Andrew had been a client for a number of years following his divorce. He had built up a substantial portfolio of pensions and investments and, as his circumstances settled, his focus began to shift towards how his wealth would be passed on to his two children.
The Challenge
His estate was comfortably above inheritance tax thresholds, and he was conscious that, without planning, a significant proportion could be lost to tax. However, he was equally clear that he was not yet ready to give up control of his capital or make large outright gifts.
Investment Strategy
We then formulated an investment strategy which centred on the client investing in a well-diversified multi-asset portfolio within an Individual Savings Account (ISA) and a General Investment Account (GIA). A multi-asset portfolio is a diversified collection of different types of investments such as shares, bonds and property funds from different geographical locations, for example the UK, USA, Europe and Asia. Our ongoing strategy was to use Mike’s annual ISA allowance and migrate capital from his GIA into his ISA each tax year, until all of the capital is invested in his tax efficient ISA.
The Solution
We worked with Andrew to explore options that would allow him to begin reducing the value of his estate, while still retaining an appropriate level of control and flexibility.
Following detailed discussions, he decided to place £150,000 into a well-established trust structure. This allowed him to make a gift for inheritance tax purposes, while the assets remained within a controlled environment, with trustees able to manage how and when funds may be distributed.
The Benefits
This approach was particularly suitable for Andrew’s circumstances. The transfer into trust started the process of removing those assets from his estate for inheritance tax purposes, subject to the relevant rules and timeframes. In simple terms, if he survives for seven years from the date of the gift, the value would generally be expected to fall outside his estate for inheritance tax purposes, subject to the relevant rules.
At the same time, the structure provided reassurance that the funds would be used appropriately for his children in the future, rather than being passed outright at a point in time that might not be suitable.
The Outcome
Andrew continues to work with us on his wider financial planning, ensuring that his remaining assets, income needs and longer-term plans remain aligned.
He now has the reassurance that he has taken a meaningful first step in planning for the future, balancing tax efficiency with control and flexibility.
