Coventry: Inheritance Tax Planning

Coventry: Inheritance Tax Planning

Jean was in her mid-60s, based in the Midlands and came to ASPL for advice on inheritance tax planning.  She had just inherited £400,000 from her mother, and in addition to this, had just under £1 million of capital in her own name. Her main concern was inheritance tax.

The first thing we did was complete a Deed of Variation which put her mother’s money into a Discretionary Trust. This enabled Jean to have full control of the capital as a Trustee. She was also a beneficiary of the Trust. The effect of this is that the money never came into Jean’s estate for inheritance tax purposes, thus saving a potential £160,000 worth of tax.

From this Trust, Jean has access to both income and capital if she ever required the monies.

We then invested £600,000 of the remainder of her capital into a Discounted Gift Trust, from which Jean drew an income of 5% of the monies invested, i.e. £30,000 per annum.

This Trust was constructed in such a way that £305,000 of the money invested was immediately outside her estate, the remainder being a potentially exempt transfer, which will be out of her estate after 7 years. In this way we created a further tax saving of £120,000 with a potential further saving of £120,000 in future years.

Jean was again a Trustee to the second Trust, although she could not be a beneficiary of the capital, but she still therefore has control over the investment decisions with the Trust.

Both Trusts have been invested using the ASPL Investment Process, in line with the Trustees’ attitude to investment risk. This incorporates the need to produce an income of 5% per annum.

NB. Whilst the Client names have been changed for Client privacy purposes, these case studies are actual ASPL Client case studies.

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Adrian Smith

Chartered Financial Planner
Chartered Wealth Manager

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