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The perils of deliberate deprivation and why a cashflow plan matters

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Financial advisers will tell you that cashflow planning is one of the most important services they offer to clients. Whilst many people think of financial advice in terms of long-term planning elements such as pensions, investments and savings, it’s often the cash that matters. What can you afford to do? What impact will your financial choices have on your cashflow? How will your long-term objectives or a sudden change in circumstance affect your cash planning?

A question for all advisers

Increasingly, cashflow planning is something that all advisers need to consider when they are working with private clients. Solicitors, accountants, tax advisers – particularly those involved in advising potentially vulnerable clients, or those who are thinking about Lasting Powers of Attorney or deputyship matters.

And although cashflow planning sounds technical, it’s actually a very helpful and straightforward way to help people see what lies ahead of them. It might also help you to avoid some common pitfalls, protecting against being caught out by deliberate deprivation of assets rules, and ensuring that the options choosen for the future are affordable.

What is ‘deliberate deprivation of assets’?

This is when an individual gives away money, income, property or investments in order to reduce their assets to avoid care fees. This is common ahead of assessment for care costs, for example, but it can lead to difficulties if the local authority thinks the assets have been deliberately reduced. In some cases, the assets might be included in the assessment regardless.

There are many legitimate reasons why people may want to make large gifts: for example, inheritance tax planning, supporting family members or ‘balancing up’ previously unequal gifts to family. When planning gifts, it is important that individuals take advice and document objectives and the effect of the gift, which can help protect them from an accusation of ‘deliberate deprivation’ in the future. Cashflow planning can help in this instance by:

Identifying and documenting the affordability for the planned gift;

Creating a timeline to document the individual’s objectives;
Showing the effect of the gift and giving evidence of motivation; and
Demonstrating evidence that the individual has a plan to pay for care and could not have reasonably expected to have run out of money.

Two main things will be considered if an assessing body thinks assets have been gifted deliberately:

Whether you knew at the time of disposal that you would be needing funded care or support; and
Whether avoiding paying for care or support was a motivating reason for the disposal or gift.

This is a complex area of advice that benefits from involving a specialist. Speak to Switchfoot Wealth for friendly expert advice.

Switchfoot Wealth Limited Independent Financial Adviser

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I started Switchfoot Wealth to offer financial planning that matches the way we live and work today. Using the best technology and offering expertise gained through both formal qualifications and years of working closely with clients, we are bringing financial planning into the 21^st century, helping people, businesses and professional advisers make the most of their time and their money.

– Sebastian Ewell

Switchfoot Wealth Founder

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SwitchFoot Wealth Limited is an appointed representative of Sense Network Limited which is authorised and regulated by the Financial Conduct Authority. SwitchFoot Wealth Limited is entered on the Financial Services register (www.fca.org.uk/register) under reference number 808196.
Registered Address: 28 Upper Hale Road, Farnham, Surrey, GU9 0NS. Principal Office: 147 Frimley Road, Camberley, Surrey, GU15 2PS. Registered in England & Wales No.: 11220173.
The information contained within this website is subject to the UK regulatory regime and therefore restricted to consumers based in the UK.

The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services business aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.

The challenges of the Sandwich generation

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The challenges of the ‘Sandwich’ generation

Children growing up and sitting exams; parents requiring more care and attention; trying to keep your career on track – these are the challenges of the so-called ‘Sandwich’ generation. If this sounds familiar, it’s probably because you’re either already in this situation or you can see it looming on the horizon. It can be an extremely difficult time of life – and even more so if you have legal responsibilities to someone you love.

Acting as an attorney for a loved one

As people become more aware of the importance of making a Lasting Power of Attorney (LPA) well before it’s needed, there has been an increase in the number of people taking on those attorney duties. This is a positive thing, because it’s vitally important that someone – or more than one person – trusted by the individual is looking after their affairs. Trying to do so after the individual’s competence to make decisions has gone is extremely complicated, so it is always best to make your LPA – both for health and finances – as early as possible.

There are a number of legal responsibilities for an attorney, and these responsibilities must be taken seriously and carried out appropriately. These include:

· Always acting in the best interests of the individual

· Taking reasonable care when making decisions on the individual’s behalf

· Acting in accordance with the terms and direction of the relevant LPA

· Involving the individual in decisions wherever practical and reasonable

Making life easier

There are a range of challenges involved with being an attorney for a loved one. The biggest of these is having to make difficult decisions when you are so personally involved in the care of that individual or the outcome of any decision you make. Add in the fact that these are often complex financial or difficult health decisions, and it’s easy to see why things can become stressful.

To add to this pressure, there is often more than one attorney appointed. This might be another family member, or it might be a professional attorney like a solicitor. This is a good thing from the perspective of the individual – it’s an added layer of protection – but it can make it trickier to organise practical things, particularly if the attorneys are not in the same location. Sharing paperwork and keeping track of finances becomes more complicated and can result in additional friction or stress.

Sandwich generation attorneys can use technology to help them manage this part of their lives. Applications like Switchfoot Teams (our preferred financial planning portal for attorneys) allow attorneys – and other relevant professionals – to have oversight of key finances, and to access important documents like the full LPA, share certificates, insurance documents and more. Easy to set up, easy to use and the ideal way to keep a handle on all the different areas you may need to cover as an attorney, this technology can help to manage at least one of the responsibilities you have.

To find out more, speak to us today.

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Sandwich generation attorneys can use technology to help them manage this part of their lives

– Sebastian Ewell

Switchfoot Wealth Founder

The perils of deliberate deprivation and why a cashflow plan matters

Written by

A question for all advisers

What is ‘deliberate deprivation of assets’?

Read more about Switchfoot Wealth

Related Articles

Why did Switchfoot Wealth choose to work with Sense Network?

PFS Awards

Financial Planning for Trusts – Should beneficiaries be insured?

The challenges of the Sandwich generation

Written by

The challenges of the ‘Sandwich’ generation

Acting as an attorney for a loved one

Making life easier

Read more about Switchfoot Wealth

Related Articles

Why did Switchfoot Wealth choose to work with Sense Network?

PFS Awards

Financial Planning for Trusts – Should beneficiaries be insured?

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