Our next step is to ensure that appropriate use is made of any tax reliefs and exemptions. This may include small or annual gifts, or larger one-off gifts to children or other potential beneficiaries. You may also wish to make charitable gifts or undertake other philanthropy.
Whilst gifts may be appropriate, our advice would ensure that any gifts would not undermine your own financial security during your lifetime. We would also discuss with you the financial and personal circumstances of the beneficiaries, so as to check that you consider the timing is appropriate.
As far as further planning is concerned, we advise on investments using a number of different types of trusts, which can potentially save 100% IHT after 7 years. There are also some trust structures which provide for an immediate Inheritance Tax (IHT) discount.
The benefit of using a trust is that in addition to a potential IHT saving, you can ensure that income and capital is preserved and passed to chosen beneficiaries at the appropriate time. This level of control is not possible with lifetime gifts. Also, a trust can be invested in mainstream investments, so risk can be managed and tailored accordingly.
We also advise on investments which qualify for 100% Business Relief (BR), meaning that 100% IHT can potentially be saved after a 2-year holding period. To benefit from this valuable tax relief, investments must be in unquoted trading companies, which carry higher risks due to the smaller size of companies and no ready market to value or sell holdings. Our approach is to consider the investment risks and tailor to your individual circumstances. Typical investments, which may be listed on the Alternative Investment Market (AIM), are often in qualifying trading activities such as:
- Renewable energy (solar and wind)
Businesses trading from freehold property (eg. Hotels, health clubs, nurseries, care homes)
Unquoted investments which qualify for Business Relief from Inheritance Tax are high risk and can be difficult to encash or value. Past performance is not a guide to future returns and you can get less back than you invest. Tax legislation and tax reliefs are subject to change.