Quick IHT solution for elderly person

[ivanbowles]

I have an elderly client (UK Res and Dom) who - very sadly has been diagnosed with a terminal condition. He is already widowed.

His estate is substantial (£2m). No succession planning has been put in place but he wants to leave everything to his son (he has no other children).

Clearly time is very limited so the PET rules are relevant. Anybody got any suggestions?

Thanks
Ivan Bowles.

[Arnold Aaron]

what is his life expectancy?

[Lee Young]

If less that 2 years spend it!

If he may have more than 2 years 100% BPR can be obtained on holding AIM shares - risky investment though, and the tax savings should never be the prime reason to make an investment of this sort.

[Taxbar]

I'm afraid it comes down to medical condition and an accurate prognosis based on age and the stage and type of cancer!

He could borrow against his estate and purchase assets qualifiying for BPR or APR.

I wouldn't rely exclusively on AIM shares, as there are managed nursing homes, forestry and agricultural land to consider.

I have heard of many older clients living 2 yers or more once diagnosed with terminal cancer.

I would advise you get a clear medical report and then act quickly!

Daniel Feingold
STP
info@stratax.co.uk

[bob.fraser@towrylaw.]

If he may have 24 months left, then the AIM share route is the optimal solution. Whilst it is certainly true that tax should not lead investment decisions, in this case the risk is IHT at 40%. Although AIM shares are a higher risk investment, a well contructed portfolio of AIM shares will reduce the risk. I suggest that you look at the article on AIM shares under the Tax Investments section to the right of the screen.
I specialise in this area, so feel free to contact me if you need further guidance.

Bob Fraser
Certified Financial Planner
07709430958

[Arnold Aaron]

...before everyone jumps in to give their solutions, perhaps it would help us if you could tell us what the estate comprises.

People seem to be assuming its is made up entirely of cash!

over to you Ivan..

[ivanbowles]

Thanks everyone. Very Interesting indeed.

Actually his estate consists of about £850K - house in UK. £450K house in Spain.

The rest being in cash and investments (the investments having been made mainly via offshore insurance bonds).

The AIM portfolio seems like a good idea - but if I understand correctly there would still be a 2 year PET.

Are there any solutions that can provide an immediate answer? (ie avoiding the 2 year wait)?

Thanks Ivan Bowles

[Arnold Aaron]

Are the offshore bonds in Trust?

This would avoid them being 'frozen' until probate is granted, although would not avoid the IHT (unless this was already done some years previously.)

Avoiding the 2 year wait ?? - yes - gifting assets to a registered charity, - although his son may not be too pleased with you!

[bob.fraser@towrylaw.]

No Ivan, your understanding of the AIM shares is incorrect.
For the AIM shares to attract business property relief they have to be owned both legally and beneficially by the investor and must be held personally at the date of death. Consequently there can be no PET since there has been no gift.
It is however true that the investor must live for 2 years from the date of purchase of the shares. If the investor is married, then his/her spouse can inherit the shares should he/she die within the 2 years, and only has to survive the balance of the 2 years.
Do contact me if you wish to explore this further.