It’s the time of year when juggling multiple priorities can sometimes feel like an acrobatic feat and it’s easy to get distracted from the fundamentals. I was reminded of this last month.
A Decade of Strategic Financial Advice
Against a backdrop of press commentary about the possible abolition of Inheritance Tax and ongoing debates about the value of advice, I was asked by an adviser to evaluate the advice that his clients had received over the previous decade, particularly in relation to a £1,200,000 capital sum back in 2013.
The Impact of Advice
I completed a review and summarised:
- Reduced Inheritance Tax Liability: The strategic advice given significantly lowered the clients’ potential Inheritance Tax by an impressive £480,000.
- Tax-Efficient Life Cover: The clients were able to secure £2 million in life cover in a tax-efficient manner, thanks to the advice provided.
- • Discretionary Trusts: facilitated longer term asset protection on the capital through the use of discretionary trusts
- • Mitigating Periodic Trust Charges: A multiple trust strategy was employed to reduce the likelihood of charges at the trusts’ ten-year anniversary.
The trusts, along with the transfer of exempt assets to them, were meticulously arranged in collaboration with the clients’ lawyers, preceding any discussions related to investment advice. Although it was a request for investment advice that had prompted the initial conversations, all investment discussions were stalled, pending completion of the legal work.
I concluded that the advice had achieved what it was intended to do (personally reassuring since I had helped the adviser to design the planning strategy in a previous role!)
The Enduring Value of Sound Financial Advice
Recommendations are made based on legislation at the time. Still I wondered, if the speculation about Inheritance Tax came to fruition, could the value of the advice still be evidenced?
The assessment in 2013 had been that the client was unlikely to require the money themselves – comprehensive cashflow modelling had been used to explore that. The initial capital, and all subsequent investment growth, are sheltered in discretionary trusts providing longer term asset protection from more than just Inheritance Tax. If the £2m life cover isn’t ultimately required towards payment of Inheritance Tax, it will provide a tax-free legacy for the clients’ heirs.
Should the Inheritance Tax advantage of the trust diminish over time, does the advice still provide value? The resounding answer is a confident yes! If what’s at the centre of something is sound, then any noise, press commentary or general seasonal hustle and bustle happening around it can’t detract from that.
