IHT Planning for the Single Man

[dane@corrigans.org.u]

For my sins I am an IFA. One of my long established clients asked me to look at his fathers position concerning IHT. His estate is valued at around £800,000 now after recently making a £200,000 PET split between his three adult children. His main concern is his house which is valued at £400,000 approx and in which he lives alone. He has been previously told that there is nothing he can do about it, he is single and 76. I have made some enquiries with local legal firms who have not exactly been chomping at the bit.

I know my limitations and am aware that estate planning should be left to the experts. I have been studying your discussions on Home Loan Schems after reading briefly about it in the Sunday Times. Although now, I feel that this appears to be somewhat blurred over their effectiveness.

My question is can you recommend a route to take to reduce his IHT liability and can you recommend a local law firm who specialise in this area to undertake the legal work involved.

Many thanks

Dane Cooper, MSFA

[wealthguard]

There are several variations of the Home Loan Scheme - some are more effective than others.

Currently the scheme does work - providing it is set up correctly. However, there is no guarantee that any future action taken by the CTO would not be retrospective and cancel the arrangement in the future - though, to be fair retrospective action is not always taken.

The scheme is costly to set up - it comprises establishment of two trusts. There is a conveyance of the property into the first trust in return for an IOU and a subsequent gift of the IOU to the second trust. This gift is a PET and 7 years must elapse before the gift is fully out of the estate. The tax liability during the 7 year period could be covered with decreasing term assurance - though for a male age 76, premiums could be high, even assuming your client is in reasonable health.

My firm can undertake this work and if you would like to contact me, I can advise you further on how to establish the Home Loan Plan. There are also some other strategies you may wish to consider in order to further reduce your client's IHT liability.

Rod Fisher
Senior Partner - Wealthguard
01924 - 490555

[Taxbar]

Dear Dane Cooper,

I was going to refer you to my lengthy discussion on this issue, but you've already seen it. I'll be producing an artilce looking at this issue shortly.

I would urge caution in looking at the home loan scheme. It requires an expert tax lawyers eye on the drafting.

There are several other options which include for a client of this age loan and invest strategies utilising Business Property Relief.

I would actually think that the clients other assets rather than his house might be a more suitable target for planning.


Daniel Feingold
Strategic Tax Planning
International & UK Tax Consultants
TEL: 0161 720 7244.
E-mail: sedrate@easynet.co.uk