Spring has most certainly sprung and at John Lamb it is business as usual; we continue to provide expert, specialist advice to our clients and professional friends as we always have done. However, the world has changed and clients’ concerns and priorities have shifted. Challenges to our health like COVID-19 bring home the message that as humans we are not invincible.
After the initial shock of lockdown, clients are beginning to mobilise and address their concerns; many clients have faced a significant drop in income owing to a reduction in dividend payments and fall in the value of their portfolios. They may well also have reduced rental incomes coming in, both on commercial and also increasingly on residential properties. It seems likely that the demand for commercial property may fall as companies realise they don’t need as much space, people can work from home and the outlook for short term rentals looks particularly dire with the loss of the tourist trade. It’s difficult to see where people are going for income in the short/medium term.
These are some of the concerns we have addressed for clients over the last month:
‘MY SON CAN’T PAY THE SCHOOL FEES BECAUSE HE HAS HAD A SIGNIFICANT DROP IN INCOME AND I WANT TO HELP BUT I DON’T HAVE ENOUGH CASH FLOW?’
After discussion with this client we have recommended a Lifetime Mortgage of £500,000 which enables them to place the money into two trusts to provide for their grandchildren’s school fees. Not only does this enable them to provide for their grandchildren’s education it also takes £500,000 out of the value of their estate with potentially £200,000 of IHT saved provided they survive for 7 years.
‘I HAVE INCOME PROTECTION BUT MY SALARY HAS DROPPED.’
If you have had a drop in income you need to review your income protection cover. We have reviewed this for several clients and in some cases they have dropped their level of cover, reducing premiums. On the other side clients have realised that they don’t have enough cover and are taking out additional cover.
‘WILL MY CRITICAL ILLNESS PAY OUT IF I HAVE COVID-19?’
The answer is – maybe – if you are placed on a ventilator for more than 7-10 days (depending on insurer) then they will pay out. We are always there to support and advise clients and their families in this process, because liaising with providers at this time is an additional level of stress that you don’t need to be dealing with.
‘DO I HAVE ENOUGH LIFE COVER?’
With excess death rates up 76% this week, everyone’s mind has been focused on their mortality. In the last few weeks we have completed several reviews for clients to ensure that they have enough cover in place to protect their family and to ensure they have enough cover for their IHT liability, in all but one case they did not. We are now in the process of getting them additional cover.
‘I AM VERY CONCERNED IF KEY STAFF MEMBERS OF MY BUSINESSES ARE UNABLE TO WORK DUE TO ILL HEALTH OR DEATH FROM COVID-19.’
It has always been essential to have business protection in place. Now more than ever the possibility of having incapacitated key staff members is a great risk to any business. Last week we placed key man cover of £750,000, with no medical required and we have several clients in the queue for medicals.
The right time to act is NOW. We are able to obtain certain levels of cover and equity release lending in the current climate and whilst we don’t currently have a timeline as to when we will be able to resume full medicals and property valuations clients need to get on the ‘runway.’ There is now a considerable back log in the industry and when it is possible to get medicals and property valuations there will be bottlenecks and it is better to be at the front of the queue.
Do please get in touch if you want to discuss any of the issues explored above.