Personal Clients

Inheritance Tax Planning Case Study

Mr & Mrs Jones, both aged 70 and in good health with a large estate came to us wishing to avoid inheritance tax. They have two sons, aged 48 and 47, who both also have very large estates. Therefore they were concerned about Inheritance Tax being paid by both them and their children.
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BEFORE

Financial Position (Between 70 and 100)

Mr and Mrs Jones’ estate is currently valued at £1.2million (£300k home valuation and £900k of cash and investments).
 

As shown by the chart, if no planning was this undertaken could rise to £3million by the end of their lives. Meaning under current legislation over £2.5 million would be subject to Inheritance Tax.

 

AFTER

Financial Position (Between 70 and 100)

As well as wanting to avoid Inheritance Tax, they also wish to be able to continue to enjoy their lifestyle without running out of money during their lifetime. (They stipulated ensuring they had in the region of £100,000 in today’s terms at age 100).

As there was sufficient income for either to survive in the event of either’s death and that £500,000 could be made as a gift from them both into a trust which after seven years (of at least one of them surviving) this would fall out of the estate for IHT.

The advantage of the trust is that both sons could be appointed trustees and their children appointed as beneficiaries. Meaning on the death of the sons the funds could be used for the benefit of their children without any IHT being paid.

The above graph shows above that a balance of £97,600 (in today’s terms would still be available at age 100).

 

This case study is an example only and should not be viewed as individual advice.You should contact us to discuss your personal situation.