Is there any point getting professional advice?

[warwick8]

The situation is that my relative passed away a year ago, and the probate has recently completed. My surviving relative received a cheque for £600k from the deceased estate. There is a balance with the solicitor of £30k, which will be released shortly. Everything is now in my surviving relative's estate, which comprises the following assets in addition to the above:

Property £425k
Liquid Investments £530k

Having run the numbers, based on exempt joint allowance of £650k, it seems that should she die tomorrow, there will be an inheritance tax bill in the region of £375k.

She is in her late 80s and not in the best of health. At a guess, I’d say life expectancy is probably no more than a couple of years. She has about £25k pa income from various pensions, and probably spends about half of it, so there is a possible option of moving £950k out of her estate for tax efficiency, as she does not need the money.

My guess based on limited research is that we need to transfer £950k out of the estate. This is based on the optimistic assumption that she survives for long enough to get taper relief, or if she survives 7 years, no tax on the £950k. I’m aware of the £3kpa gift allowance.

I appreciate that we probably need professional assistance, however I’m wondering whether there is any point if she only survives for a year or 2?

Thanks,

Warwick.

[pqtaxation]

The situation is that my relative passed away a year ago ..... I appreciate that we probably need professional assistance, however I’m wondering whether there is any point if she only survives for a year or 2?

I’d say your elderly relative definitely needs good professional advice if she agrees to your assessment of her situation in view of the values involved. Spending only about £12k of income on herself seems mean to herself in her situation. If she agrees to taking steps to mitigate IHT payable on her death then I suggest start with legal advice from specialist probate solicitor with STEP membership and go on to similarly qualified financial adviser who charge fees.

There are obvious alternatives to the only one you cite of her gifting £950k as PETs and hoping to live more than 3 years (when taper relief starts).

As the first to die did so only a year ago leaving £630k then deed of variation to gift that amount to other beneficiaries could be executed but doing so uses up the transferable NRB (assuming the first to die was her husband) so its impact for IHT liability reduction is (630-325) = £305k *40%.

Some assets within a death estate can qualify for relief (exclusion) from IHT. Examples are shares in private trading companies but this also applies to shares quoted only on the London AIM. Such shares only have to be held for 2 years to qualify for 100% relief (business property relief or BPR). Other assets are in the agricultural sector – farmland, woodland etc. (agricultural property relief). In both cases investment managers can put a portfolio together than qualifies for BPR and/or APR. Fees and quality of such managers vary of course but after some searching I have found good ones (i.e. they do exist).

[pqtaxation]

In today’s FT money section in the column on Wealth Questions there is a very similar scenario described to that of warwick8 above -- both surviving spouses are 82- see:

http://www.ft.com/cms/s/0/7f5bd35a-0082-11e1-930b-00144feabdc0.html#axzz1cBWDczQh

It gives a summary of options, that is similar to my post above but fuller, from Harry Franklin of Tritax Securities LLP who I don’t know. His firm appears from their website to be mainly a property fund manager but they look to have recently launched an IHT mitigation fund -see:

http://www.tritax.co.uk/files/protected/news_112_FT%20Advisor%20-%201.10.11%20WPF.pdf

It would be nice if first-time posers like warwick8 had the courtesy to acknowledge a reply otherwise why should I or anyone else bother to do so.

[warwick8]

Thanks, that's very helpful.