Octopus Aim IHT portfolio

valueman1

Is this a sensible way of avoiding IHT?  This is the market leading fund by some way but fees are high and Aim shares are more volatile. 

george4064

I think the expectation is that it’s a trade-off between saving tax and fees/volatility.

pjread

I think the silly but correct answer is "it depends".  Inheritance tax/estate planning is one area I'd suggest is worth chucking a few pounds to a decent IFA to talk through. 

There's a lot of detail that could impact the 'most likely best' thing to do, not least what your objectives are & size of likely inheritance - if it's literally assets you have no need to ever touch, you expect to be around for a good many years yet & your own lifetime needs are comfortably covered, gifts to whoever you would want to inherit during your lifetime might be another option.

valueman1

@pjread In this particular case the 2 year qualifying time is preferred to the 7 year gift exemption period.

pjread

Yeah, didn't want to be too direct on that Q but in that case AIM or even maybe even things like EIS investments could make sense (although it sounds like you're a bit risk averse) - what I would say is if a considerable amount I'd not go 'all in' on any single option. 

Octopus are big so I can't realistically see them failing, but as you mentioned they're not exactly cutting costs to the bone either.  A decent IFA might be able to help with some cheaper options, but again the murkier waters of small cap are more expensive than dealing with blue chips.

steampowered

Most of the people posting on MSE about IHT won't be subject to IHT anyway.

How big is the estate?

masonic

pjread said:

Octopus are big so I can't realistically see them failing, but as you mentioned they're not exactly cutting costs to the bone either.  A decent IFA might be able to help with some cheaper options, but again the murkier waters of small cap are more expensive than dealing with blue chips.

Failure of the provider is quite unlikely. The main risk to consider is the investments falling in value by more than the IHT that would otherwise be paid.

valueman1

The estate is big enough to consider IHT planning, I hadn’t considered EIS, but seem to be an alternative to aim but possibly even less liquidity!

pjread

masonic said:

pjread said:

Octopus are big so I can't realistically see them failing, but as you mentioned they're not exactly cutting costs to the bone either.  A decent IFA might be able to help with some cheaper options, but again the murkier waters of small cap are more expensive than dealing with blue chips.

Failure of the provider is quite unlikely. The main risk to consider is the investments falling in value by more than the IHT that would otherwise be paid.

Well yeah, but reducing management charges reduces that risk slightly

valueman1 said:

The estate is big enough to consider IHT planning, I hadn’t considered EIS, but seem to be an alternative to aim but possibly even less liquidity!

Liquidity certainly isn't the draw for EIS, I'd be thinking of combinations rather than one or the other.  Some decent tax advantages in the right circumstances to consider as a component of a portfolio, but all in on one EIS eligible investment would be at best 'very high risk'

Aegis

valueman1 said:

The estate is big enough to consider IHT planning, I hadn’t considered EIS, but seem to be an alternative to aim but possibly even less liquidity!

EIS is great if you like investing in high-risk ventures anyway and can get the benefits of doing so magnified by favourable tax treatment, but the days of "low risk" EISs are gone, so most will require you to invest into ventures which make the more generalist AIM services look tame by comparison.

As a rule, I don't suggest EIS for anything other than investing.  The tax benefits are nice to have, but not if the investment itself doesn't make sense for you.

masonic

pjread said:

masonic said:

pjread said:

Octopus are big so I can't realistically see them failing, but as you mentioned they're not exactly cutting costs to the bone either.  A decent IFA might be able to help with some cheaper options, but again the murkier waters of small cap are more expensive than dealing with blue chips.

Failure of the provider is quite unlikely. The main risk to consider is the investments falling in value by more than the IHT that would otherwise be paid.

Well yeah, but reducing management charges reduces that risk slightly

Insofar as charges are a drag on returns, then sure, but when dealing with such high volatility investments then what is actually held within the fund will introduce a lot more variability to the outcome. If an equivalent basket of shares can be obtained for less money, then that's a good thing, but when considering an expected holding period of between 2 and 7 years, luck will be the overriding factor in influencing risk and returns.