Two of our clients, Brian and Susie, had a house worth just under £1 million, and savings and investments of just over £1 million. As things stood, there would have been an Inheritance Tax liability of £540,000, a little over 25% of the estate.
On top of that, Brian's mother had died recently, leaving them £300,000. This would add a further £120,000 to the Inheritance Tax liability.
Brian and Susie are both retired and have sufficient income from their pensions for their everyday needs. However, they did want to retain access to their capital and therefore didn't just want to give it away.
The first thing that we did was to organise a 'deed of variation' on Brian's mother's estate. This gave them access to the inheritance, but the money was excluded from their taxable estate. This saved £120,000 of Inheritance Tax. We then organised two trust arrangements that gave Brian and Susie access to their capital annually, in tranches, so that it was accessible if they needed it. Although this was unlikely, it did give them peace of mind.
After seven years, these trust arrangements will fall outside of their taxable estates, saving a further £260,000 in Inheritance Tax.
Finally, we invested £350,000 in arrangements that enjoyed relief from Inheritance Tax after two years, whilst still giving Brian and Susie access to the capital should they need it. This saved a further £140,000 in Inheritance Tax.
As a result of this, there was a total inheritance tax saving of £520,000, whilst allowing Brian and Susie to retain access to their wealth.
We also looked after their ongoing investment management requirements.