Inheritance Tax

For most people there is only one way to avoid this tax which is to make gifts and survive by seven years. Many clients are reluctant to give away their capital in case they need it later in life – for example if they go into care.  However the majority of people do not go into care.  There is a perfect solution for such clients using a trust that avoids tax after seven years survival, but which allows the client access to their capital. This trust may also be closed in favour of the beneficiaries at any time, unlike the discounted gift trust sold by so many providers.

Other clients may be willing to make gifts but feel fear that the recipient may lose the capital. A good example is a gift to a child with a rocky marriage, or perhaps one with a business in difficulties – very common at present.  These clients may benefit from a discretionary trust and our association with Burt Brill and Cardens means that you may set this up very cost effectively and then seek our advice about sensible investments.

Some clients have only their homes and pensions so they cannot see how to make gifts.  For these clients and subject to very specific independent advice, equity release coupled with a trust may be a practical solution.  Such a solution should only be explored with the involvement of the whole family because it could backfire if property prices fell and you died early.

For clients who are very elderly and for whom survival by seven years seems unlikely, it is possible to invest in certain listed shares on the Alternative Investment Market (the “junior” stock market).  This strategy is very risky as such shares are volatile and there may not be any market for them when you want to sell.  

For all clients, make gifts every year – at least £3,000 is exempt and if you can show that you can make more gifts than this from income, without depleting capital, you may do so.  If you seek to rely on this little-used exemption, make sure you keep meticulous records of your income and outgoings and keep them until at least seven years are up.

Finally, do something and do it with specific advice for your own unique circumstances.