Managing our investments to reduce IHT?
Janet had recently been widowed and with the help of her family, was doing well at coming to terms with taking charge over her own finances. I met with Janet, her son and daughter about six months after her bereavement to discuss adjustments to her financial plan in light of her changed circumstances. Living comfortably for the rest of her life and saving her estate from as much Inheritance Tax as possible were her main requirements.
Janet’s pension income was sufficient to cover her current living needs but unfortunately her widow’s pension was fixed in amount and so we anticipated she may shortly need to supplement her income from other sources. Selling her family home to release capital was not a preferred option for Janet: in fact, she wanted her plan to provide for her to stay living in her current home for as long as possible.
We then developed a plan to aggregate a number of her investments into a single trust structure which sheltered the entire value from Inheritance Tax, providing Janet lived for at least 7 years. The trust structure included an option for annual withdrawals which, subject to the trustees’ approval, may be paid directly to Janet. As Janet wanted to continue living in her home even if she came to require long term care, we tailored the scheme so that the annual withdrawals could be large enough to cover the cost of resident nursing care at her home if necessary.