Paper Example on Windsor Family Financial Plan: Alastair & Wendy's Secure Future

1.0 Introduction

I am a financial consultant that will provide a plan for the Winsor family. A financial plan is a comprehensive evaluation the current pay of an individual as well as the future financial state which is determined by the current known variables which will make a prediction of the future income, the asset values and also plans for withdrawal. In that case, financial planning involves estimating the amount of capital required and determining the level of competition. The objectives of financial planning is to determine the capital requirements, capital structure, framing financial policies and ensuring that the scarce financial resources are maximally utilized in the best manner possible. I will be consultant for Windsor family to plan for the future finances.

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2.0 Objectives and key actions

There are some short term financial objectives of Alastair and Wendy that you can consider such as; There is the need for creation of a will which will provide ultimate protection from all the possible scenarios. Sale of property is considered a kind of taxable income which is unavoidable and it benefits the state. The most critical objective is to plan for investments an also maintain defined pension benefit schemes. In this way, you will be able to gain more profits and target growth with benefits that accrue over time.

There are also mid-term objectives that you should consider which include: The current investment move should be changed to move to more risky ventures. The higher the risk, the more the profits.

The key actions that will be considered in long-term include: It will be necessary that you keep changing the portfolio ratio to maintain balance between risk and reward. It is important to rebalance the portfolio because of the performance of the market which could increase or decrease the value of assets with time. This way, you will need to at times reinvest the excess money in other types of investment assets that have low performance. You need to provide a university education for the niece Holly and also help her with a small house deposit so she can buy property in the future. Education is important to Holly as it is also a way of investing in children. Her stability in the future both financially and professionally will be good for the household as she can be a breadwinner in any scenario. You need to also control spending by having a family budget and having all members to agree. The budget will be divided into fixed (those that you cannot change) and flexible categories those that you have at least some control over such as utilities, groceries and entertainment).

3.0 Specific advice on pension reforms

There have been changes in the pension schemes over years and it is important that you know the current reforms that are in place. In the previous days, when one has retired, you needed to turn a contribution-based pension pot to become retirement income soon after you get hold of the tax-free lump sum. However, in the recent years, you can use the pension pot in any way that you like.

The pension scheme will provide cash options which you will get 25% of the withdrawal tax-free. If you choose the annuity options, you will be able to take close to 25% of the pot used for the option of tax-free. However, the rest of the income is to be taxed. If you have to mix the choices, you can use different parts of the single pension pot, use the different pots to fulfill your various options or still combine the smaller pots to go about a single option or many of them.

However much it seems too good to be true, these freedoms are welcome with risks with the least being that you could land yourself in large tax bills or running out of money if you make the wrong the choice (King & Carey, 2013).

Another crucial thing that you need to be keen about is the pension advice scams which have been growing tremendously over the years. There are increased reports of cold calls or some kinds of advertisements which are targeting people by offering free pension reviews. It is good that you do not be fooled because their sole aim is to get their hands on their hands on your cash. It is possible that you could end up losing all your money in the scam.

On the same note, it could also get hard for you to qualify for another full state pension but it is also easy to pass the pension to the dependants because of the new rules. It is only when you survive beyond the age of 67 to that of 75 that the pension pot will be passed to them tax-free, otherwise, at 67, it will be taxed. In the event where death occurs at 75, and the descendants want the entire pot in the form of a lump sum, they will need to pay 45% of tax which was previously 55%. You need to take the best option that suits your needs such that n burden is left to the kids that will require to pay more to get the pension.

The pension schemes of Wendy need to be followed closely to determine how much she is due to receive since she has been making her contribution based on her salary. The fact that Wendy is aware that there are options she can consider is such that she needs to get to closely be on the track to receive her money due. If Wendy is not sure that the pension provides for Alastair, it is important to have a will at hand. In that case, it will be easier for Alastair to claim the money upon her death.

4.0 Capital gains

Wendy's sale of property will result in capital gain because the sale of the asset exceeds the cost used for investment. There is for sure some tax treatment on the capital gain which could either in short term or long term. The tax on capital gains is dependent on the kind of capital asset that was invested and he number of years it has been in use (years of holding the asset) (Jin, 2006). For the case of Wendy, it has been 24 years holding the flat that she wants to put on sale. Selling it at PS190,000 since it was bought at PS69,000 meaning that there is capital gain on the capital asset.

Short term holding is for a period of one year or less and long-term holing is for more than a year meaning that for Wendy, the tax will be calculated on basis of long-term holding (Government, 2016). The calculations for tax by short-term gains is at ordinary income tax rates which is according to the tax bracket.

Wendy is at a good position since she has owned the property for more than a year. If it was a kind of short-term holing, it would be better if she waited until some time later for more than a year. Planning for tax on the asset will help to focus on deferring the sale of this profitable investment until it is time when they are fully qualified to get a discounted long-term capital gains tax.

5.0 Inheritance taxation

The tax man collects tax upon the death of the deceased individual. In that case, Wendy and Helen will likely pay inheritance tax upon the second death of their parents. The tax will be based on the person who receives the property and the value of what they receive. However, there are exemptions to the inheritance tax rates in some states which exempt immediate family members (Government, 2016).

The amount of tax is calculated separately for each of the individual beneficiary who must pay the tax. An example is that the tax charge may be 5 percent for inheritance wealth that is more than $2 million. The fact that Wendy and Helen are children may qualify for the same exemption. However, in other circumstances, it is only a part of the inherited property may qualify to be exempted from tax.

6.0 Estate planning

You need to plan how your heirs will receive your estate in a manner which is fast and effective. The fees related to estate planning are deductible to the extent in which they have a relation with production, maintenance or still the generation of taxable income.

The application of these fees in estate planning is in the example that if there is involvement of advice in the estate plan on things like constructing income generating instruments like income trust or provision of guidance on the use of property transfer methods, they are likely to meet the restrictions of IRS for them to have the ability to deduct these expenses. The will will have the statement of the simple transfer of property to the heir or the use of these planning instruments and they will help to prevent the estate assets from being encumbered in probate hence being deemed personal expenses that are deductible.

7.0 Care planning

You need to consider long-term care planning because that is what the tax law encourages. It will be better than having it short-term because there will be more tax deductibles. The federal laws provide encouragement for use of long-term goals of care planning because there are benefits that you will receive upon the purchase of qualified insurance.

It is important that you consider care planning because of less tax deductions and benefits from the government. The IRS tends to allow one to deduct qualified medical expenses which have exceeded 7.5 % of the adjusted gross income. It will be important to insure the family since there is more protection from the government especially for individuals who purchase it while in their 40s and 50s before the retirement.