Beating the tax man
"My parents live in a property worth a lot of money − we are concerned about Inheritance Tax − can you help my family?"
This is a very familiar tale. A property worth a considerable amount of money and this is creating a tax burden upon the family upon the parents passing.
In this case our clients were a whole family of two brothers and their Mum and Dad. We found that Mum and Dad had more than sufficient income to live on from their pension schemes and other savings and investments. The problem was that the parents home was loved by the parents, they did not want to move out of their home that they had lived in for much of their married life, of many years.
We took it step by step.
Before we even met with the Mum and Dad, we met with the two brothers, to establish just what they were hoping to achieve. We then met with Mum and Dad and the two brothers to confirm the objectives on a collective basis, making sure that there was no coercion or pressure being brought to bear by the children upon Mum and Dad. We then started to calculate the potential tax burden by collecting the relevant data of the current value of the estate and noting any gifts that had been made by the parents in the previous seven years. Then we went away with our calculators!
We do not want the Chancellor to get that much money from our estate if at all possible. We have worked all our lives for this, why should the government get it?
This is a familiar cry. The first thing that we outlined to this family was that tax avoidance is a legal means of tax planning. Once we had performed the calculations with our in house tax advisers we then started to devise a solution for the family. We decided upon an equity release plan and at this point we introduced a local legal adviser whom understood equity release plans and Inheritance Tax and they understood fully what we were aiming to do. The legal adviser also met the family and drafted some relevant wills that met the clients needs combined with some very careful trust planning.
It worked!
We advised the clients upon the most suitable equity release plan, careful explaining the risks involved in this strategy − including the risk of the house decreasing in value and investments failing to perform − we then set up various investments for the clients and worked with the legal adviser on using the relevant trusts. Sadly, the parents passed away a few years post planning, but the plan worked and the burden of Inheritance Tax, upon the second parent passing away, was reduced significantly.
Are you concerned about Inheritance Tax and the burden that this will place upon your estate? With our team of qualified tax advisers and our network of professionals, why not contact us to see if we can help bring freedom from the burden of taxation to yourself and to your family?
Your clients should think very carefully about this information. If they are at all unsure about which equity release transaction is right for them, then they should ask their adviser to make a recommendation. We also offer advice on home reversion schemes and conventional mortgages, either of these products may be more suitable to your clients own circumstances.