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| Case Studies - Case Studies |
Summary:We helped some clients to realise that their assets were growing too quickly and that they would never been able to spend the capital put aside. Therefore we put in place a programme to ensure that they kept their desired lifestyle while passing excess capital to family members thus avoiding inheritance tax at 40%. Background:An existing client had previously asked us to manage their money in line with their income goals. However, at an annual review we highlighted that they actually had too much capital for their needs and were in danger of paying inheritance tax at 40% on their death. Therefore, we decided to change the emphasis of their planning to provide flexible solutions to legally and safely avoid inheritance tax, whilst retaining the right to receive an income from their assets. Problems/Challenges:As with all inheritance tax cases it is not possible to achieve complete avoidance of tax without some corresponding trade-off. For example, it is actually very easy to avoid inheritance tax completely by giving away assets. In this case however, the clients wished to retain control over their assets and retain access to capital. In addition, they still needed to achieve an income from their assets and were reticent to give assets away if this would affect their future lifestyle. Our approach:The first point was to establish their goals and aspirations for the future and this also encompassed their extended family such as children and grand children. We also discussed their wider interests such as involvement with local charities. This gave us a good foundation to understand where their priorities lay in relation to the future distribution of their assets. We combined this with an analysis of their lifestyle requirements for the future aiming to retain access to enough capital for any eventuality (such as care fees). Then we worked on a financial plan to ensure that they had enough income in the future to meet their needs without the risk of running out. We agreed a programme of gifts over time to various family members and charitable institutions. This made use of available exemptions with the aim of giving away their excess capital without fear of running out of money. With the remainder of their estate we were able to recommend a variety of solutions which would enable them to avoid inheritance tax over time whilst still retaining access to their capital should they need it and also giving them a sustainable income. We referred them to a specialist solicitor who we worked with to ensure that their affairs would be efficiently handled on their death whilst still paying the minimum tax. Outcomes and Impact:The clients were able to make informed decisions about their future financial stability and also to help a number of family members financially from their excess assets. This meant that they had the enjoyment of seeing their money being usefully employed by their family whilst they were still alive. They did this whilst still ensuring that they retained control over their assets and income and made sure that their standard of living would not worsen. We were careful to ensure that all the options we presented to the clients were cautious, tried and tested, and approved by the tax authorities. This meant that, as far as we were able, we could ensure that their planning was applicable to the longer term and would not become obsolescent. Continuing Support:Each year we schedule two reviews with the clients. The first is to re-evaluate their financial situation and revise their financial plan so that we can take into account any changes to their circumstances and re-assess whether they remain on target to meet their long-term goals. The second meeting reviews the clients’ investment portfolio and aims to keep it on track towards its goals while taking the least risk needed to do so. Further information: |
