Case Study: How effective Estate Planning saved Mrs D’s family £400,000

“After seeking advice from Innes Reid at age 90, my Mother saved over £400,000 Inheritance Tax. It’s never too late to start your Estate Planning!”

 

After helping Mrs M with her Retirement Planning for over 10 years, Chartered Financial Planner, Mark Reidford also reduced her Mother, Mrs D’s Inheritance Tax bill by over £400,000. This outcome was achieved in just 8 years.

Here’s an overview of Mrs D’s story broken down into stages. Click on the boxes below to read more about Mrs D’s background, the steps that we took and the outcome.

 

Estate Planning Case Study - Mrs D's story (Innes Reid Investments Limited)

Innes Reid were recommended to Mrs D in October 2009 by her daughter, Mrs M, who had been a client of Innes Reid for 10 years. Aged 89, and a widow since 1998, Mrs D wanted a full review of her affairs with the objective of simplifying her estate now that she was getting older.

She was aware that on her death her 3 daughters would be faced with a significant Inheritance Tax (IHT) bill but, at that time, she had only undertaken limited Estate Planning. Time was not on her side.

We also noted that her investments had been accumulated over many years and any changes ran the risk of unwanted Capital Gains Tax (CGT) charges. Mrs D recognised professional advice and positive action were essential and Innes Reid’s holistic approach was a perfect fit.

October 2009 – We advised that Mrs D should execute a Lasting Power of Attorney. It was decided that her 3 daughters would be appointed. We later relied on this as she lost capacity during the last year of her life.

November 2009 – Gifts of £3,000 were initiated and repeated every year thereafter.

January/February 2010 – We created 3 family trusts in favour of Mrs D’s daughters. These achieved immediate IHT savings because the investment growth within the trusts was free of IHT. They achieved maximum IHT benefit once she had survived 7 years because the full value of all 3 trusts was then outside her estate.

March 2010 – We recommended and set up a managed portfolio of AIM (Alternative Investment Market) shares. Through the operation of Business Property Relief (BPR), these investments achieve very quick estate planning results because the investor only needs to survive 2 years from the start of the investment.

In the following years we recommended the sale of selected shares, calculated to use Mrs D’s CGT allowance with the proceeds added to the AIM portfolio.

February 2011 – We set up another Family Trust. This time it was a Loan Trust; an arrangement that achieved IHT savings immediately whilst still allowing Mrs D’s control and access to her capital, if required.

Each year we conducted a comprehensive review of Mrs D’s finances to ensure she stayed on track.

Sadly, Mrs D has since passed away but despite leaving her Inheritance Tax Planning until later in life, the work we had done during her last 8 years had paid off.

On an estate valued at £1,687,174.70 the Inheritance Tax payable was £74,144.00 which represents 4.39% of the total estate (with planning) as opposed to £481,559.00 it would have been without planning
(28.54%).

As her estate had been simplified, the Inheritance Tax return to HMRC went in just 11 weeks from the date of death.
We are delighted to say that Mrs D’s daughters are still valued clients of Innes Reid which highlights the value of long-term relationships in financial services and the growing demand for inter-generational planning.

 

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