Protecting you and your estate
Frequently used terms
Age of majority
The legally-defined age at which a person leaves childhood and reaches adulthood. Doing so means they become legally responsible for their actions and decisions, their parents losing responsibility for them (although there may be other age-based rules they are legally required to observe). The word ‘majority’ refers to their having the full number of years to be an adult. The Age of Majority is 18 throughout the UK, except for Scotland where it’s 16.
Critical illness insurance
Critical illness insurance pays a tax-free lump sum if you are diagnosed with one of relatively few, potentially life-threatening conditions that are specified by the insurer: heart attacks, strokes and cancer are the usual conditions listed.
Life insurance is often called a ‘death-in-service’ benefit if offered as part of an employee benefits package. Death does not need to happen while the person is at work or be as a result of their carrying out their work: they have only to be employed by the employer providing the benefit at the time of their death.
Investment plans with an integral life insurance element. Endowment policies used to be popular with interest-only mortgage holders, the concept being that the investment fund would grow so that it could be used to repay, or partially repay, the capital element of the mortgage when the term expired. Endowment policies are much less popular now due to poor performance and a decline in the use of interest-only mortgages.
Income replacement insurance
Income replacement insurance provides protection from losing an income as a result of illness, injury or, and usually as an optional extra, from becoming unemployed. Unlike life and critical illness insurance, which both pay out a tax-free lump sum, income protection insurance pays a regular, tax-free income.
To die ‘intestate’ means to die without having a will. In this case the person’s estate will be distributed according to the Rules of Intestacy which set out standard principles for how this is done. The rules rarely reflect what the person would have wanted – which is a very good reason to ensure you have a valid and up-to-date will.
One of two principal types of trust. Irrevocable trusts, as opposed to revocable trusts, permanently remove specific assets from the settlor’s estate. Doing so offers a number of tax advantages, especially in respect of Inheritance Tax, and gives the beneficiary peace of mind about the eventual outcome of a will.
Lasting Power of Attorney
There are two general categories of power of attorney: ‘ordinary’ and ‘lasting’, the key difference between the two being the donor’s mental capacity. Lasting Power of Attorney is granted by the Office of the Public Guardian and covers, in separate authorities, Property & Financial Affairs and Health & Welfare. Keeping the two forms separate allows them to be granted, exclusively, to appropriate people.
An insurance policy that pays a tax-free lump sum, or sometimes a taxable pension, in the event of the death of the person insured. The purpose of life insurance is to make financial provision for the policyholder’s dependants should the policyholder die. There are two principal types of life insurance: term insurance and whole-of-life insurance.
The ability to make reasoned decisions. Losing mental capacity, either temporarily or permanently, is the reason for granting Lasting Power of Attorney to someone who becomes legally empowered to act on the person’s behalf. Mental capacity is initially assessed by the person’s GP but diagnosis is frequently required from a specialist healthcare professional.
The legal process of establishing the validity of a Will: the Will is ‘proved’ in a court and a Grant of Probate recognises the Will as a public document that is the true last testament of the deceased. A significant part of the probate process is the identification and verification of the deceased’s entire estate. In Scotland, probate is termed ‘confirmation’.
Relevant life cover
A relatively little-known life insurance policy which uses pension legislation introduced in 2006 to provide a tax-efficient life insurance policy for company directors or high-earning employees. Although similar to other types of life assurance cover, any payout is not tested against the policyholder’s lifetime pension allowance, there’s no P11D Benefit in Kind penalty for the employee and the premium is an allowable business expense.
One of two principal types of trust. Revocable trusts, as opposed to irrevocable trusts, allow the assets to be returned to the settlor. Although they have few, if any, tax benefits they are useful in some circumstances.
Serious illness insurance
Serious illness insurance pays a tax-free lump sum if you’re diagnosed with one of the many serious medical conditions listed in the insurer’s policy documents, the amount you receive often reflecting the severity of the condition you have.
The simplest and most popular type of life insurance. You decide the value of the cover you want and the ‘term’, the length of time you want it for, and then pay a regular premium for the duration of the term. If you die within the term the policy pays a tax-free lump sum to your estate.
A legal contract by which a group of people are given responsibility for administering and managing named assets for the benefit of another group of people. The person creating the trust is known as the ‘settlor’; the people administering the trust are the ‘trustees’ and the person or persons who will eventually benefit from the trust are its ‘beneficiaries’. There are many different types of trust.
Life insurance that offers protection for the entire life of the policyholder and guarantees a lump-sum payment at whatever age they die. Premiums are often used to finance two components: a life cover policy and an investment fund, the idea being that any investment profit helps cover the rising-with-age cost of life insurance.
A ‘Will’ or ‘testament’ is a legal document drawn up by a person, the ‘testator’, setting out how they would like their ‘estate’ to be distributed on their death. It names an ‘executor’, who will manage the estate during ‘probate’ and ensure that it’s distributed accordingly. It also names the ‘beneficiaries’, the people or organisations who will receive all or part of the estate. There are several different forms of Will.
Will in solemn form
This is one of two common forms of will and is used by an individual, ie: someone who is not in a relationship, which means they have to set out who their beneficiaries are and what part of the estate each will receive.
Will (Reciprocal Will)
The second of the two common forms of Will. Frequently known as a ‘mirror’, ‘mutual’ or ‘husband and wife’ Will, the Will is made by two parties, typically husband and wife or civil partners, and makes similar or identical provisions in favour of each other.
How can One Financial Solutions help you?
‘Hope for the best but plan for the worst’ is a common maxim – but many of us just ‘hope for the best’ and don’t do any planning at all.
One Financial Solutions is here to help you. As a firm of independent financial advisers we can provide impartial advice to help you identify the potential risks you face and develop a strategy that provides protection from their consequences. We’ll recommend the best products from across the whole of the financial services market and help put in place the safeguards you need to protect both you and your dependants.
We can also provide a comprehensive estate planning service to complement the financial advice we give you. Helping you preserve everything you’ve worked so hard to achieve and ensure that it’s passed on to who you want is a natural extension of what we do.
So, if you’re looking for help with any aspect of protecting either yourself or your estate, please call us on 020 3714 9565 or ask us to call you by sending an email to firstname.lastname@example.org.