Everyone should make a will, for those who have property in Bahrain it’s a good idea to take advice about a local will; British expatriates should also have Wills drawn up relevant to the UK, even if they feel they do not own much property there because their whole worldly assets are taken into consideration by the UK taxman the will is very important indeed. As a Bahrain Financial planner and Will writer I find more than half of my British clients have so far not had Wills drawn up.

Mirror Wills are simple enough. It is a common expression used when a husband-and-wife make virtually identical Wills. For example, Mr X’s will might say, ”I give everything to my wife on death, but if she dies before me it goes to the children”, and Mrs X’s will can say the same thing relevant to her husband. What a mirror Wills do not do is to ensure, after the death of the 1st spouse, that the family home does not have to be sold to meet any nursing home fees of the surviving spouse. However, you can use a will to protect against a claim from the local authority for fees-provided you change the form of ownership of the family home.

Most couples own their own house as joint tenants, which means the house ownership in its entirety automatically passes to the surviving spouse. If, when a will is drawn (or before), the joint tenancy severed and replaced by ”tenants in common”, then it is possible for each partner to leave his/her share of the family home to someone else, such as the children.

Usually a trust is used to safeguard the remaining spouse’s right to live in the house-but in reality, the owners of the other half would find it difficult to dislodge him/her from the other half of which they are the outright owner. So if the surviving spouse has to go into a home, the local authority can only access the market value of his/her share of the house, which will not be high-not the other half, which belongs to someone else.

Your money is compiled by Bahrain Financial Planning Consultant Brian Davis

Brian@AssetProtectUK.com

You are not alone in being forced to choose between paying your own retirement and your parents. Many of us are well aware of this problem is we reach our own retirement age many others are finding themselves having to care for ageing relatives with increasing medical needs and dwindling financial resources. In the USA around 20% of the population care for someone over the age of 50 who is ill or ageing, a number that has steadily increased over the past 10 years. Caregivers have to take time off from work and dip into their own savings to pay for expenses, even more so now that state and local programs are facing budget cuts. For many the question isn’t whether they’ll face higher costs, but how they’ll manage them.

The costs can be daunting many adult children are still clawing their way back from the financial crisis and we financial advisers agree that caregivers will get stuck with some hefty expenses and are scrambling to offer ideas that will help. There has to be a balance between supporting parents and supporting yourself!

So you have to try to cover the extra costs and can start by investing more aggressively but the risks might outweigh the rewards! Perhaps it’s better to set aside a chunk of your savings for these expenses by investing in dividend paying stocks and bonds using the income for expenses rather than reinvesting it. If you have the luxury of time to plan getting parents to sign up for a long-term care insurance plan early on can curb one of the biggest costs: assisted living and nursing home fees, which can easily top BD25,000 a year. While you may be tempted to dodge these costs by leaving your job and helping out I prefer to discourage that, as in the long run it can be less expensive to continue to work and hire someone to care for the family members.

After all by giving up work and caring for a parent you run the risk of ending up in the same shoes as they – are passing on your financial burden to your kids!

Half the population, whether expatriate Bahraini expect to be poorer than their parents due to a chronic lack of saving. Many are earning too little, spending too much failing to save and are building up debts. This is the generation known as the “Ostrich Generation “.

Millions are burying their heads in the sand over the need to save retirement. The ostrich generation will live longer than previous generations and state and company pensions will not be so generous, says a report from HSBC bank. 17% do not have a clue how it will pay for their retirement, while 21% plan to rely on their state pension or GOSI. But this will not pay for a comfortable old age, with the UK state pension of just over £100 a week if you’re entitled to the full amount.

Because of debts many people over 65 years old have been looking to release money held in their houses as equity. On average, those who have debts are in the red to the tune of over £25,000, the equivalent of what the average full-time worker earns in a year! Many pensioners are being forced to rely on their credit cards to survive or remortgage their houses which were bought decades ago for a fraction of the current value.

The earlier you start to save to your pension, the better. Even a very small proportion of your monthly salary put away now can have dramatic effects on your wealth in the future. In the course of my work I have encountered many people who have lived here for more than 15 years and yet have failed to save one dinar and it’s my job to help them salvage something for their future and in many cases it is too late to do enough.

If you began now saving BD 40 on a monthly basis and by the time you are 65 (35 years from now) you will have over BD 85,000 at a growth rate of 6% per annum. This can be used to generate an income for you of over BD 4000 without touching the principal. We still have inflation to cope with, but don’t forget as your career progresses you will be able to increase the amount you save without too much pain; the trick is to start early and keep it going every month, without fail, preferably into a long-term plan that a good financial advisor can help you select.  This takes the money away from your regular bank account and so removing the temptation to spend frivolously.

Your money is compiled by Bahrain Financial Planning Consultant Brian Davis

Brian@AssetProtectUK.com

Everyone should have 2 basic building blocks for their retirement planning state pension and some form of private saving. In the UK to get a full basic state pension, currently £102.50 a week, you need 30 years National Insurance contributions. If you have fewer you will receive a pension on a pro rata basis, so someone with 3 years would get £10.25. This pension is now undergoing the biggest overhaul for generations. One big changes arise in women’s state pension age this was already rising gradually to 65 by April 2020. But over the past year the government has been pushing through controversial proposals to raise this to 66 by that date, forcing half a million women to work longer for their pension. Looking further ahead the state pension age could rise beyond 70 as the government wants to link it to life expectancy.

There are also proposals for a single state pension worth £140 a week. From April next year the state pension will arise with the greats of 3 measures: the consumer prices index, earnings inflation or 2.5%. This has the potential to have a huge impact on state pension increases because CPI is typically lower than RPI. But if wages inflation is greater than both it will make any difference. Historically, wage increases have outstripped inflation. If the link between the state pension and earnings hadn’t been broken in 1980, it would be worth over £140 a week today.

If you want a bigger retirement income and the state will provide you with another pension, very few people living as expatriate in Bahrain have a 2nd pension and it is this area which I have addressed repeatedly in this column and continue to stress. It is never too late to start saving and if you don’t do it no one is going to do it for you! Enquire as to whether you can bring your contributions up to date to the state pension in the UK and arranged to continue payments by direct debit from now on in order to boost that income; after all every little helps!

Having read some of your earlier columns I really feel but I have to take action on retirement savings. I’ve never saved a regular basis before, what you advise?

As retirement nears many boomers are coming face-to-face with the fact their nest egg might not provide them with enough income to last through retirement. In fact more than 40% of the baby boomers, those born between 1950 and 1965, are at risk of not even having enough retirement income to cover even basic retirement expenses like living and healthcare costs. It seems clear that whatever we are doing to save for retirement isn’t always working. So what does work?

While there’s no magic bullet, some strategies tend to lead to greater retirement savings and others. I have three tips:

1. 1.       Use a Consistent, Long-Term Savings and Investment Strategy. This might seem like a no-brainer, but let’s face it a lot of people simply don’t have a disciplined approach to long-term savings and investing, this is the most powerful factor in determining the size of our nest eggs regardless of income level. A recent survey revealed that the people who seemed most able to replace their current income in retirement – those who are on track to replace 100% or more of their current income – and the people who seemed least able – those who were on track to replace less than 45% – had the same average household income! So the difference appears to be behaviour around savings not income. So, how to do it: at regular intervals say once a month put away a percentage of your salary, I recommend at least 10% of your income into your retirement fund. Then, LEAVE IT ALONE!
2. 2.       Work with a Financial Adviser: those with a financial adviser have an 82% chance of replacing all their current income in retirement, while those without only a 61% chance. This holds true across all income levels. Advisers make people save more! This is partly due to the fact that people who are likely to save more are more diligent and are also more likely to seek out advisers!
3. 3.       Save money in your workplace retirement plan: out here in Bahrain not many companies run retirement plans though some of us who work here as financial planners are engaged in a campaign to persuade some of the more responsible employers to look at providing retirement plans for their employees. Workplace retirement plans often contain a level of contribution from the employer and is an excellent way for workers to dramatically increase their pension benefits upon retirement.

Whilst you might feel that my tips are not exactly earth shattering they do serve as a gentle reminder that taking simple steps like contributing regularly into a financial plan with an adviser can make a big difference to your bottom line in retirement.

Your money is compiled by Bahrain Financial Planning Consultant Brian Davis

Brian@AssetProtectUK.com

You’re absolutely right, I have been banging on for quite a while about how everyone should save regularly for their future. I haven’t gone into great detail as to what the money should be saved into other than a long-term pension plan. As a financial adviser I carefully study my client’s financial situation, needs both now and for the future and ability to finance these needs and aspirations. But when it comes to giving actual advice on specific investments I prefer the cautious approach. A good pension plan gives you the ability to invest in a wide range of unit trusts or mutual funds and each has its own area of investment, investment type and risk. The amount of time one has to save before retirement has a big influence on the complexion of the mix of investments I might suggest. Whilst you are young it’s okay to take a little bit more risk; with risk comes reward but, of course, there is a higher chance that from time to time investments will drop but you do have time to recover. The degree to which investments rise and drop is called volatility and this rises with risk as well so the experience can be quite a bumpy ride! You do not want that sort of experience towards the last few years of your savings before retirement so over the time span of the plan you will gradually reduce risk to almost 0. It’s important to build up a nest egg early as the longer the money is invested the greater the fund will be in the long run.

Stocks and shares have had a challenging year so far and little change is expected as long as economic conditions remain bumpy and uncertain. Some shares withstood the general malaise but is increasingly important to pick stocks with care and to watch performance through good times and bad. Almost every type of investment has been hit by volatility. The BP oil disaster showed that blue-chip shares can suffer large falls so, clearly, investing directly in stocks carries a much higher risk than investing in a broad range of stocks contained within a unit trust or mutual fund. By working closely with your financial adviser an appropriate portfolio of equity, money and bond funds can be tailored to your needs. The consistency of the portfolio will change over the years and your financial adviser should be able to help arrange that for you.

Your money is compiled by Bahrain Financial Planning Consultant Brian Davis

Brian@AssetProtectUK.com

Society of Will Writers supports the licensing of will
writers

The Society of Will Writers thanks the Legal Services Consumer Panel for taking the
bold step to carry out their own investigations rather than continuing to rely
on the anecdotal evidence that has been regularly provided by various parties
in the past in an attempt to discredit professional will writers.

Although will writing has been around for over 20 years, it is only in very recent years
that we have seen a rise in the numbers of will writing companies, in
particular, that work outside of any regulatory regime, and as a consequence
have succeeded in bringing the profession into disrepute through their poor
practices.

Every action taken and initiative supported by the Society recognises the importance
of ensuring that the consumers’ interests lie at the heart of all we do. We
believe that now could be the right time to introduce a system of regulation
that will ensure that any person or company that provides wills and other testamentary
documents in exchange for a fee are properly licensed to practice.

The Society supports the introduction of the licensing of professional will writers
in Scotland and looks forward to working with the Scottish Executive in the
future in bringing their plans to fruition.

Furthermore the Society believes that such a system can also work in England and Wales, and need not necessarily be prohibitive on cost resulting in even fewer people
being put off from making a will. We also believe that such a system, if
adopted could be introduced very quickly and cheaply with the profession
bearing the bulk of the cost.

The Society of Will Writers already has in place the infrastructure needed to
support such a scheme including well established training and legal support
systems, a Code of Practice which its members are required to adhere to and
which has been drafted in consultation with the OFT, the CAB, LACORS and Age
Concern (now part of Age UK) and is currently before the OFT for stage one
approval under their CCAS scheme.

Monday 18^th July 2011

NOTES

The Society of Will Writers (SWW) is a
non-profit making self regulatory organisation which seeks to Protect the
Public and serve the interests of those men and women who are active
professionals in our field.

All SWW members are covered by
Professional Indemnity Insurance, with the Society main scheme being
underwritten by the UK’s leading insurance company Hiscox. Members are bound by
the SWW’s code of conduct and disciplinary and complaints procedures, copies of
which are available from the society upon request.

All SWW members go through a stringent
vetting procedure and continuing training to ensure that they are suitable
persons to properly write a will.

For More information please contact Brian
McMillan, Director General on 01522 687888

through a stringent
vetting procedure and continuing training to ensure that they are suitable
persons to properly write a will.

For More information please contact Brian
McMillan, Director General on 01522 687888

The cost of attending university can be high and it is commendable that you are already starting to think about how you and your family are going to foot the bill. Before applying it is advisable to sit down and work out where you want to go and what you want to study as this will impact heavily on the costs. You then need to research the cost per year of study; this should include tuition fees, accommodation costs, equipment, field trips, health insurance and living expenses such as food, mobile phone and transport.  This is important  as you don’t want to start a only to have to pull out because you cannot afford to complete the course.

Your parents have a savings fund which they set up specifically to pay your university tuition fees, this will most probably have been set up by an independent financial advisor and he or she will be able to advise you on how much will be available to cover these costs. Depending on the type of policy your parents have, this sum will either be transferred directly to the academic institution you choose to attend or will be available to your parents as a lump sum to manage accordingly.

Most universities also offer scholarships and grants to financially assist talented students so make sure you check out their websites to find out what’s on offer at the academic institution you decide to attend. Make sure you apply early in the year and have a strong application form to enhance your chances of being chosen to receive the funds.

Once you have calculated the costs and factored in any grants and the money your parents are able to contribute you will then have a figure of how much you need to earn to make up the short fall. Many students take on a part time job while they study but check the visa regulations for the country you are studying in. If you can work then think about the skills you have, maybe you are an excellent sportsman who can help train younger children, or an expert in web design who can take on projects for family and friends.

You may want to invest some of the savings in a short course. Learning how to skipper a sailing boat, for example, will give you a skill that you can use during the long university holidays to earn extra cash and travel at the same time.

The situation you, your wife and your sister find yourselves in is a difficult one which needs careful planning. The main priority for all of you will be safeguarding the future wellbeing of your two young nieces, whether that is assisting your sister in caring for her family in your home country or bringing the children to live with you in Bahrain.

Being a  legal guardian means you will be responsible for all their daily needs; providing food, clothing, shelter and other necessities, and on a more complex level it may require you to manage their finances until they are of an age when they are legally deemed old enough to do so themselves.

There are two ways in which you can become their legal guardian; if this role needs to be taken on while your sister is still alive then there are number of legal regulations you will have to follow under Indian law to do this, and it would be advisable to speak to a qualified lawyer to assist you with this matter.  If guardianship is only to take effect on the death of your sister then she must name you and your wife as guardians in her will, which should also set out directions for the appointment of executors to deal with her estate and instructions for the payment of debts and the transfer of assets.

Depending on your sister’s wishes you may be asked to take on the management of some of her assets for the financial good of your nieces.  Your sister may do this by setting up a trust fund where the ownership of her assets, including real estate, shares and cash are legally transferred to you. For example, your sister may have some real estate that she wants to pass on to her daughters – as trustee you become the legal owner of the property with a legal obligation to put the interest of your nieces above your own when managing it.

As well as safe guarding the future financial wellbeing of your nieces, you and your wife will need to assess your own personal finances to ensure that you are prepared to take on the financial commitment of caring for two young girls. Seeking the assistance of an independent financial advisor will help you plan for this.

One of the most important things is their education and you may want to consider is setting up a specific investment fund to pay for this.

 We all need to get our hands on some cash at certain points in our lives and there are many ways you can go about this depending on your overall financial situation. If you need a small amount of cash fast then you could ask to borrow the money off a close relative or friend, saving on any kind of loans fees. Alternatively, you could take a look at making savings on your current out goings or even selling some of your belongings, perhaps you have two cars and can manage with one – selling the other will free up some cash and pay off any outstanding car loan, allowing to you to cut your monthly outgoings.

In line with this you could sell some of your valuables – gold in particular will fetch a good price at present as the value has more than trebled over the past few years. However, you will need to think about this very carefully as there is often an emotional attachment to items that have been in the family for a long time, and you may want to discuss this with your relatives before moving forward. If you decide on this course of action then make sure you go to a reputable dealer who is qualified to value the item correctly – you may want to seek up to three valuations before you decide on the selling price.     

However, if it is a large sum of money you are after then you will need to look at taking out a lump sum loan or moving your money around to free up some cash, such as borrowing against your mortgage. If you are fortunate to have a life insurance policy then you may be able to borrow monies against the surrender value of the policy, either from the insurance company or a third party lender such as a bank.

This would be a good time to speak to an independent financial advisor to review your overall financial plans to see where money can be freed up and what you can do to make sure you have enough accessible savings in the future to pay for urgent necessities.