"A great outcome was secured on an Inheritance Tax analysis and mitigation case. Our client Mabel, came across many challenges, and the solutions that we recommended created a successful result..."
A property sale raises Inheritance Tax questions
Mabel approached our team after deciding to sell her £1.2m home to downsize to a property worth approximately 50% of this value.
After our first initial meeting with Mabel, we learned that in addition to the profit attained from this house sale, there was a substantial amount of other assets involved meaning if Mabel was to sadly pass away, this would have resulted in the beneficiaries of her estate having to pay a large sum of Inheritance Tax.
Mabel wanted to support her children with their own mortgages and outstanding debts. And came to us to take control of her assets and to reduce her Inheritance Tax liability.
Being in her late 80s, we were mindful that whatever route we took, we wanted to ensure it was ultimately the right option for Mabel, with her best interests at heart, at every step of the process.
Mabel sat down with our Chartered Financial Planner Suzanne Shepherd, along with our Paraplanner Rachel Challenor, and Trainee Paraplanner Will Dowd. With each of our cases, we like to utilise all of our in-house expertise and build a team that all play a vital role in each step of the process.
It gave us an opportunity for us to really gain a deeper understanding of Mabel’s requirements and to discover what was most important to her. It helped us to appreciate what Mabel’s goals were, what she wanted to achieve in working with us and how each of our services would help with this.
Following our in-depth discovery discussion, we went away and created solutions using our expertise and modern technology to analyse Mabel’s current situation and future objectives.
We calculated Mabel’s total assets and applied any applicable IHT reliefs, and confirmed the total IHT liability. We discussed different mitigation strategies and options available to Mabel. After weighing up the pros and cons of gifting away versus investing in potential relievable assets, we found that an investment into Business Property Relief (BPR) was the best fit for Mabel given her circumstances.
After doing our research, we met with Mabel again, to ensure she had complete clarity and understanding of her options and financial position. It’s also a chance to discuss any concerns she may have.
A tailored solution is the best one
Our chosen route ensured that Mabel retained full access to the funds should they ever be required. With a BPR-qualifying investment, the shares become 100% Inheritance Tax exempt after a holding period of just two years, as long as the shares are still held at the time of death and remain invested within the BPR environment.
The gifts that Mabel wanted to give to support her children, wouldn’t have been able to have left her estate for 7 years. By investing in an amount that was equal to her assets that would be liable to IHT, the amount of time before the IHT relief can be applied is reduced from 7 years to 2 years. Given Mabel’s advanced years, we figured this would help efficiently give Mabel the confidence she needed.
Providing peace of mind for Mabel
We pulled together a clear plan of action and after a discussion with the team, Mabel decided to go ahead with the investment into the Business Property Relief funds.
Providing Mabel survives for a further 2 years, by choosing this method, she will not leave a IHT liability for her estate beneficiaries. This not only means a potential saving of £206, 469 to Mabel’s beneficiaries, they will also benefit from the targeted investment growth on the sum invested in to BPR, and will receive a rate of 3% per annum.
Mabel was delighted with this outcome, and it certainly put her mind at ease to know that she was now in complete control of her assets.
We appreciate that nothing in life stays the same, as with all our clients, we pledge to stay right by your side should anything change, and we’ll continue to review Mabel’s plan and make any changes should they be required.