Chapter 11: Financial Advice Flashcards
what is involved in accidnt and sickness cover?
provides for income or some sort of lump sum in the event of an accident or some sort of illness.
what is medical insurance?
intended to cover the cost of medical and hospital expenses, may be taken out on individuals or provided as part of an individual’s employment. costs covered are closely defined, limits on payouts
what is long term care cover?
cover that provides the funds needed in later life to meet the cost of care, value depends on amount of state funding available. expensive and premiums will be paid as income that can be used to cover the expenditure#
what does business insurance provide?
cover for claims against faulty work/goods, protecting loans, providing income in case of lack of ability to work, payments if a key business member/ shareholder dies
what is compound interest?
interest on interest already earned
how dos the UK govt define ‘saving’?
putting money aside without risk
what investing involve?
committing money into an investment vehicle in the hope of making a financial gain, greater level of risk than saving. should be for the longer term, and suitable if the individual already has enough savings for 3-6 months of living expenses
what are the characteristics of later-life planning?
building up capital to have the ability to enjoy rather than endure retirement where a worthwhile income will be accessible
what is estate planning?
making sure that a client takes appropriate steps to ensure that their accumulated wealth passes to their intended beneficiaries. involves determining who will inherit the assets and capital left behind and steps that can be taken to reduce taxes
what is the definition of a will?
a legal document that specifies what is to happen to an individual’s assets on their death, if no will is made, the legal system decides who inherits
what is tax avoidance?
legal exploitation of the tax system to one’s own advantage to reduce the amount of payable tax
what is tax evasion?
effort by individuals and other entities to evade the payment of taxes by illegal means
what is the worldwide system of taxation?
residents of a country are taxed on their worldwide income and capital gains irrespective of where their income or gains arise e.g., UK, US, Germany
what is a territorial based tax system?
residents are only taxed on income and capital gains arising in that country
what is a legal person?
an individual or entity that is recognised as having legal rights and obligations
what is the definition of an individual?
acquire their status as legal persons when they are born
what does ‘executing power of attorney’ mean?
an individual has signed a legal document which authorises someone to act on their behalf
what is the ordinary power of attorney?
authorises one or more persons to make financial decisions on behalf of an individual
what is lasting power of attorney?
where an individual authorises one or more persons to make financial/ health and care decisions on their behalf. must be registered with the Office of the Public Guardian and then submitted to financial institutions to show the attorney’s authority
what is a deputy order?
where a LPA is issued as someone has become mentally incapable of managing their financial affairs
what is the role of a personal representative?
they collect the assets, settle any debts and distribute balance to whoever is entitled to the remainder. must apply for grant of letters of administration
what is a trust?
legal means by which an individual can give property to another person to look after on behalf of a third party, terms are set out in a trust deed
what are the roles of trustees and beneficiaries?
trustees are responsible for managing the trust and are the legal owners of its assets. the beneficiary is the person for whom the trust is intended for
what is the definition of a company?
legal entity formed to conduct business or other activities in the name of its members, separate entity from its shareholders
