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Should I accept a ‘living will’ from my grandparents to pay off my university debt?
I am 28 and have racked up some serious debt since leaving university (£20,000). My grandparents have offered to pay off my debt saying it’s a ‘living will’ and they would prefer to help me out now when I need the money the most. My grandparents are not particularly wealthy and are very old, if they need to go into a nursing home in the next few years or die – will I have to return the money? Franchesca, London.
Catrina Walker-Jones of Howard Worth Financial Services replied: As the majority of students are now leaving university with debts, most families would love to help their children or grandchildren. I can understand your grandparent’s wishes to help you.
If they paid the £20,000 to pay your debts, there would only be an issue if your grandparent’s gift leads to a funding problem if they ever require long term care (if their estate is below £23,500 this would not be a problem).
On the death of your grandparents, you would only pay inheritance tax on this gift if their estate was above the nil rate bands, which jointly would have to be £650,000. You have suggested this will not be the case.
As this is a gift, with regard to long term care, I think that your grandparents could pass this to you without creating a major problem. It would be very difficult for a local authority to demonstrate this gift was made to avoid paying care fees, as you have genuine need at this time.
Should we cancel our life insurance policies to avoid debt?
My husband and I are finding it increasingly difficult to cope financially on one salary (I lost my job a few months ago). We need to make a few financial cut-backs and my husband has suggested we cancel our life-insurance policies for 12 months. I am reluctant to do this because we have three children and hate the idea of leaving them penniless should the worst happen. I would prefer to stop paying into our pension or take a mortgage holiday for six months. We would really appreciate some guidance on where to cut-costs. Sally, Bradford.
Catrina Walker-Jones of Howard Worth Financial Services replied: I am sorry to hear about your current financial position. I would stress that protection of your family and each other should be bumped to the top of your priorities at the moment. As you are currently without employment, insuring your husband at least should be the main financial consideration. If anything was to happen to him without protection you may lose your home and financial security for your children. Your pension may be able to take a holiday from the premiums and your mortgage provider may be sympathetic if you contact them before payments become a problem.
Banks and some Financial Advisers are useful when looking at budgets. I would seek their advice before you cancel any policy or premium.
How can I ease the money worries of my late friend’s husband?
My best friend recently died of cancer leaving her husband struggling to cope financially with three young children. Can you recommend a way that I can tactfully offer to help him meet his bills? He is a proud man and will not take money off me directly but would be amenable to me paying into savings accounts for the children. Can you recommend a savings vehicle for children that will allow him to withdraw money as and when he needs it? I can afford around £300 per month. Sandra, West Sussex.
Catrina Walker-Jones of Howard Worth Financial Services replied: You are a great friend. I would recommend that you open a joint bank account for your best friend’s husband and the children, who could share this account. Although current/savings accounts pay very little interest, this would allow you to indirectly offer a source of cash without offending your friend and build cash pot for their children. You stated you are looking for a savings plan; however any type of conventional savings plan would restrict the husband’s access to the capital.
There a number of accounts which are offering decent interest rates National Savings Direct Saver at 1.75%, Sainsbury’s Easy Access Saver at 2.70% or Post Office 2.10%.
The investment would be taxed at the adult’s highest rate of tax (and you suggest that he would be basic rate tax payer) and this would deducted at source.
Advice provided by Independent Financial Adviser, Catrina Walker-Jones. Catrina is based at Howard Worth Accountants and Business Advisers in Cheshire – a multi-skilled professional partner practice specialising in providing tax, financial services and corporate finance advice. Visit www.howardworth.co.uk to find out more.
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