Case Study

Inheritance Tax Planning

One of our clients owns a mixture of businesses with a value running into tens of millions of pounds. Some of them are trades for tax purposes and therefore qualify for Business Property Relief.

Others do not.

To complicate matters, the client in question has adult children from his first marriage, each of whom work in one or more of the businesses. They in turn have young children of their own.  The client also has young children with his current partner.

His dilemma was how to continue to reward his adult children for their work and make provision for their children (his grandchildren), whilst ensuring that provision was also made for his current partner and their young children.

The answer was a mixture of trust and other protective planning measures.

Some of the company shares were placed into trust for various beneficiaries, including the children and grandchildren. A Family Investment Company was set up to protect cash assets for various members of the family, including his partner. We also assisted in Will planning in order to ensure that the client’s partner was protected in the event of his death.

By undertaking this planning, the client has achieved the following outcomes:

  • The assets are no longer 100% vested with him but have no committed direction on death, at this stage.
  • The series of lifetime gifts into trusts means that he has been able to provide an income to his children and grandchildren quite easily. This planning also ensures that the capital value is completely protected and ring-fenced from other external forces (e.g. divorce and other financial risks).
  • The Family Investment Company will continue to yield an income, but also has the effect of beginning to move significant amounts of assets, which do not qualify for Inheritance Tax reliefs, out of his estate.
  • Finally, he has ensured that his partner will be well provided for in the event of his death, should this occur whilst they remain unmarried.

In summary, this plan optimises the benefit of his diversely-spread wealth, equitably, for all his family successors.

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