IFA trying to sell me on inheritance tax avoidance strategy for my mother (who has dementia)

Sportacus

I've been talking to an IFA about an immediate-needs annuity to cover care costs for my mother (I have power of attorney), but the IFA is suggesting another meeting to go over my mothers savings and property value and is saying they can 'protect it' from inheritance tax without my mother needing to give anything away.

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

Before I have another meeting with this IFA, any ideas what scheme they likely have in mind?

Keep_pedalling

It’s difficult see what can be done at this late stage other than investing in assets that are subject to business relief which would only need to be held for two years to qualify. These tend to be high risk investments, so very hard to see how they would be in the best interest of your mother. 

My attitude is similar to yours, so I would just decline the offer. 

LHW99

As attorney you have to act in her best interests, and I fail to see how protecting her assets from inheritance tax could be considered as that.

dunstonh

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

It is likely that you are using tax avoidance.   If you have a pension or an ISA, for example, you are using tax avoidance.  There is nothing wrong with avoidance.   

poseidon1

Sportacus said:

I've been talking to an IFA about an immediate-needs annuity to cover care costs for my mother (I have power of attorney), but the IFA is suggesting another meeting to go over my mothers savings and property value and is saying they can 'protect it' from inheritance tax without my mother needing to give anything away.

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

Before I have another meeting with this IFA, any ideas what scheme they likely have in mind?

There is a long established investment bond based IHT mitigation product called a Discounted Gift Trust which I suspect will see a degree of resurgence in the years to come- see links below  

https://techzone.abrdn.com/public/iht-est-plan/Tech-guide-discounted-gift

https://www.standardlife.co.uk/adviser/business-support/techvoice/technical-articles?article=/adviser/business-support/techvoice/technical-articles/list-of-articles/discounted-gift-trusts

It is non controversial and accepted by the HMRC as a perfectly legal way to obtain an immediate IHT  saving from inception of the plan, and is available from a number of prominent UK insurance companies. Minimum investment levels around £50k , but by its nature the notable IHT benefits accrue at much higher investment levels.

Many years ago ( pre March 2006 ), one of my firm's clients invested £1.5 million in a bespoke DGT with Clerical Medical providing the Insurance 'wrapper', and the underlying funds discretionary managed in a stocks and shares portfolio by a prominent city stockbroker, so very much a product available at different levels of personalisation and sophistication.

You may find the thread below referring to the culmination of a highly successful DGT scheme from the point of view of one of the beneficiaries, of interest.  My comment on 12 February summed up the tax mitigation outcomes in that particular circumstance.

https://forums.moneysavingexpert.com/discussion/comment/81293607#Comment_81293607

To be noted that these trusts needed to be reported for the purposes of HMRC's trust registration service, but the nature of the trust asset ( the investment bond ) , means there is no annual income or capital gains tax reporting during the settlors lifetime, and no trust accounts necessary.  However once set up it cannot be terminated other than on eventual death of the settlor.

Notwithstanding your apparent abhorrence with regard to IHT mitigation planning, if this is one of the strategies to be discussed by the IFA , worth keeping an open mind.  

Finally, if your mother's disability is such to preclude her from understanding any IHT mitigation discussion, then a meeting with an IFA on the subject maybe moot, in that any strategy ( other than utilising the annual gifts exemptions) may require approval from the Court of Protection - see link below


https://www.thepfs.org/news-insight/news/articles/powers-of-attorney-in-trust-and-estate-planning/43ee25e7-aef6-4535-835a-dc6acb99e047#:~:text=Given the restrictions on an,sort of IHT mitigation strategy.

Marcon

Sportacus said:

I've been talking to an IFA about an immediate-needs annuity to cover care costs for my mother (I have power of attorney), but the IFA is suggesting another meeting to go over my mothers savings and property value and is saying they can 'protect it' from inheritance tax without my mother needing to give anything away.

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

Before I have another meeting with this IFA, any ideas what scheme they likely have in mind?

You're confusing tax avoidance (which is entirely legitimate) with evasion (which isn't!).

Surely the best person to explain what the IFA has in mind is the IFA? If you then want some thoughts, post the details here and doubtless plenty of people will have a view, regardless of their actual level of knowledge.

akm2018

One particular (somewhat axe-grindy) website doesn't get to define the meaning of English words...

Marcon

akm2018 said:

One particular (somewhat axe-grindy) website doesn't get to define the meaning of English words...

Indeed, but HMRC and the legal system certainly do!

poseidon1

[Deleted User] said:

poseidon1 said:

Sportacus said:

I've been talking to an IFA about an immediate-needs annuity to cover care costs for my mother (I have power of attorney), but the IFA is suggesting another meeting to go over my mothers savings and property value and is saying they can 'protect it' from inheritance tax without my mother needing to give anything away.

I don't like the idea of tax avoidance and I'm always sickened to read about these tricks the superwealthy use to dodge tax.

Before I have another meeting with this IFA, any ideas what scheme they likely have in mind?

There is a long established investment bond based IHT mitigation product called a Discounted Gift Trust ...

Notwithstanding your apparent abhorrence with regard to IHT mitigation planning, if this is one of the strategies to be discussed by the IFA , worth keeping an open mind.  

Not everything sold is acceptable.  See, for example: https://www.gov.uk/government/publications/gaar-advisory-panel-opinion-of-29-october-2024-reducing-the-value-of-an-estate-for-inheritance-tax-and-avoiding-inheritance-tax-on-a-lifetime-transfe

No dispute with your primary contention.

All I would say is HMRC has no problem with DGTs as long as the settlor's life is truly insurable and commercially underwritten  - see HMRC manual below

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm20424

artyboy

[Deleted User] said:

dunstonh said:

If you have a pension or an ISA, for example, you are using tax avoidance.  There is nothing wrong with avoidance.   

That is complete and utter ****.  Neither using a pension nor an ISA as the government intended are tax avoidance.  This article explains the difference and nuances in more detail: https://taxpolicy.org.uk/2024/10/26/what_is_tax_avoidance_how_different_from_evasion/

Well, back at you in terms of a post being load of old twaddle.

I use an ISA and a pension to avoid paying tax that I would otherwise pay if I didn't use these vehicles. I am engaged in tax avoidance. I'm not sure how much simpler I can put it...

The point being there are entirely legitimate and widely socially accepted tax avoidance options, and then there are those that, whilst legal, may not pass an individual's own ethical 'sniff test' (such as the OP may be alluding to, although probably needs to be more specific).

It's only once you get into the realms of aggressive avoidance and of course evasion that you end up on the wrong side of the law.

artyboy

[Deleted User] said:

artyboy said:

I use an ISA and a pension to avoid paying tax that I would otherwise pay if I didn't use these vehicles. I am engaged in tax avoidance. I'm not sure how much simpler I can put it...

That's like saying that you go speeding but never exceed the speed limit.

It's like nothing of the sort, but I'll save myself the pain of banging my head against a brick wall and say that I'm out.