A lady in her late 70’s contacted us as she was concerned about the effect of Inheritance Tax on her estate. She had been widowed for a number of years but still enjoyed good health and was in the fortunate situation where she had substantial investments and more than enough income for her needs.
Estate planning can be a sensitive subject and at her request, we met with her and her children to discuss various ways of reducing Inheritance Tax. Using our Lifestyle Financial Planning software, we assessed our client’s income and outgoings and looked at her investments and other assets. As a result of that discussion, she felt that she could afford to give away some of her capital but she was reluctant to lose full access to the amount in question – “just in case”.
After some discussion, it was agreed that she would make a lump sum gift out of her capital thus reducing her taxable estate. However, although she was happy to make this gift, she wasn’t quite ready to give up full access to the amount in question. On that basis, we suggested a Trust arrangement where there is access to part of the value each year for our client, if required, whilst the gift itself will fall out of the estate for Inheritance Tax after 7 years.
In working closely with our client and her family, we were able to provide a flexible solution where she can reduce her Inheritance Tax liability with the reassurance of knowing there is access for her to part of her capital, if required.