Case Study #3: Mary. Retired & Divorced.
Age: 67. Profession: Retired & Volunteer. Primary Goal: Lifetime gifting whilst not outliving her capital.
Mary was a divorcee, the granddaughter of a wealthy stockbroker. She had two daughters, both married with children. Her late grandfather's firm managed her significant assets.
She held significantly more wealth than her friends, but she wanted to live the same lifestyle. Mary is a woman about town, living comfortably, alone, owning her own home, and volunteering for a local charity.
The Challenge
Mary wanted to make sure she didn't outlive her capital, but she also wanted to leave a legacy for her kids and grandkids. She also wanted to make substantial gifts to charity.
She'd been working with an IFA for the previous ten months, who had suggested a trust where she takes income, and the money passes to her kids on death. Some medical underwriting was involved, and she was frustrated with having to see doctors dragging on.
Carol was frustrated because:
- She didn't want more income.
- She wanted to see her kids and grandkids benefit now when they needed it most.
- She was fed up with the invasive medicals.
- She wanted to keep the money invested in her granddad's firm.
- She didn't know how much to give away and what to keep.
She knew seeking a second opinion from someone her stockbrokers recommended was the right choice to ease her mind and create a plan that worked.
The Approach
The first step for Mary was to sit down with someone who would listen to her concerns and devise a solution that met all her needs.
Once her requirements were documented, a personalised succession plan aligned with her values and priorities could be created.
The Result
In collaboration with her planning professional, Mary was able to:
- Produce a lifetime cash flow forecast, producing various "what-if" scenarios for her to select her favourite future.
- Create two family trusts for her daughters, with income retained within each trust.
- Dispense with invasive medical questions and examinations.
- The trusts could make discretional lifetime gifts to kids and grandkids to help put them through school and college.
- The trust assets were held in a lifetime bond to ease tax reporting, with investments managed by her stockbroker.
- She made other gifts to charities.
- She was comfortable that she could maintain a cosmopolitan lifestyle consistent with her friends and was confident that she held sufficient assets not to outlive her capital over many scenarios.
The level of gifts was within her nil rate tax band, so there was no tax to pay. One of her daughters got divorced, and we could keep the gift outside the marital estate in a settlement. Survival after seven years would leave no death tax to pay. The arrangement gave peace of mind to three generations of the family.
Note: The above case studies are hypothetical and do not involve an actual Advice-only Financial Planning client. A client or prospective client should construe no portion of the content to guarantee they will experience the same or a specific level of results or satisfaction if Advice-only Financial Planning provides financial planning services.
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