Investment Plan

Aegis

grey_gym_sock wrote: »

hmm, you mean like this: http://www.wealthprotectionreport.co.uk/public/123.cfm

i didn't know about that ... however, it only seems to come into play if you make lifetime gifts to trusts.

True, it's only when you have Chargeable Lifetime Transfers (CLTs) interacting with other gifts that the 14 year rule comes into effect. From memory, it comes about when someone has made a gift then subsequently makes a CLT within seven years of that gift.

If no CLTs have ever been made, then it's only the seven year rule to worry about.

well, you pay the premiums before you get the payout. if you pay the premiums for decades, it's effectively a regular investment scheme. and for that to be accounted a success, you would need to get back substantially more than you paid in.

why not instead pay into a real regular investment scheme for your beneficiaries? they would then both get the returns available from proper investing, and have a choice about when to cash it in, instead of waiting for you to die.

it is not as if you even prevent the IHT from being paid. all you do is (pay to) generate a payout that matches the IHT liability. but why pay to generate a cash at that precise time? your beneficiaries are getting richer at that point anyway, since IHT is less than 100%.

or better, if you can permanently do without the part of your income that will be used to pay the premiums/contributions, then give away the part of your capital which generates that income. and then live for at least another 7 years. which is likely to work if you are in early retirement, with a decent life expectancy.

also, the latter approach does actually avoid paying the IHT, if that is the aim.

Options that could be considered instead of or in addition to life insurance might include gifting into trust, gifting into a discounted gift trust, loaning assets to a trust, holding exempt assets or simply gifting outright. As part of gifting, it is worth considering a gift made out of regular excess income, as such gifts can, if made habitually, be immediately exempt from inheritance tax.

That said, none of this should be done without first reviewing the original owner's financial situation and ensuring that they have sufficient provision for their own retirement. After all, if they spend down capital over many years, the inheritance tax problem might well go away on its own.

grey_gym_sock

hmm, if you don't trust your beneficiaries with the money, why trust them when you're dead, either? you can always not give them anything outright, but give it all to trusts for their benefit.

i find the "break even" concept rather odd in this case. in the case when you fail to break even, that means you've died sooner than expected, and therefore you beneficiaries get their inheritance sooner. financially (though not in more important ways), they are winning. even after paying IHT, they then have time to invest it and make up the losses.

Brock_and_Roll

Chaps,

Thank you all for the great advice - plenty to ponder.

As it happens and just to settle any arguments about PETs etc, the only gifts my father made is his lifetime were to his local pub landlord! His will was straightforward - all to my mother.

It is not yet 100% clear (there is a legal claim against my father's estate) but the potential net value of my mothers assets is circa £930k in a best case scenario and £730k worst case. So the outcome of this will have an effect on the extent to which need to worry about IHT etc.

I will take independent advice down the line.

Thanks again