Background

• Mr & Mrs Client Aged 74 & 77
• Proposed sale of their home £4m
• Purchase of new home £2m
• Clients wanted their 3 grown up children & their grandchildren to receive the maximum benefit from the surplus sales proceeds of £2m

Challenges

any ‘gifts’ of capital and/or income could be subject to Inheritance Tax in the event of death within 7 years of making the gift. Any planning typically involves giving up the right to the capital and/or income it might produce. However clients indicated they had no need to access the capital and/or income it might produce.

What we did

1. We amalgamated a number of planning opportunities
2. We used Potentially Exempt Transfer legislation & Normal Expenditure out of income to mitigate Inheritance Tax
3. A Discounted gift & income trust was established which
4. Created a fixed income stream
5. Which in turn funded the Insured Trust

Brief Description of Strategy

The Results

• On Death of both clients within 3 years their children will receive £3.56m (+ growth on £2m)
• On death of Mr in Yr 5 & Mrs in Yr 7 children receive £3.82m (+ growth on £2m)
• If clients both live for more than 7 years their children are due to receive £2m + growth (original gift) + Insured Trust £2m = £4m + growth
• We were able to create an estate for our clients’ children & grandchildren far in excess of the initial capital sum.

This document is provided as a working example and for information purposes only, this should not be construed as financial or investment advice.