Inheritance Tax  

Intergenerational wealth planning (Part I)

  • Describe some of the ways clients can mitigate IHT
  • Identify some of the advantages of Aim-mitigating products
  • List the ways life interest trusts can work
CPD
Approx.60min
Intergenerational wealth planning (Part I)

Introduction

Inheritance tax applies primarily on death, but also to gifts made to individuals within seven years of death and to lifetime gifts other than to individuals, charities and qualifying political parties.

As Laura Suter, personal finance analyst at AJ Bell, puts it, IHT is a “notoriously tricky tax to navigate and understand’.’

Indeed, HM Treasury commissioned a review of IHT over concerns it is too complex, leading the Office of Tax Simplification to propose a change to the seven-year rule as part of a body of reforms.

Ms Suter says: “IHT increasingly falls on the middle class, with estates worth £10m or more paying an effective 10 per cent tax rate, compared to a 20 per cent tax for those with smaller estates of £2-3m.”

She adds: “This is down to the fact that the wealthiest families get professional advice to make full use of the allowances, while those with smaller estates do not – highlighting the benefit of planning for IHT.”

It is extremely important that all clients – no matter their income bracket – who come to you seeking advice, are made aware of the possible rules and exemptions available to them and their families sooner rather than later.

This will spare their loved ones the financial and emotional burden of a hefty IHT bill.

But, unsurprisingly, when it comes to inheritance, “some clients will not be comfortable to start with – money has long been a subject no one talks about, but it’s really important that we knock down these walls,” says Tracy Crookes, financial planner at Quilter Private Client Advisers.

Ms Crookes adds: “An easy way to build that long-term relationship is to suggest meeting family members and/or including them in client conversations.”

This guide will look at the main factors driving interest in intergenerational wealth planning among clients and why families should start thinking about potential IHT issues.

It will also look at how advisers can ensure clients have thought about how to pass wealth on by using their pension contributions, gifting and tax-efficient investments such as Isas and trusts, as well as how they can engage with younger generations to make sure all family members understand the process.

Victoria Ticha is a features writer at Financial Adviser and FTAdviser.com

In this guide

CPD
Approx.60min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. What is the nil rate band for an individual, according to Victoria Ticha?

  2. According to Laura Suter, an estate worth £10m or more is likely to pay more tax than estates of between £2m to £3m, true or false?

  3. According to Ben Gilmore, which of the following is NOT one of the most likely groups to receive an inheritance?

  4. What are the advantages of holding Aim shares, according to Victoria Ticha?

  5. According to Jon Gould, Aim-listed shares can be put into an Isa, true or false?

  6. According to Philip Whitcomb, how does a life interest trust work?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Describe some of the ways clients can mitigate IHT
  • Identify some of the advantages of Aim-mitigating products
  • List the ways life interest trusts can work

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