IHT Planning case study
The people
Mrs A, her two children and her three grandchildren.
The problem
Mrs A received several million pounds from the sale of her shares in the family company plus a large Inheritance Tax (IHT) problem. She had inherited the shares in the company, following her husband’s death, a few years earlier.
The solution
On our advice Mrs A created a trust for her family and lent it £1 million.
She used an insurance company’s loan trust scheme which:
- provided her with annual repayments of 5% of the original loan
- means she has no tax liability on the repayments
- means all the investment growth belongs to the trust
- puts the investment growth outside Mrs A’s estate for IHT purposes.
13 years later, Mrs A is alive and well. Her Hart Brown financial planner has regular review meetings with her.
£650,000 of the loan has already been repaid to Mrs A through the annual repayments. The trust’s investments have performed well and the trust fund is now worth £1.35 million.
Mrs A is still owed £350,000. This means the net trust fund available for the benefit of Mrs A’s family in due course is £1 million.
The potential IHT saving from the loan trust arrangement is currently £400,000 and rising.
The loan trust arrangement was part of an overall financial strategy that we recommended to Mrs A.
Our ongoing involvement has ensured that the trust’s investments have been professionally monitored and that the annual loan repayments to Mrs A have been smoothly administered and properly documented. Careful financial planning has benefitted Mrs A and her family significantly with tax savings.
Who to contact
Philip Kingscott
Senior consultant
Email
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