At Dentons Wealth, our research has shown that for many clients nearing, or at retirement, the need to maintain a certain level of assets in their estate is of paramount importance. Although we recognise that wills, gifts and trusts are all effective tools for mitigating inheritance tax, pressure is growing on individuals to hold larger amounts of easily accessible funds to cover a range of potential situations: from increased longevity, meaning funds being held for retirement are stretched further, through to the possibility of needing funds for residential care.
As a result, the holding of a larger fund will generally increase the value of an estate and with it its potential inheritance tax liability. Although you can insure against this potential liability, the cost of doing so can be significant and health issues could remove this option entirely.
However, inheritance tax can be mitigated using investments that qualify for Business Relief (BR), as they should not form part of the deceased`s estate on death for inheritance tax liability purposes, provided that they have been held continuously for a period of two years and are held at date of death. This could benefit clients who may need future access to capital and the income it could provide, as it would allow them access to the funds in these investments, if required.
Another solution may be to invest in a discretionary portfolio of shares, which qualify for inheritance tax relief. Such portfolios invest directly in companies listed on the Alternative Investment Market (AIM).
The most suitable route for each client will depend on his or her risk profile, tax position, as well as other personal and financial circumstances.
At Dentons Wealth, we are committed to reviewing the options with clients, to ensure the recommended solution meets their risk profile and individual needs. Our recommendations are personal to each client. We often work closely with professional partners and other family members, to ensure we explore all aspects of inheritance tax planning. Of course, because we are independent, our ability to diversify with full impartiality helps us to limit clients’ exposure to unnecessary risk.