Estate Planning Guide

Shifting portfolios towards later life Retaining wealth within the family Mr Bennett, 65, currently owns a portfolio of buy-to-let properties worth £1,500,000 which he intended to pass onto his children following retirement. However, they are not ready to manage the properties and the recent changes in tax rules affecting landlords mean he is looking to sell his portfolio and retire. Mr Bennett is also keen to pass on his wealth to his children in a tax efficient manner BR benefits: - Control of funds - Regular income - IHT exempt after 2 years EIS benefits: - 28% CGT liability deferred - 30% income tax relief could be used to offset income tax (i.e. from pension) - No CGT on EIS gains - IHT exempt after 2 years CGT Deferred from day one (28%) EIS BR Capital Gains £500,000 £1,000,000 *If Mr Bennett were to die within the first 2 years of investment, the value of his holdings would be inside his estate, therefore subject to IHT. However, his deferred CGT liability through the EIS will never come into charge. Saves £400,000 in IHT Total IHT saving £600,000 Saves £200,000 in IHT Total CGT deferral* £140,000 BR He and his beneficiaries could save hundreds of thousands of pounds in IHT without losing access to his capital and with the potential to earn a regular income, offset his capital gains tax liability and participate in capital growth. After consulting with his financial adviser, he learnt that the proceeds of the property sales could be invested in BR qualifying companies and after two years the value of his funds will be IHT exempt. BR Qualification 2 years 2 years Their IFA recommends the WAY Flexible Inheritor Plan IHT The WAY Flexible Inheritor Plan is a valuable inter-generational IHT and family wealth preservation strategy, whilst also helping Adviser’s to retain assets under management and advice by having the opportunity to discuss the most tax efficient manner in which to release Trust assets to Beneficiaries; including the use of CGT Holdover Relief to mitigate tax on gains when distributing to the many potential Beneficiaries. Mr and Mrs Green each gift £331,000 (£325,000 NRB plus £6,000 in unused Annual Gift Exemptions), appointing WAY’s Professional Trustee Service as the Trustees. Sarah and Tony divorce. They ask the Trustees of their WAY Flexible Inheritor Plans to consider loaning £150,000 from each plan to Sarah to buy a house. They survive a further seven years and so each has removed £331,000, plus (hopefully) growth from their estates. Reversions of up to 10% p.a., could be returned to them, if required, or deferred to a later anniversary, by their Trustees, without any tax consequences. Each then recycles their NRB’s via further WAY Flexible Inheritor Plans thus further reducing their estates to IHT liabilities. Mr and Mrs Green are 62. They have two children: Sarah 34, married to Tony, and David 32. Mr and Mrs Green’s total combined estate is valued at £2.7 million including a £1 million ISA portfolio and general investments of £720,000. Their key concerns are: • IHT mitigation. • Funding potential future care fees. • Protecting their family wealth. • Access to capital, should their circumstances change. • Access to capital should their children or grandchildren require financial assistance. • Education and university fees for their grandchildren. Sarah signs a loan agreement with the Trustees, repayable on demand by them, but Mr and Mrs Green submit a revised Letter of Wishes asking them to consider not charging any interest on the loan and for it to remain outstanding for the remainder of Sarah’s lifetime, thus reducing the value of her estate and also protecting their family wealth, if Sarah re-marries. £331,000 x 2 £150,000 x 2 RNRB QUALIFY 7 years NRB WAY LOAN 79 CASE STUDIES