Financial Planning and Wealth Management working with lawyers

Our clients were already trustees of an existing trust created during the settlor's lifetime for Inheritance tax purposes. This existing trust had been in existence for more than 7 years and the beneficiaries of the trust were all expecting a legacy as a result of the sale of farm assets, which would qualify for Agricultural Property Relief (“APR”) due to the death of the settlor. The settlor had died 12 months earlier thus enabling the deed of variation route to be considered.

The objectives of holding farm assets until death is that IHT relief can be claimed by the executors to save 40% tax on the entire estate. As the four beneficiaries were not keeping the farm as a going concern, the capital received as a result of the sale of the farm would then be brought into their own estates, subjecting the capital to IHT due to their total personal assets exceeding £325,000 (and £650,000 for the married couples).

The family wanted to retain control of the capital, while making immediate IHT savings. The original trust was also considered, with a view to ensuring further IHT savings, and the original trust deed was reviewed and trustees/beneficiaries reassessed.

Why the Solicitor sought to work with us

We originally identified that our clients had inherited funds and were expecting the proceeds of the sale of the farm. By understanding the circumstances of the individual beneficiaries, we were able to ascertain that all four beneficiaries would benefit from a deed of variation into a discretionary trust, to ensure that the funds did not form part of their estates for IHT purposes.

• Single beneficiary: Inheriting £500,000. This would immediately be subject to IHT as their net worth was already over £325,000. They had also not made any will provisions.
• Divorced beneficiary: Inheriting £500,000. Also subject to IHT immediately; it was important that their children had protection in place to avoid future marital disputes or claims on the estate.
• Married beneficiaries: Inherited £500,000 each. They wanted to avoid capital being paid into their estates due to the complex nature of their business assets and circumstances.

In all cases, should the estate have been distributed equally in line with the will provisions, the capital would have been subject to IHT at 40%, totaling £800,000.

What we did for the client

• Arranged bespoke deed of variations into discretionary trusts tailored for each beneficiary.
• Arranged new wills to ensure assets would be aligned to the new plans and long-term objectives.
• Provided advice on how to invest the trust capital and enabled beneficiaries to become trustees of their own trust capital.
• Reviewed the original trust and appointed new, younger trustees to ensure the deed allowed greater perpetuity.

Result

• Saved the next generation at least £800,000 in IHT.
• Saved a further £100,000 by restructuring the existing investment bond within a flexible trust to generate income rather than immediate distribution.
• The solicitor created bespoke trusts and updated wills to cater for changed circumstances.

The Issue

Individuals with large or complicated estates likely to face inheritance tax consequences on early death for the remaining spouse and children.

What we did for the client

Our close relationship with clients allows us to identify early scenarios where the use of a deed of variation or alternative trust arrangement could be used effectively.

Interaction with a Solicitor

Where a legal practitioner is not already involved, we make a referral to a trusted solicitor to formalize the arrangements.

Result

Planning with these arrangements is extremely effective for those left behind, often resulting in substantial tax savings and protection for the family.

The Issue

Clients with no dependents but substantial wealth who have specific intentions for their wealth during their lifetime and after they pass away.

What we did for the client

A client wished to pursue his passion for the arts and support young people in the community rather than having his estate overly taxed. We protected the anticipated IHT liability through a whole-of-life protection policy.

Interaction with a Solicitor

A referral to a local solicitor meant they were able to draw up a specific charitable trust arrangement.

Result

We enabled the client to support those in need during his lifetime and beyond through a structured charitable investment.

The Background

Pension rules on death changed significantly in 2015, creating a shift in estate planning and taxation advantages.

The Issue

Clients with existing drawdown arrangements now benefit from the removal of the 55% tax charge which previously applied on death.

Result

Individuals with significant pension accumulation can now pass their pension wealth down through generations, allowing any nominated individual to benefit from the tax wrapper.

The Background

In 2015, rules changed to allow ISA tax wrappers to effectively remain and be transferred to a spouse or civil partner on death.

The Issue

Legislation in Financial Services changes frequently, and many are unaware of the seamless transfer options available.

Why we interact with a solicitor

Legal practitioners refer clients to our Financial Planning Consultants to ensure the spouse rightly benefits from the change in rules and that estate affairs are managed correctly.

What we do

Our consultants ensure the spouse benefits from these rules in a seamless manner, providing confidence that the estate is constructed as it should be.