BR Guide FINAL 20 Feb

61 CASE STUDIES 60 CASE STUDIES Item Value (No estate planning) Value (Jimmy leaves his shares to discretionary trust) Value (Wanda buys Jimmy’s shares from discretionary trust) Value (Wanda puts purchased shares in trust) UNLISTED SHARES £600,000 £600,000 £600,000 £600,000 PROPERTY £1,500,000 £1,500,000 £1,500,000 £1,500,000 OTHER ASSETS £1,000,000 £1,000,000 £1,000,000 £1,000,000 TOTAL ESTATE £3,100,000 £3,100,000 £3,100,000 £3,100,000 NRB AVAILABLE £735,415 £735,415 £735,415 £735,415 RNRB AVAILABLE £20,000 £320,000 £320,000 £410,000 ASSETS REMOVED FROM ESTATE (IN TRUST) £0 £600,000 £600,000 £1,200,000 IHT FREE ASSETS £600,000 £0 £600,000 £0 TAXABLE ESTATE £1,744, 585 £1,444,585 £844,585 £754,585 IHT PAYABLE £697,834 £577,834 £337,834 £301,834 RESIDUAL ESTATE £2,402,166 £2,522,166 £2,762,166 £2,798,166 WANDA AND JIMMY’S PLANNING OPTIONS ( * ) If Wanda places the shares in the discretionary trust Additionally... Additionally... £600,000 WANDA BUYS THE SHARES FROM THE TRUST SO SHE OWNS THE SHARES AND THE TRUST HOLDS £600,000 CASH BR Qualifying Even greater tax savings could be achieved if the company was not sold following Jimmy’s death after two-year qualification period There is an IHT liability of £301,834 on Wanda’s death. (The outcome is £3.1 million less £600,000 successfully gifted into trust, less £600,000 of BR qualifying shares in trust, less £735,415 NRB, less £410,000 RNRB, leaves £754,585 subject to IHT @ 40% = £301,834 payable) RNRB taper: £1 RNRB lost for every £2 of estate value over £2,320,000 RNRB available = £410,000 No RNRB taper So, full £410,000 of RNRB remains available There is an IHT liability of £337,834 on Wanda’s death. (£3.1 million less £600,000 successfully gifted into trust, less £735,415 NRB, less £320,000 RNRB, less £600,000 subject to BR leaves £844,585 subject to IHT @ 40% = £337,834 payable)* *This does not consider possible CGT and other costs relating to share transactions. +£240,000 IHT SAVING WHEN SHE DIES £1.5m PROPERTY £400,000 OTHER ASSETS WANDA’S ESTATE: £1.9 MILLION £1.2 million total taken outside estate £600,000 BR QUALIFYING SHARES £600,000 CASH FROM WANDA’S PURCHASE OF SHARES