commission v fees

EdInvestor

I wonder if Janemw is aware that you can give away as much as you like in your lifetime out of income (not capital) without incurring any liability to IHT at all, as long as it doesn't diminsih your lifestyle.

Giving away the money is a great way of getting it out of the estate, and usually much appreciated by those in recipt of the largesse

But note that the 5% witdrawals from the bond are not classified as income, but as capital.Thus they would be subject to the 7 year rule, whereas genuine income from investments would not be.

It's a little hard to help in this case because there's not much information so far: we don't know if the investor owns other assets apart from the 500k, what the taxable income (eg pensions) might be, and thus how to avoid impacting the age allowance by an investment strategy - indeed we don't even know how much income the investor wants/needs and what part the investor's 285k nil rate band (ie excluded from IHT liability) is playing in all of this.

But I do think we want to try to avoid simply passing the money that would have been taken by IHT to the insurance company and the advisor, as this represents no net gain to the investor at all, and arguably a lesser contribution to the overall public good.

cheerfulcat

For those interested in learning more about insurance bonds, I found this document most illuminating ( no connection, etc. ).

EdInvestor

I also ran across this useful document which explains all about how discretionary trusts to avoid IHT work in clear English which is somewhat unusual in this area :rolleyes:

Some worked examples at the end - there's quite a big difference in the options in terms of what the survivor of the couple can do after the first death - important to get this area right IMHO, otherwise the survivor can end up with quite a lot of problems.

BTW if this is a survivor case, has the deceased partner's "nil rate band" IHT exemption been used?If not, a "deed of variation" can usually be made to the will within 2 years to sort this out,which might perhaps solve the IHT problem at the cost of a solicitor's fee.

Market_Oracle

Tiggs wrote:

laughable that the advice to someone being sold a bond in trust for IHT saving with (one assumes) a potential tax saving of £200k+ is to put in a bank account and dont worry about tales of the tax "boogey man"

theres always some iffy advice flaoting around here from people with no idea what they are commenting on but £200k loss is still pretty impresive.

Maybe we should have a league table for rubbish ideas and how much they would cost the OP?

The impression i got, was that the advisor only did half a job, with many loose ends left for future problems.

Hence the cash should be kept liquid, temporarily until they get a proper solution TO ALL aspects.

Tiggs_2

Market_Oracle wrote:

The impression i got, was that the advisor only did half a job.

based on what?

the only issue unclear was the commision - for all we know LTC, normal expenditure relife, deed of variations, etc, etc may have been covered in depth.

prudryden

Unbelievably expensive. Look around. Remember an IFA is a salesman. Tell the IFA you want to look around. He will probably immediately come back with an offer. 3% to him on £500m is way over the top. Most brokerage firms will discount this to at least 1% and I would hold out for that. The brokerage firm will have access to all the funds and will give you choices of the best ones. I offer that to my clients every day.

Take your time. The fact that you are asking makes me think that you know that is too high. Good for you.
Regards

dunstonh

Unbelievably expensive.

No its not. Its slightly discounted on standard terms. Those standard terms are still cheaper than banks and building societies, many of whom wouldnt have a clue when it comes to giving this level of advice.

We have already said that some discounting should apply but it doesnt make this unbelievably expensive.

Most brokerage firms will discount this to at least 1% and I would hold out for that. The brokerage firm will have access to all the funds and will give you choices of the best ones. I offer that to my clients every day.

I'm a 1% NMA IFA so discount significantly over this as well but we have to remember that this case is likely to have been time consuming and the trust work could easily incur an additional cost.

Remember we are talking about tax savings that could run into hundreds of thousands of pounds here. Yet quibbling over a couple of thousand on the fee. If the adviser hadnt done their work, the OP could end up over £200,000 out of pocket.

Paul_Herring

prudryden wrote:

3% to him on £500m is way over the top.

I agree - £15 million is a lot, however the amount mentioned in the OP was only £500k.

Tiggs_2

strange that no matter how many times someone says "the OP could save £200k" there are still people that pop up with different ways to ensure the adviser drops £15k of earnings and the client drops £200k of IHT saving.

funny old world.

richgirl

Tiggs wrote:

strange that no matter how many times someone says "the OP could save £200k" there are still people that pop up with different ways to ensure the adviser drops £15k of earnings and the client drops £200k of IHT saving.

funny old world.

What about Eds point about care home fees ?

Why are the IFA's ignoring this ?