THIS week’s experts are Lee Smythe, managing director of Killik Chartered Financial Planners in Mayfair, central London; Patrick Harrison, tax partner in the London office of accountant PKF; and Helen Kanolik of HelenK Financial Advice in Wimborne, Dorset. if you have a personal finance query, write to: ask the Experts, Room 445, Northcliffe House, 2 Derry Street, London W8 5TS. Please don’t send original documents. sorry, no personal replies.
J.T.writes: I want to protect myself against ill health, but have a limited budget. which is likely to offer better value – income protection insurance or critical illness cover?
L.S.replies: Income protection pays a regular monthly income for the period you are unable to work if you fall ill with a qualifying medical condition.
Illness cover? our experts suggest you try to build up an emergency fund equivalent to at least three months income to tide you over any short term problems
Critical illness pays a lump sum on diagnosis of a qualifying condition, regardless of whether you are unable to work.
But not all conditions that qualify under one plan would qualify under the other.
You should contact an independent financial adviser and ask himwhich plan he thinks would be the more appropriate option for yourpersonal situation.
However, I would suggest you try to build up an emergency fundequivalent to at least three months income to tide you over any shortterm problems, just in case illness strikes. This will give youimmediate security in case illness strikes.
L.G.writes: My family has moved in to live withmy mother, paying to extend the property to accommodate us all. she hasnow given us the house, but continues to live here. I am concerned thatwe may have left ourselves open to some unexpected tax bills?
P.H.replies: The good news is that your mother’smain residence exemption means that there is no capital gains taxliability arising from the gift of the home. however, inheritance taxmay be an issue.
Although your mother gave you the property, because she still livesin it she has a ‘reserved benefit’ in it. This means that the home’svalue remains in her estate. In layman’s terms, even though she hasgiven the home to you, the taxman will still treat it as belonging toher.
Depending on the value of the property, your mother’s other assetsand her personal circumstances, IHT may be due if she dies beforemoving out of the property.
If she moves out, the value of the property will remain in her estate for seven years.
P.L.writes: I earn very little interest on my cash Isa. Is there any benefit in transferring it into an equity Isa for a better income?
H.K.replies: If you transfer to an equity Isa, you are taking more risk in return for a potentially higher reward.
The equity Isa could be invested in shares that producedividends. It could also be invested in fixedinterest stocks such asGovernment gilts or corporate bonds, which pay a regular income.
You can transfer from a cash to a share Isa, but not the other way. the transfer would take a few weeks to complete.
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