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Case Study: Why Robust Estate and Tax Planning Is Important for Your Wealth

No matter who you are or what point of life you’re at, it’s never too late to start your Estate Planning. At Strathmore, we specialise in making detailed plans that secure your wealth and ensure certainty for your family and loved ones in the years ahead.

This case study shows how we helped one older couple plan for their future and mitigate a potential tax liability, ensuring that their hard-earned wealth will go to those they love.

How We Helped Malcolm and Alison

Malcolm and Alison are an elderly couple with an estate worth several million pounds. They’ve built their wealth over many years, with the majority now held in several buy-to-let (BTL) properties that they’ve spent their lives working to hold mortgage-free.

However, now in their mid-70s, Malcolm and Alison realised that they were potentially facing an Inheritance Tax (IHT) bill upwards of £400,000 if they both passed away unexpectedly.

With children in their 50s and grandchildren growing up quickly, Malcolm and Alison wanted to ensure that their growing family would receive as much of their money as possible if the worst happened. They were also keen to keep hold of their BTL portfolio as a way to provide a strong financial base for future generations.

That’s why Malcolm and Alison contacted Strathmore: to help them create structures that would protect their wealth for their family’s future.

After a detailed investigation of Malcolm and Alison’s financial situation, we created a personalised, two-phase plan to safeguard their wealth for the next generation.

Phase 1: Death planning, including Wills, Trusts and Lasting Power of Attorney

When creating an Estate Plan, the first stage focuses on death planning and ensuring you have the correct legal infrastructure in place. There can be various aspects to this initial plan that will depend on your personal circumstances.

For Malcolm and Alison, their Estate Planning needs revolved around their Will, creating Trusts for their children, and putting a Lasting Power of Attorney (LPA) in place.

Rewriting Comprehensive Wills

Malcolm and Alison had previously had Wills written by a local solicitor when we started working with them.

However, with the size of their estate and their specific concerns, the Wills were not fit for purpose; they lacked proper planning measures, and there was next to no protection included. They had also not reviewed their Will recently, creating the potential for outdated plans that no longer reflected their wishes.

Your Will is a legally binding document and is the opportunity for you to have your say on what will happen to your wealth when you’re no longer around. As a result, it’s one of the most important parts of your Estate Planning and should be as precise and specific as possible.

We helped Malcolm and Alison to rewrite their Wills, including detailed instructions for exactly what should happen with their wealth and assets, as well as comprehensive planning and protection measures.

Creating Trusts for Their Children

Next, we advised Malcolm and Alison to create Trusts to ringfence the money they wanted to pass on to their children.

A Trust allows you to appoint an individual, known as a “Trustee”, to give your wealth to your intended recipient, known as a “Beneficiary”, at a time of your choosing.

Trusts can be useful as their strict rules prevent other third parties from claiming a stake in your wealth if they’re not included as a Beneficiary. This makes Trusts particularly useful for protecting against events such as divorce, remarriage, or bankruptcy.

By putting assets into Trusts, Malcolm and Alison know with certainty that their wealth will go to their children if something were to happen to either of them.

Trusts can also offer certain IHT benefits, depending on your circumstances. Please speak to us if you’d like to know how this may work for you.

Putting Lasting Power of Attorney in Place

The final stage of Malcolm and Alison’s death planning was to set up an LPA for each of them. This gives their children the legal right to make decisions on their behalf in the event that either of them becomes mentally incapacitated.

It’s advisable to set up an LPA before you actually need it; many people don’t think to do so before it’s too late.

By having this in place, Malcolm and Alison can now be confident that their family will be able to make decisions on their behalf if they ever have to.

Phase 2: Tax Planning, Including Conveying Properties into Trusts, and Strategies to Reduce IHT

With infrastructure in place for the worst-case scenario, Malcolm and Alison were keen to look at strategies that could help to reduce their potential IHT bill.

Firstly, we advised Malcolm and Alison to gift two of their BTL properties into Trust funds for their children. Doing this through a Trust will offer the same protections from third parties that their money will receive. And, as the properties are mortgage free, we were able to do this via Conveyance.

Next, we were able to apply for “Holdover Relief” on the properties. Holdover Relief essentially postpones Capital Gains Tax (CGT) for 125 years or until the Trust sells the property.

Malcolm and Alison were happy to do this as they no longer need the income that the properties generate, preferring to prioritise their family inheriting as much of the property portfolio as possible.

Tax issues such as Holdover Relief can be complex and difficult to understand. If you’d like help understanding how to potentially save yourself an excessive IHT bill, please do contact us.

Secure your family’s future

If you’d like to know how to best plan for your wealth to go to your family, please get in touch with us. At Strathmore, we have years of experience in helping families of all kinds to protect their money from tax and ensure a smooth inheritance process.

Email enquiries@strathmorewills.co.uk or call 01708 923 303 to speak to us.

Please note:

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation which is subject to change.

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Case Study: Why Robust Estate and Tax Planning Is Important for Your Wealth