Inheritance Tax Liability Mitigation

Many clients come to us with a desire to mitigate the potential Inheritance Tax (IHT) liability that could fall due on their estate, after they pass away. There are a number of different possible solutions and which one might be most suitable will depend largely on their individual personal and financial circumstances.

One such solution can involve making new investments and in particular, investments which offer protection form the impact of IHT in just two years. Such investments are designed to benefit from what is known as Business Relief. However providers of these investment products are operating in a competitive market and new and innovative solutions are being brought to market. That said, they are all keen to stress that they manage clients’ money in such a way as to provide peace of mind and that clients legacies are managed carefully and professionally.

New product innovation

One such relatively new product innovation is a service that offers life insurance cover that mitigates the potential impact of IHT on the value of an investment should the investor die before their investment qualifies for Business Relief. For example, an investors estate is such that at least £500,000 is subject to IHT and they invest this amount into the appropriate investment. Without the cover, if they were to die within the first two years, then the full £500,000 would be subject to IHT. The liability would be 40% of £500,000, in other words £200,000.

However, the policy would cover up to 40% of £500,000. This would mean that if they did die within the first two years, then the benefit payable of £200,000, would be paid to the investors beneficiaries, taking into account the investor`s most recent expression of wishes.

That`s not all. In our experience, many clients who are coming to us with their desire to mitigate their potential IHT liabilities, are at the same time, also very mindful of the issue of long term care. They are aware of some, or most of the issues, but feel far from comfortable with managing the situation should the need arise. We understand that making the decision to find care for elderly family members or friends can often be emotional and unsettling. People want to feel confident that they or those for whom they are acting, will be comfortable and well cared for.

There is another such new product innovation in this area. This is in the form of a service which offers investors the access to a support team from Grace Consulting, one of the UK`s premier independent consultants on care options. If required, experts from Care Consulting will offer personal guidance through the complex decision making process for long-term care. This involves advice in helping with any hospital discharge, NHS and Local Authority responsibilities, pros and cons of care options, selecting the best care providers, reviewing and monitoring existing care, assessing care needs and managing the cost of the care. These are all issues which we understand people need to address, but are often very unsure as to how to go about addressing.

So if you think that investing money to mitigate any potential IHT liability is always solely about meeting this single objective, please think again. We aim to consider all of our clients objectives and not just their investment related needs.

Dentons Investment Services Limited is not a paid introducer of Grace Consulting who offer a practical long term care service rather than financial planning.

This article is not intended to be specific financial advice and you should always seek independent financial advice tailored to your circumstances.