Andrew and Christine were referred to us through their child, an existing client of ours. They were beginning to plan their future and what would happen to their wealth when they passed away.
They were particularly worried about how much of their estate would go to the Exchequer on their deaths, rather than their preferred beneficiaries.
The couple had previously made substantial gifts. However, they were concerned about how further gifts to loved ones would have an impact on their annual income needs, especially if long-term care were needed in the future.
Given their respective ages and state of health, they were unsure what option would be suitable and how they could fund supporting loved ones without a potentially detrimental impact on their lifestyle.
After discussing their situation and reviewing their asset base, it became apparent that some options were precluded due to inherent tax complications. Other options would also fall foul of the ‘gifts with reservation’ or ‘artificial transaction’ rules. As a result, alternative solutions were required.
During the course of our meetings, it became apparent that there had been a clear deterioration in the couple’s decision-making powers. Due to the complexity of the situation, we urged the couple to involve their beneficiaries in the planning process; that way, the needs of Andrew, Christine and their children would be understood and better met. The children already had Powers of Attorney, which made the process easier.
Ultimately, it was agreed that the couple would borrow money using Equity Release and gift all the proceeds to their children; smaller amounts would go to grandchildren for house deposits. This allowed the couple to improve the financial security of their loved ones now, rather than waiting until after death.
The children had all indicated that they were likely to sell the family home upon their parents’ deaths as it was unsuitable for their needs. Both Andrew and Christine felt comfortable about this route.
To help mitigate Inheritance Tax concerns, we also altered the structure of some of their investments. This meant they would be outside of their estate after two years but could still provide an income and fund long-term care if necessary.