How Can I Protect My Wealth for My Loved Ones?

For one of our clients, building wealth was not a primary concern. After having built a successful real estate business, Giles came to Efficient Portfolio with a concern about his next generation, and how he could protect his wealth for their benefit. Giles has four children and a growing brood of grand kids, so wanted his loved ones to be able to reap what he had spent many years sowing. He felt that if he didn’t take action, their inheritance could be at serious risk.

I think, for most of us, the real reason we want to build wealth is so that we can provide a comfortable, enriched future for our loved ones, but sadly, many of us overlook how we can ensure that our wealth delivers the greatest impact upon their lives. When it comes to any type of estate planning, there are several risks to consider, namely Inheritance Tax, divorce and third-party risks such as care fees. Giles fully understood these issues and wanted to look at how to overcome them.

After having explored and researched Giles’ position, we decided that a collaborative approach was the best tact to overcome his concerns. We worked incredibly closely with Giles’ accountant, Smith Hodge and Baxter, and reviewed his current gifting strategy, to make use it was tax efficient, and also considered some more sophisticated estate planning strategies.

Gifting is a generally good strategy, as these gifts can be exempt from Inheritance Tax, if they are made 7 years prior to death. However, we wanted to make sure that this money wasn’t being squandered or was open to the threat of a divorce in the family. To help with this, we decided that gifting into a Trust was a sensible strategy, as the money could then be given in the fashion that Giles wanted and only be used for it’s intended purpose. With young grandchildren, this was especially important, as Giles retained some control over when they were able to access their inheritance and ensure they didn’t blow the lot on a frivolous or flashy purchase.

In our conversations, Giles also told me that he wanted to make sure that him and his wife could maintain their current standard of living and that if anything were happen to either of them, this would continue. One option to overcome this issue was to put some cash aside, but this could have led to an Inheritance Tax issue or could reduce the amount being gifted into Trust. Given Giles’ situation, we decided that a Whole of Life policy was a prudent move, as this would provide protection and peace of mind, but would also not impede on his intended gifting strategy.

Th final piece of the puzzle was to try to mitigate as much Inheritance Tax as possible. The use of Trusts would help, but we felt that there was still ore we could do. Giles still held some surplus wealth, which would have been subject to Inheritance Tax upon his death, so we wanted to try and remove this issue. We elected to invest some of Giles’ assets into a Business Property Relief scheme, as the money would benefit from some significant IHT breaks, leaving more for Giles’ future generations.

We continue to monitor Giles’ ongoing situation but are delighted that he now feels that his wealth is protected for his loved ones and that he and his wife can enjoy their retirement with peace of mind.