Planning For The Future: Michael & Helen

Ian gives his clients confidence to make plans to protect their financial future, reduced their inheritance tax liability and increased the legacy to their family.

I helped my clients, Michael and Helen, to understand their financial situation. This gave them the confidence to make plans to protect their financial future, reduced their inheritance tax liability and increased the legacy to their family.

Michael and Helen had over the years prudently put money into savings and investments and had pension plans that were providing them with income in retirement. Now in their 70s they we were thinking more about supporting their family and were concerned about the impact of inheritance tax on their estate. However, they were also mindful of ensuring that they had sufficient income and capital for the future. The size of their estate meant that they did not qualify for the Main Residence Nil Rate Band and therefor part of their estate was liable to an inheritance tax charge of 60%. Their overall inheritance tax liability was around £550,000.

I helped them understand their financial situation by building a personalised cash flow plan that projected over the long term their income and expenditure and the impact on their savings, investments, and pensions. The plan looked at different scenarios, such as increased expenditure and different investments returns on the sustainability of their capital. Michael and Helen always believed they were financially secure, but there was always nagging doubt that stopped them from making big financial decisions. Michael and Helen stated that it was such a relief to now know they could afford to help their family during their lifetimes and see the benefit and enjoyment of their support.

Having taken the time to understand and clearly explain Michael and Helen’s financial position I recommended changes to their income and advised moving some of their investments into trust to reduce their inheritance tax liability. They stopped taking income from their pensions, as these are not included in their estate for inheritance tax and replaced some of that income from their investments. The investments that went into a trust paid the balance of their income needs, but also immediately reduced the inheritance tax liability. After 7 years all the money in the trust, that would still be providing Michael and Helen with an income, would be outside their estate and not subject to inheritance tax. They also made some immediate gifts to their family. By restructuring their income, I reduced the income tax they were paying, and I set a strategy for future income that utilises Michael and Helen’s tax allowances. Importantly they maintained adequate capital for their own financial security, sufficient to deal with the unexpected and potential care costs in later life.

The changes I recommended reduced their inheritance tax liability by over £150,000, and their income tax fell by more than £5,000 a year. I also restructured their investments, creating portfolio aligned to a level of risk that they were comfortable with and with ongoing management and reviews.

Michael stated: “Ian helped us to understand our finances. That gave Helen and I the confidence to make decisions to help our family, happily knowing that we are still comfortably secure for the long term. Ian made what seemed an overwhelmingly complex, very straightforward. We feel reassured that our investments are being professionally managed, and each year we meet up to review our situation”.

As our clients typically demand the utmost confidentiality, some of the information in this case study has been changed.

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