CASE STUDY SEVEN - REDUCE YOUR POTENTIAL INHERITANCE TAX LIABILITY

Mr and Mrs B were a lovely couple who had worked hard all of their lives and were now talking to viva through their IFA as they had accumulated a vast estate. They were both years old and due to the success of their building firm, lived in a property worth £2m and had around £500,000 in other assets.

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Giving holistic advice their IFA recommended that they chat with a reputable firm in the later life sector. Having completed their homework, they decided to contact Viva Retirement Solutions, as they said, due to our low fees and multi-award winning achievements in the Later Life Sector.

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Viva arranged to see the clients with the IFA present so that we could understand the whole picture of what the clients had and what they were trying to achieve.

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The clients were very aggrieved that “The Taxman” might get 40% of all assets above a certain tax threshold and so wanted to try and reduce this whilst helping our their children at the same time.

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Two of the three children could do with financial help now, whilst the third child did not require any help at this time.

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The clients were always careful to pay off anything owed when it was due and had cleared their mortgage several years earlier. They did not like the fact of “not owning their own home” anymore so were very dubious at the first meeting with a Viva adviser.

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Everything was discussed at length and following the meeting and understanding that their home would remain in their name, the clients were happy to look into things further.

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It was agreed that they would release £200,000 for each of their two children needing help now and then they had a choice to keep the remaining £200,000 in a reserve for their son, or take it now and place it into a suitable trust to start to reduce potential inheritance tax.

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They also initially wanted to make interest payments, but after understanding that potentially 40% of each payment could go towards increasing the tax due in the future, they instead decided to let the interest roll up and use the payments that they would have made to gift out of normal expenditure to the grandkids now.

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It was fully discussed and determined at what would be owed and paid in the future if the clients decided to make monthly interest only payments or not and so after being fully informed and speaking with their children, they decided not to do this.

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The clients know that once 7 years has passed, then their gifts will become inheritance tax free and that this tax actually starts to reduce after 3 years.

The clients were very happy with this outcome and their children, in each of their different financial situations, were also very happy.