For the first time in the conversation, Olive’s interest is piqued. This could be a way to pass more wealth to her beneficiaries while retaining control of it while she’s alive.
Ben also explains the risks of making a BPR-qualifying investment. It would involve holding shares in one or more unquoted or AIM-listed trading businesses, and the value of her investment, as well as any income from it, could fall as well as rise. Olive would need to be comfortable that BPR-qualifying investments are higher risk than more mainstream investments, and she may get back less than she invests.
In addition, Olive should bear in mind that HMRC assesses BPR when the estate makes a claim after she has died. Entitlement to the relief will depend on any companies she invests in maintaining their BPR-qualifying status such that they qualify at that time. Tax treatment will depend on personal circumstances, and rules could change in future.
Ben also makes clear that withdrawals can’t be guaranteed, as the shares of unquoted companies or those listed on the Alternative Investment Market (AIM) can be harder to sell than those on the London Stock Exchange’s main market. The share prices may also be more volatile.
Olive wants to know more
Olive agrees to take some literature, and she books a follow-up meeting. Like many estate planning decisions, this one may take a few conversations before Olive decides what she wants to do. But for the first time, she is actively engaging with the idea. That’s because she now realises estate planning doesn’t necessarily involve giving up control of assets or being assessed by doctors.
In a survey commissioned by Octopus in December 2019, 89% of advisers said their clients have become more mindful of retaining control of their assets compared to five years ago.1 Introducing a client to the idea of BPR-qualifying investments can be a good way to show that estate planning does not have to mean giving up that control. Even when a client decides this type of investment is not for them, it can be a good way to unlock the wider estate planning conversation.
To find out more about BPR-qualifying investments, as well as resources you can use to support your estate planning conversations, go to https://octopusinvestments.com/our-products/inheritance-tax-investments/.
1Research was conducted by Vouched For via an online survey of 560 financial advisers.