As our clients progress through their financial lives, we see a consistent trend. Thoughts tend to move from thinking about the “here and now” to a much greater focus on the future. While the age at which this happens varies from client to client, retirement coming on to the horizon is an obvious driver for this mind shift. Alongside this, or maybe lagging by a few years are thoughts and conversations about passing wealth efficiently to loved ones. Of course, this opens up the whole discussion about estate planning.

This in turn creates a very important conversation, and that is the purpose of your wealth accumulation. Are you accumulating wealth solely to live life to the full in retirement and that it is there to be enjoyed by you as you live out your life? Or are you accumulating to give your loved ones a helping hand at some stage in the future as they navigate their own wealth journeys? Or is it a bit of both?

By the way, none of these objectives are right or wrong, they’re just different. But we believe everyone should carefully consider them. Apart from the importance of having clear objectives and purpose in your life and for your money, there are also tax considerations when it comes to passing money to children.

Estate planning differs to other areas of financial planning in that the tax opportunity / problem belongs to your children who will inherit the assets, rather than the parents who are passing on wealth. Different people like to approach this issue in different ways, and again, who are we to say who is right?

Some people approach this from the perspective of having accumulated the wealth themselves, it’s theirs to spend as they wish. Whatever is left over after they’ve shuffled off this mortal coil will be inherited by their children. If some tax must be paid on this, well, the kids will just have to pay this out of cash inherited or by selling some of the assets if necessary.  

Others want to leave everything all tied up with a bow on it, as neatly as possible for the next generation. They want to live their life to the full too, but they want their inheritance to be structured so that even the tax bill is planned for. The benefit of this approach is that they can then ensure that maybe a particular asset such as a holiday home won’t need to be sold to pay a tax bill, but instead can stay in the family as a legacy and memory of the parents.

The difficulty in Ireland today is that the amounts a person can inherit tax free, known as the Capital Acquisition Tax thresholds are so low, and the tax rate is high at 33% on inheritances above these thresholds. While the thresholds for children receiving inheritances are not generous, they are significantly lower again where the relationship to the person leaving the money is more distant. It doesn’t take an enormous inheritance to exceed the thresholds, resulting in tax bills for those receiving it.

The good news is though, that if the parents and/or the children are minded to addressing the issue while the parents are alive, there are strategies that can be deployed to mitigate the tax bill. These can include using specific life assurance solutions, or indeed the parents can gift money to the children tax free using the Small Gifts Exemption while they are alive. As with most areas of wise financial management, a little bit of foresight and advanced planning can produce remarkably more positive outcomes for all. When it comes to enjoying your retirement and leaving a tax efficient legacy behind you, maybe you can have your cake and eat it…

If you’re wondering what slice tax might take from your legacy, feel free to give us a call.

OK, we don’t want to blow our own trumpets, but we got access to some research recently that was simply too good not to share the key findings with you. The research titled “The value of financial planning” was carried out by the Financial Planning Standard Board, in which they surveyed over 15,000 consumers in 15 countries, including Ireland. The full report can be found here.

The key findings of the research were as follows,

Financial advice unlocks the benefits beyond wealth, including better mental health.

Clients who work with a financial planner report improved financial wellbeing and peace of mind (38%), financial confidence (37%), a better understanding of financial matters (36%), and greater wealth growth (33%).

We trust that you’ve experienced this with us too. Our advice offers significantly more value than simply helping you to grow your wealth.

Financial planning benefits are wide-ranging.

Clients report financial planning has helped them to build a realistic plan to achieve a more comfortable retirement (1 in 3), get the most out of their financial situation (1 in 3) and reduce financial worries and stress to achieve great peace of mind (1 in 3).

Picking up again on the theme in the first point above, we believe that the mental health and peace of mind benefits are so important. After all, we see our role as enabling you to go and live your life to the full, while we do a lot of the watching and worrying about your financial health.

Financial planning benefits more than just the wealthy.

Clients with an income of US$60,000 (€55,000) or less report that financial planning has led to an improved family life (44%), social life (26%), mental health (46%) and increased work satisfaction (29%).

This is something that we hear all too often – that financial planning is just for the wealthy. It isn’t. Financial planning can make a significant difference to people across the economic spectrum. The financial challenges of people with lesser means will be different, but professional financial planning can make a positive difference in addressing those challenges too.

Clients show a strong level of trust in their financial planners.

95% of financial planning clients trust their financial planner to act in the best interest of their client.

This one doesn’t surprise us at all… and we hope not you either! The relationship between a client and their financial planner grows and evolves over many years, as the client progresses through life and all the changes that happen along the way. Relationships are often measured in decades, and they become deeply personal and trusting.

Demand for financial planning is growing.

72% of people who have never received financial planning advice would consider doing so, with 52% intending to seek financial planning advice within the next three years.

This is very promising, as those people who to date have been unadvised now recognise the importance and value of financial planning. What we believe is also very important in this era of lots of free (supposed) advice that is available online through a variety of platforms, is that many Gen Y people are rightly sceptical about this advice. They recognise the value of a professional financial planner, with two thirds of this cohort considering paying for financial advice. We look forward to working with many of these people, as they begin their journey towards financial independence under our guidance.

There are many more interesting findings in this research, but we hope that the above gives you a sense of the value that is placed on professional financial planning. We look forward to helping you achieve your financial objectives in the years and decades to come.