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A welcome side-effect of estate planning

Why it’s worth encouraging clients to talk about the entirety of their wealth

Towards the end of 2019, Octopus commissioned a survey of advisers in which nine out of ten respondents said their clients are increasingly reluctant to give up access to capital as part of their estate planning.

I ended the last Tax Angle by sharing a link to a planning scenario that shows why investments expected to qualify for Business Property Relief (BPR) are worth considering in situations like this. Because BPR-qualifying investments stay in the client’s name, they directly address that reluctance.

Here’s the link again in case you missed it

How estate planning can lead to advising on more of a client’s assets

Today, I’m going to look at how encouraging clients to feel more comfortable about doing their estate planning can lead you to advise on more of that client’s assets.

In fact, our survey found that 76% of advisers said that estate planning has led to them advising on client assets that they hadn’t previously advised on1.

“When you start talking to clients about their inheritance tax problem, more often than not, they will begin to open up about all the other assets they own, whether it’s the second bank account or the holiday home in Spain,” says Jessamy Walker, a financial planner at Brown Dog Financial Planning in Berkshire.

Estate planning can give an adviser greater visibility of a client’s assets, because they need to plan for the whole estate. In some cases, the adviser will identify a better way to allocate assets they weren’t able to advise on previously.

“Talking to clients about inheritance tax planning leads to conversations about their entire estate,” says Ken Bannister, an estate planning consultant at Active Wealth Independent Financial Advisers in Hampshire.

“We’ll often find that people have investment bonds and large ISA accounts, which we wouldn't necessarily have touched before starting their estate planning.”

Estate planning never happens in isolation, either. Some clients may be planning to sell their home with a view to downsizing, or selling a business as they retire, both of which would free up previously illiquid wealth.

“Sometimes people sell a second property,” says Geordie Bulmer, an independent financial adviser, inheritance tax and pension specialist at AISA Retirement Planning in Bristol.

“They realise they’ve got to deal with the hassle of renting it out, and they also realise that the value of it is going to be taxed at 40% when they pass away, because their home uses up their nil-rate band. So some people think, let’s sell the house, take the cash and put that into an inheritance tax service.”

All of the above examples are of planning that was right for the client given their circumstances and objectives. The fact that working together on the plan gave the adviser more visibility over the client’s estate was a side-effect.