Once we have discussed your asset protection and Inheritance Tax avoidance goals and drawn up detailed plans to help you achieve these outcomes, we get to work to make these aspirations a reality. Asset protection is achieved by utilising a variety of inheritance tax discretionary trusts.
The smarter way to preserve your estate
Unlike most other financial advisers, we can recommend a perfect solution for anyone using an IHT trust that avoids Inheritance Tax after seven years survival, but which allows the client access to their capital.
This trust may also be closed in favour of the beneficiaries at any time, unlike the discounted gift trust sold by so many providers. This allows those who may have been putting off IHT planning to take action.
Asset protection and Inheritance Tax avoidance can include making gifts to your children, however the risk here is that the recipient may lose the capital. For example, a gift to a child with a rocky marriage, or one with business difficulties. In this instance IHT advice and commercial sense can conflict. The Inheritance Tax plan described above could alleviate these concerns.
Home and pension only
If you only have your home and pension, you might be wondering how to make use of these inheritance tax discretionary trusts. If you are in this situation, then subject to very specific independent advice, equity release coupled with an IHT trust may be a practical solution.
Such a solution should only be explored with the involvement of the whole family because it could backfire if property prices fell and you died early. However, if used correctly this may cut IHT liability significantly.
The very elderly
For clients who are very elderly and for whom survival by seven years seems unlikely, it is possible to invest in certain listed shares on the Alternative Investment Market (the “junior” stock market).
After being held for two years there is no IHT. This strategy is very risky as such shares are volatile and there may not be any market for them when you want to sell. However, this may be the last chance to avoid Inheritance Tax for those with a limited life expectancy.
Cash gifts
Everyone should consider making cash gifts annually – at least £3,000 is exempt from IHT. If you can show that you can make more gifts than this from income, without depleting your capital, you may do so.
Make sure you keep meticulous records of your income and outgoings and keep them until at least seven years are up.
Note that as IHT allowances are transferable between spouses (including civil partners) complex wills are no longer needed to avoid IHT. However they remain a vital part of estate preservation.
Please note: Estate Planning & Tax Planning is not regulated by the FSA.