I first met Keri when my late husband sold his company shares and we turned to Broadway Financial Planning for investment advice. Keri quickly impressed us with her vast knowledge and understanding of the financial marketplace and global economies.
Tax and Estate Planning Case Study
Broadway Financial Planning helped Peter and Valerie Smalley to mitigate the potential Inheritance Tax liability on their estate.
Peter and Valerie were referred to us as they had been seeking advice in respect of estate planning but had failed to find anyone previously who they felt suitable. As a result, they had put off taking any action to reduce the sizeable liability due on their estate. They were in their early 70s and felt they needed to take action before it was too late.
They had built up a large portfolio of investments which they used as their main source of income in retirement. They had two children and, whilst happy to pass wealth to the next generation where sensible, were concerned that this could result in complications within the family.
Challenges facing Peter and Valerie
Peter and Valerie’s estate had a potential liability to Inheritance Tax of approximately £800,000. They were keen to reduce this if possible but were nervous about passing large sums of money to their children who they felt were not financially astute.
They were also concerned about the costs of long term care in the event of either of them requiring care either at home or in a residential facility.
Peter and Valerie were happy that their overall investments were being managed efficiently by a discretionary manager and were keen to preserve that long term relationship. Their previous experiences with advisers had shown reluctance to work with existing managers and a desire to replace their existing investments usually at a large cost.
Their investments had been held for many years and subsequently carried large gains which needed to be considered in any planning strategies.
Peter and Valerie were keen to support charities via their Wills but were unsure of what options and advantages this would bring.
How BFP helped
We spent some considerable time discussing with Peter and Valerie the potential options available to them and the challenges that each one carried.
We assessed their current and future expenditure requirements, using specialist software and agreed assumptions. We were then able to forecast their income requirements and provide a long term view of what options were likely to be most suitable. This included accommodating the potential for costly long term care.
We re-established their investment risk tolerance and made recommendations to reduce their exposure to UK equitieswhich we then discussed and agreed with their discretionary manager. We also agreed a strategy to consolidate their investments with this manager ensuring tax allowances were fully utilised.
We made recommendations for available assets to be placed into a discretionary trust of which Peter and Valerie would be trustees and their children potential beneficiaries. This removed approximately £600,000 from their estate and gave them the flexibility to make distributions as and when they saw fit.
We finally explained the benefits of making provision for charitable gifts of up to 10% of their estate within their Wills and liaised with their lawyer to ensure the relevant amendments were made.
Benefits of working with BFP
Peter and Valerie had a clear idea of what options were available to them for reducing their taxable estate whilst providing them with the peace of mind that their expenditure in any scenario was affordable.
The recommended changes potentially enabled Peter and Valerie to increase the amount of legacies to their children by approximately £350,000 whilst still leaving their chosen charities with a considerable donation on death.
Their investment portfolios were realigned in conjunction with their investment manager to reduce some of the likely volatility without affecting the amount of income available to them.
The names in this case study have been changed to protect our clients’ identities.