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Point of View

Increasing your families inheritance, whilst retaining accessibility to your wealth

By Daniel Szabo, Portfolio Manager


One of the biggest concerns for my clients is inheritance tax (IHT). It’s complex, confusing, and of course emotional, since it means facing up to your own mortality. Also – many people think that sheltering from IHT means locking money away in complex trusts where they can’t get hold of it. But nowadays there are several ways to shelter from IHT while still retaining control of your money, should you need it.
The key is to start planning early. Many IHT tax planning strategies require seven years to take effect, so the longer you leave it, the greater the risk you will leave a larger than necessary tax bill for your beneficiaries. Here are some of the ways you can shelter your savings from IHT, while staying in control:


Thanks to the Pension Freedoms legislation changes, a good way to shelter money from IHT is in a Self Invested Personal Pension (SIPP). The new(ish) legislation means that any money held within the SIPP can be passed on free of IHT. If you die before you are age 75, then your beneficiary can take that money free of income tax as well. If you die after you are age 75, then it will be taxed at the beneficiary’s marginal rate. Hopefully, in most cases, this is likely to be better than the 40% IHT levy.

Life assurance in trust

You can take out a life assurance policy, which pays a sum of money to your beneficiaries when you die. If you take this out within a trust, the pay-out does not form part of your estate, so is given to your beneficiaries immediately, and is exempt from IHT. This can be used as a way of ‘insuring against’ IHT, meaning your beneficiaries can use the lump-sum to pay the IHT bill when you die, but you can continue to enjoy your assets without having to gift them, or place them into trust. The earlier you implement this strategy the better, as the older you get (and if you develop any illness), the higher the premiums will become.

Business Relief

Business Relief (BR) has now become a mainstream IHT solution. Originally designed for business owners, it offers either 50% or 100% IHT relief on business assets, which can then be passed down while you’re still alive, or as part of your will. In effect, BR reduces the value of a business or its assets when working out how much IHT must be paid.
But these days, you don’t need to be a business owner to benefit from this relief, and there are plenty of options for clients to consider. Sanlam Private Wealth offers a solution that invests in around 30 stocks listed on the AIM market. AIM is the London Stock Exchange’s international market for smaller growing companies seeking access to capital, and has developed a global appeal since its inception in 1995. It now contains approximately 1000 companies operating in around 100 countries. This is a complex process as only around 70% of companies on AIM will qualify for BR, and their qualification may change over time, hence using a service such as Sanlam’s can assist, as this is a specialist form of investing.
One of the key benefits of investing for BR, is that your investment is protected from IHT after just two years, assuming the investment requirements are met. This is a major selling point, particularly for clients who are in failing health or for attorneys acting under a power of attorney. Another benefit is that you can make withdrawals from your investment, and any money left in the fund is unaffected.
As an IHT strategy, these investments are medium to high risk, largely because of the nature of the businesses they invest in. Using a service such as Sanlam’s means you have specialist investors, using detailed research to ascertain the longer-term outlook for every business we invest in.
In conclusion, transferring wealth with the minimum of tax is an increasing area of concern for many families across the UK. The vast array of options makes it difficult to consider the best possible strategy. Seeking a highly qualified adviser to discuss your individual circumstances will help you obtain the best outcome for all parties concerned. And the sooner you plan for it, the better.

Find out more about Sanlam’s IHT Service 

The value of your investment can go down as well as up and you may not get back your initial investment. Investing in companies listed on AIM can involve more risk than those listed on the main market of the London Stock Exchange and their share price movements tend to be more volatile.
Tax rules are subject to change.  Based on our understanding of HMRC interpretation as at July 2018.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.