Inheritance Tax  

Advisers reveal how they are mitigating IHT for clients

Advisers reveal how they are mitigating IHT for clients

Financial advisers expect to be drawing on a wide range of solutions to help mitigate potential inheritance tax bills for their customers, according to research.

Topping the list of methods they are using to reduce clients' IHT bills are discretionary gift trusts, discounted gift trusts, taking advantage of business property relief and using a protection plan in trust, all of which were favoured by between 31 per cent and 36 per cent of advisers in the last year.

The findings, from TIME Investments and Cicero Research, reveal IHT planning has become huge business for advisers.

Of the financial advisers surveyed, 63 per cent view IHT planning as an important part of their services, and 36 per cent believe it will become more vital over the next two years.

Paul Killik, senior executive officer of Killik & Co, said: “Families need to plan to bequeath a large chunk of their estate to their younger generations, giving less or even nothing to their immediate children, in order that the capital can enjoy the long term benefits of compounding.

“An intelligent approach to giving money away is to determine how much the client would like to bequeath to the younger members of the family. The client then discounts that number by the growth they might hope to achieve over the expected remaining years of life and invests it in an Alternative Investment Market IHT service.

"However, they should also consider attaching a codicil to the will naming their grandchildren and great grandchildren alive at the time of the client’s death as the beneficiaries of the investments in the IHT service.”

Demand for professional financial advice on IHT and estate planning is being driven by several factors. This include the increasing value of assets and property, especially in London and the south east, the use of pensions as an estate planning tool, changes to the IHT limits and an aging population.

Simon Housden, sales and marketing director at TIME Investments, said: “IHT and estate planning represents a growing opportunity for financial advisers.  There are a wide range of tax efficient investment solutions open to advisers and their clients, including several that will help them generate steady growth or income, whilst mitigating IHT liabilities in only two years.”

Phil Wickenden, managing director of Cicero Research, said: “This in-depth research highlights the opportunity IHT planning presents financial advisers.  It shows that there is low-hanging fruit in terms of clients who need sound, sensible IHT advice and there are plenty of solutions open to them but greater pro-activeness will be key.”

For the TIME survey, 100 advisers representative of the market were sampled from a panel of circa 16,000 advisers.  All interviews were conducted by telephone lasting 30-40 minutes on average.  Interviews were conducted during quarter two 2017.