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Inheritance Tax

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With careful planning inheritance tax can often be reduced or nullified. There are several ways to help mitigate Inheritance Tax (IHT) using annual allowances, discounted gift trusts, whole of life contracts and gifting. Individuals will be advised about the different strategies.

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Our Solutions

Inheritance Tax (IHT)

IHT can be a big burden for many people, not just those with large estates. Without the right planning, you could be limiting the amount of your wealth you can pass on to your loved ones. They might even need to sell assets to pay the IHT. This could be especially distressing if the asset is the family business.

We'll work with you to understand what you want to achieve, then provide advice and solutions to match. For example, a well-drafted will can significantly reduce or eliminate your IHT liability, enabling you to pass on more of your wealth to future generations.

By working with John Davies Financial Consultancy you can benefit from the following areas of our expertise:

Exemptions and reliefs
Tax efficiency
Use of trusts as part of your wealth planning

Discounted Gift Trust

This allows the investor to maintain a withdrawal (income) and have the capital in a Trust for beneficiaries. The withdrawals have to be maintained for the life of the Trust and the investment vehicle must be an Investment Bond. The attraction with the DGT (Discounted Gift Trust) is that depending on the age at setting up, plus getting the investor underwritten, an extra ‘discount’ on the investor’s estate can be achieved for IHT purposes, but this discount will not be confirmed until death, and maybe challenged by HMRC.

Loan Trust

A Loan Trust is where you loan a trust a sum of money which is to be repaid, normally using an investment bond. This arrangement has a minimum of a 20-year time scale. If you invested into a loan trust, the trust would pay your capital to you over the 20 year term.
Any growth the trust has made over the 20 years is outside of the estate. If you were to pass away before the loan was repaid, then the remainder of the loan would form part of your estate.
Loan Trusts are normally used for relatively young clients due to the minimum 20-year time scale, with an inheritance tax problem that requires income.

Whole of Life Policy

Another way to resolve an inheritance tax issue is with a whole of life policy. This policy is a life assurance contact that pays out on the death the life assured and the proceeds are then used to pay the inheritance tax liability. This policy must be set up in a trust so is outside of the estate on death.

The value of investments can fall as well as rise. You may get back less than you invested. Tax treatment varies according to individual circumstances and is subject to change.

Will writing is not part of the Quilter Financial Planning offering and is offered in our own right. Quilter Financial Planning accept no responsibility for this aspect of our business.