Forgive me if, for once I ask your opinion rather than tell you mine. I have been on a quick holiday, having been made an honest man of, but while I was away my mind could not help wandering to a query raised by some friends just before I left.
All too often, problems you read about tend to focus solely on money. This one is subtly different. It concerns, indirectly, independent financial advice received over a potentially contested will. The rest of the family is wrestling with decisions they need to make about the IFA in question.
Here is the problem – an elderly gay couple lived together in a stable but unmarried relationship for 18 years until one of them, who had three children she loved dearly, was diagnosed with lung cancer. The couple then entered into a civil partnership and the person suffering from cancer died a few months later, aged 73.
During their time together, the couple jointly bought a property as tenants in common. But the civil partnership changed all that, as did the fact that the dying partner wrote a will in her final days allowing the survivor, who is 70, to live in the property until her own death.
In addition, the will stipulates that if the home should be sold, the surviving partner can draw an income from the deceased person’s share of the proceeds until her own death. The capital sum, which must be protected in its entirety, then passes over to the deceased person’s three children, aged between 42 and 52.
The difficulty for the children is that while they accept the terms of the will, it has no provision on whether the capital sum to be returned to them when the second partner dies should be protected against inflation. Unless it is, they risk a significant cut in the value of the capital sum over the next 10-15 years.
My first question is – can they insist on an element of capital protection even if the will does not stipulate this? How can an adviser guarantee this?
What about an adviser’s annual management fees? Should they be taken from the income paid to the survivor or from the capital sum itself, which the will stipulates must be protected?
My second question concerns financial advice. The surviving spouse has engaged the services of an independent financial adviser when the property, now on the market, is finally sold. It looks as if the total proceeds of her deceased partner’s assets will be about £240,000.
The children, understandably, would like to access the money now rather than wait until the survivor dies. One of the three children is physically and mentally handicapped and while they respect the surviving partner’s legal rights, the immediate needs of their sibling should – not must, just should – be considered. They have suggested a deed of variation in the will to allow them to get a share of their mum’s assets. Not all the assets, just a fair amount.
The key issue is what constitutes fair. The IFA in question has written to the surviving partner suggesting the deed of variation should involve a payment of £15,000 to each of the three and she keep the rest of the money for her own use in perpetuity.
I have seen this letter and it does not appear to be based on any legal opinion, only the IFA’s desire to side with his client and, presumably, manage the vast bulk of the remaining assets she would become the sole owner of.
My second question is – should an IFA become involved in advising how much, or how little, ought to be offered in relation to a possible contested part of a will between several parties involved in a trust? Is this professionally acceptable behaviour?
The surviving spouse has made an offer to the children that is significantly more generous than the one suggested by her IFA, although it is still not considered acceptable to the children for reasons that are too complicated to go into here.
My third question concerns what kind of advice might be given in any event in terms of managing that money. Say, the children decide they do not want to accept the offer from the surviving partner. Under the terms of the trust as set out in the will, they are jointly responsible with her for managing the assets to ensure the security of the capital sum while paying an income at the same time. What investment strategy might be suitable?
My final question concerns the adviser and his relationship with the children. On the one hand, he has a relationship with the surviving spouse to whom he has offered initial advice. But if the joint trustees of these assets – who are the surviving spouse and the children – were to need further advice on how to manage them, should they go to the same adviser?
If they were to hold a beauty parade of local IFAs, should he expect them to invite him to tender his services to represent them, as well as his existing client? Would you hire him to give you advice if he did?
Let me know your views.
Nic Cicutti can be contacted at firstname.lastname@example.org