

Property £300,000 (60% share less mortgage)
Life assurance benefit £100,000
Savings Account £25,000
Total £425,000

Assets passing between UK domiciled spouses are exempt from Inheritance Tax but the same exemption is not afforded to cohabiting couples and therefore the value of the estate above the nil rate band (currently £325,000) will attract Inheritance Tax at 40%. This means Sarah will need to settle a tax bill of £40,000 before probate can be granted.

The tax bill could have been easily avoided simply by writing the life assurance policy in trust so that it did not form part of Paul’s taxable estate. This would also mean that the proceeds would be available immediately without the need to wait for probate to be granted which can take many months.

The position could have been considerably worse had Paul and Sarah not written Wills. Under the laws of intestacy, where there are no children, cohabiting partners do not receive anything and Sarah could have found herself co-owning the house with Paul’s parents.

David Anderson is a Chartered Financial Planner with Concept Financial Planning

Concept Financial Planning Website

Property – Good buy? … Stick to the fundamentals

After rising strongly for several years, UK house prices peaked in the latter half of 2007. Property prices in many parts of Britain had grown at an impressive rate, and some had stunning gains. On the other hand, those looking to trade up saw their profits from one house absorbed when they bought their next property.

Since those heady days, the UK housing market has slumped, proving that an investment in property is not a ‘get-rich-quick’ strategy. Indeed, we are unlikely to see the same sensible long-term investment if certain rules are followed and, in particular, expectations about possible profits are realistic.

In a slower market, it is even more important to choose property in a strong location and to manage your budget carefully. Choosing the right mortgage is essential. Many people are offered a high-street loan that appears to be a good deal, but has expensive fees or locks-ins that are part of the small print. An adviser can help to assess your individual circumstances and recommend a mortgage that offers sustained value for the long term. Although you will not want to review your remortgage options when discounts have lapsed, it does not always make sense to move your mortgage, as a move can incur fees and other charges.

Aside from your own house, the buy-to-let market is also worth considering. However, rising defaults amongst buy-to-let borrowers have made it much harder to find a buy-to-let mortgage, and lenders now insist on larger deposits – generally at least 25%. Oversupply in the market has also put downward pressure on rental incomes, making it harder for landlords to keep up with mortgage payments. Meanwhile, falling house prices have meant that some buy-to-let investors have found themselves mired in negative equity.

Most experts – and indeed homeowners – believe that UK property market remains its long-term growth potential, whilst accepting that future returns are likely to be lower than before. Nevertheless, as demand for housing continues to grow and migration into the UK continues to expand, there are compelling reasons why property will remain an attractive long-term investment. The challenge is to make sure your repayments are affordable so that, if interest rates rise or inflation takes hold, you are still able to meet your monthly mortgage payments.

And as most people know … YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE